U.S. GOVERNMENT PUBLISHING OFFICE

30–368 WASHINGTON : 2018

CARE WHERE IT COUNTS: ASSESSING VA’S 

CAPITAL ASSET NEEDS 

HEARING 

BEFORE THE

COMMITTEE ON VETERANS’ AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

WEDNESDAY, JULY 12, 2017 

Serial No. 115–22 

Printed for the use of the Committee on Veterans’ Affairs 

( 

Available via the World Wide Web: http://www.fdsys.gov 

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(II) 

COMMITTEE ON VETERANS’ AFFAIRS 

DAVID P. ROE, Tennessee, Chairman 

GUS M. BILIRAKIS, Florida, Vice-Chairman 

MIKE COFFMAN, Colorado 

BRAD R. WENSTRUP, Ohio 

AMATA COLEMAN RADEWAGEN, American 

Samoa 

MIKE BOST, Illinois 

BRUCE POLIQUIN, Maine 

NEAL DUNN, Florida 

JODEY ARRINGTON, Texas 

JOHN RUTHERFORD, Florida 

CLAY HIGGINS, Louisiana 

JACK BERGMAN, Michigan 

JIM BANKS, Indiana 

JENNIFFER GONZALEZ-COLON, Puerto 

Rico 

TIM WALZ, Minnesota, Ranking Member 

MARK TAKANO, California 

JULIA BROWNLEY, California 

ANN M. KUSTER, New Hampshire 

BETO O’ROURKE, Texas 

KATHLEEN RICE, New York 

J. LUIS CORREA, California 

KILILI SABLAN, Northern Mariana Islands 

ELIZABETH ESTY, Connecticut 

SCOTT PETERS, California 

JON TOWERS, Staff Director 

RAY KELLEY, Democratic Staff Director 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Veterans’ Affairs are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 

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C O N T E N T S 

Wednesday, July 12, 2017 

Page 

Care Where It Counts: Assessing VA’s Capital Asset Needs ............................... 1 

OPENING STATEMENTS 

Honorable David P. Roe, Chairman ....................................................................... 1 

Honorable Timothy J. Walz, Ranking Member ..................................................... 2 

WITNESSES 

The Honorable Anthony Principi, Former Secretary , U.S. Department of 

Veterans Affairs ................................................................................................... 4 

Prepared Statement ......................................................................................... 35 

Roscoe G. Butler, Deputy Director for Health Care, Veterans Affairs and 

Rehabilitation Division, The American Legion .................................................. 6 

Prepared Statement ......................................................................................... 36 

Debra Draper, Director, Health Care Team, Government Accountability Office ......................................................................................................................... 7

Prepared Statement ......................................................................................... 38 

James M. Sullivan, Director, Office of Asset Enterprise Management, U.S. 

Department of Veterans Affairs .......................................................................... 9 

Prepared Statement ......................................................................................... 44 

Accompanied by: 

Regan Crump MSN, DrPH, Assistant Deputy Under Secretary for Health, 

Policy, and Planning, Veterans Health Administration, U.S. Department of Veterans Affairs 

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CARE WHERE IT COUNTS: ASSESSING VA’S 

CAPITAL ASSET NEEDS 

Wednesday, July 12, 2017 

COMMITTEE ON VETERANS’ AFFAIRS, U. S. HOUSE OF REPRESENTATIVES, Washington, D.C. 

The Committee met, pursuant to notice, at 10:00 a.m., in Room 

334, Cannon House Office Building, Hon. David P. Roe [Chairman 

of the Committee] presiding. 

Present: Representatives Roe, Coffman, Wenstrup, Poliquin, Higgins, Bergman, Banks, Gonzalez-Colon, Walz, Takano, Brownley, 

Kuster, O’Rourke, Rice, and Correa. 

OPENING STATEMENT OF DAVID P. ROE, CHAIRMAN 

The CHAIRMAN. Good morning, and the Committee will come to 

order. Welcome and thank you all for joining us at today’s hearing 

entitled, Care where it Counts: Assessing the Department of Veterans Affairs’ Capital Asset Needs. 

Though this morning’s hearing is ostensibly about VA’s management of its extensive capital asset portfolio, it is actually about 

something else altogether: patient care. VA is one of the Federal 

government’s largest property holding entities with a capital asset 

portfolio that includes thousands of medical facilities spanning 

hundreds of millions of square feet in both owned and leased space 

across the country. Managing and maintaining those properties 

and aligning them to meet the ever changing shifts in patient population and in healthcare demand and delivery is increasingly complex and costly. And I might add that the private sector is doing 

the same thing with bricks and mortar because of how medicine’s 

practice today is changing. 

The average VA medical facility building is five times older than 

the average building in a not for profit hospital system in this 

country and was designed and built to meet very different 

healthcare needs and delivery models than we see today. The consequences of this have been well documented in recent years by entities including the independent assessment, the Commission on 

Care, and the Government Accountability Office. All too often current facilities, including those that have been well maintained, are 

not equipped to support the provisions of modern high quality care 

and are not well suited to providing care in the current VA 

healthcare system. VA does not consistently allocated capital to 

projects that address the greatest areas of veteran needs in the 

most cost effective and timely manner. There is a wide and growing 

gap between VA’s capital need and the antiquated and anticipated 

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resources. And previous efforts to align and realign VA capital assets have failed. 

What is more, due to shifts in the veteran population VA spends 

millions of dollars, taxpayer dollars, every year maintaining buildings that are empty or largely so. That led the Commission on Care 

to include this startling statement in their final report last year, 

and I quote, ‘‘VHA’s principal mission is to provide healthcare to 

veterans, yet over time has acquire an ancillary mission, caretaker 

of an extensive portfolio of vacant buildings.’’ That is an extraordinary statement. VA’s primary mission is caring for veterans and 

it is those veterans, those veteran patients, who bear the brunt of 

the consequences of VA’s lack of physical infrastructure. 

We can no longer continue to allow VA’s outdated, inflexible, and 

ill-suited capital asset program to compromise the department’s 

core mission and the care provided to millions of our veterans. That 

is why I am calling this morning a top to bottom review of all VA 

Health Administration capital assets. This is not something for the 

VA or her champions to fear. As one of our witnesses, former VA 

Secretary Anthony Principi will testify this morning, quotes, ‘‘VA 

will fail to honor our Nation’s commitment to its veterans if VA’s 

medical systems do no evolve with the times.’’ 

Rather than continuing to invest valuable resources on infrastructure in many cases long past its prime, we need to take an 

objective view of all VA medical facilities and smartly plan for 

where and how we can divest of buildings and property that are 

no longer needed, and more importantly for where and how we can 

grow to ensure that VA medical facilities maintain strong assets in 

communities across the country and are equipped to provide the 

care and services veterans need. 

As the veteran population continues to shift, care continues to 

evolve. VA’s infrastructure continues to age and veteran demand 

for care in the community continues to grow. A capital asset review 

and realignment free of political influence is critical to ensuring 

that the VA healthcare system remains strong and sustainable for 

veterans today and tomorrow. 

I will now yield to Ranking Member Walz for any opening statements that he may have. 

OPENING STATEMENT OF TIMOTHY J. WALZ, RANKING 

MEMBER 

Mr. WALZ. Well I thank the Chairman, and I want to thank our 

distinguished panel. And Secretary Principi, it is great to have you 

back and I think it is worth noting there is probably no one else 

in America knows the very issue we are going to talk about today 

more than you. And we are grateful you would find the time to 

come and help us with this. 

I would also like to thank the Chairman. I know it goes against 

my Minnesota Lutheran roots to, if you do a good deed and talk 

about it, it does not count, is the way we see these things. But I 

am going to talk about it. I think it has become obvious in the 

short time of this new Congress that this Committee is committed 

to tackling the big issues, to finding bipartisan issues, and to getting them done. And I am certainly glad that this is one the Chairman decided to take on also. It is important. 

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It is a complex and vast issue plaguing VA’s ability to effectively 

manage its incredibly large capital asset portfolio are daunting. I 

do think it is worth noting the numbers even for those of us up 

here. VA owns over 6,000 buildings encompassing over 151 million 

square feet. If we were as a Committee to go visit each one of these 

buildings and spend an hour getting there and going between each 

one and we did that eight hours a day, seven days a week, 365 

days of the year, we would finish in three years getting through 

them. This is a massive undertaking and it is one that we need to 

get our minds wrapped around. 

VA and Congress has been very aware of this issue since the late 

1990s when the CARES Commission was established under the direction of Secretary Principi. However, GAO’s recent report shows 

little progress has been made in improving the capital management. The effective management of VA’s vast and aging capital 

asset portfolio is intimidating, yet it is incredibly important and 

one I hope that we are willing to get done. 

Recently GAO has found that VA has neither the process nor the 

data necessary to make a long term decision regarding the alignment of its facilities to the needs of veterans. Today GAO is going 

to testify that both the VAIP and the SCIP are ineffective and significantly flawed. The VAIP process is meant to determine veteran 

needs, simply put, while the SCIP process is meant to produce a 

long term plan to align VA capital assets with that need. These 

processes are absolutely crucial to VA’s ability to strategically determine gaps in VA capacity to meet veterans’ need and then to 

produce a long term plan to cover the gaps. But buildings do not 

deliver care and benefits. VA staff inside those buildings do. However, VA is unable to determine the amount of care its staff yields 

or has the potential to yield. Therefore, VA is unable to ensure existing structures are fully utilized by a highly productive staff and 

how that translates into veterans’ care. In an age of billion dollar 

medical facilities, this determination is absolutely imperative and 

it is unacceptable we do not have it. 

Tomorrow GAO is going to testify in front of the Health Subcommittee that VHA also lacks the ability to accurately determine 

the level of clinical productivity and efficiency of its healthcare providers. How can VA determine a building is necessary to meet a 

veteran’s need when VA at this time cannot determine how much 

need is being met using the existing building? Complex problems 

demand complex solutions. 

The failure of the CARES Commission to execute its recommendation proves that a commission is not enough. The cost of 

VA capital asset maintenance proves time is not on our side. I hope 

we, along with VA, are able to thoroughly consider pragmatic and 

timely solutions to the many costly issues impacting VA’s ability to 

manage its care. And as the Secretary said, this is going to take 

courage. It is going to transcend politics. If it is not done now, we 

can no longer kick this can down the road. Because if we do, the 

ability to deliver that care and the capacity to deliver that care will 

be diminished. And all of us here have a commitment to making 

sure that does not happen. 

So Mr. Chairman, I once again thank you for tackling the tough 

problems and I look forward to hearing from our witnesses. 

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The CHAIRMAN. Thank you, Mr. Walz. And joining us on our first 

and only panel this morning is the Honorable Anthony Principi, 

former Secretary of the U.S. Department of Veterans Affairs. And 

welcome, Mr. Secretary. Mr. Roscoe Butler has been here many 

times, the Deputy Director of Healthcare for the Veterans Affairs 

and Rehabilitation Division of the American Legion. Thank you for 

being here. Debra Draper, the Director of the Health Care Team 

for the Government Accountability Office. Again, many times here. 

And Jim Sullivan, the Executive Director of the Office of Asset Enterprise Management for the Department of Veterans Affairs, who 

is accompanied by Dr. Regan Crump, the Assistant Deputy Under 

Secretary for Health Policy and Planning at the Veterans Administration, and welcome. Thank you all for being here. And Secretary 

Principi, we will begin with you and you are now recognized for 

five minutes. 

STATEMENT OF ANTHONY PRINCIPI 

Mr. PRINCIPI. Thank you, Mr. Chairman and Ranking Member 

Walz, Members of the Committee, it is certainly an honor to be 

back before you this morning. And I just commend you for the 

working relationship that all Members have. And veterans should 

be reassured that you are tackling the tough issues. So thank you 

very, very much. 

Medical care is a key component of the benefits and services enacted by Congress in recognition of the sacrifices of the men and 

women whose service in uniform preserved and protected our Nation’s freedoms. Neither medical science nor the veteran population 

is static and unchanging and VA must always provide veterans 

with modern, high tech facilities to offer them high quality 

healthcare. The department will fail to honor our Nation’s commitment to its veterans if VA’s medical system does not evolve with 

the times. 

VA is a proud organization with a great history. The department 

has made enormous contributions to American healthcare across 

the spectrum of care, research, rehabilitation, and has been a lifeline for tens of millions of veterans returning to our shores. But 

many VA medical centers were designed and built in an era in 

which medical care was synonymous with hospital care and long 

term psychiatric care, facilities built in the twenties and thirties, 

1,700 beds, still in existence today, with an average daily census 

of maybe 166 patients. American medicine and VA healthcare has 

transformed itself from hospital centered to patient centered treatment. Most veterans, like most Americans, see their physicians on 

an outpatient basis and much treatment is provided by prescription 

drugs. 

However, while the practice of VA medicine has evolved, VA 

medical infrastructure has not kept pace. VA facilities are out of 

step with changes in the practice of medicine and with the statutory changes in VA’s healthcare benefits package. In addition millions of veterans following the population migration patterns of the 

Nation have moved to different parts of the country. And as GAO 

noted in its recent report on VA real property, the new Choice program has also reduced the need for some VA facilities and services 

VA offers. If VA does not realign itself, the current decline in the 

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veteran population will make many VA medical centers museums 

of the past, not the guideposts for the future they should be to care 

for our Nation’s veterans. 

When I became Secretary in 2001, President George Bush reminded me that every dollar my agency spends is a dollar taken 

out of someone else’s hard-earned pay. It is not how much money 

you are given in your budge, he told me that is important. He said 

it is whether you spend the money wisely. We are stewards of the 

public trust, he reminded me, and we must never forget that. I had 

an opportunity to recall his words a short time later when I was 

stuck in traffic in New York City. As my car idled in front of VA’s 

Manhattan Hospital, I looked up at the hospital’s enormous bed 

tower. Among the hundreds of windows looking out on First Avenue, only a handful were lit. I did not know what to make of it. 

I learned a short time later when I returned to Washington that 

the hospital was one of many built in the 1940s and fifties to handle the influx of ill and injured World War II and Korean War veterans. It once held 800 veterans, as did nearby hospitals in the 

Bronx and Brooklyn. I was told that the three hospitals that night 

were caring for only 283 veteran patient’s altogether. All the other 

beds were empty and there were tens of thousands of empty beds 

throughout VA’s system. 

Accordingly I commissioned a comprehensive assessment of VA’s 

capital infrastructure and the demand for VA healthcare. The process was called Capital Asset Realignment for Enhanced Services, 

CARES, and was modeled on DoD’s infrastructure review process. 

The CARES Commission offered sound recommendations for realignment and reallocation of the department’s capital assets to 

meet demand of VA’s services over the next 20 years. 

Unfortunately the CARES and DoD processes differed in one 

way. Under CARES there was no requirement for Congress to 

adopt or reject the commission’s final recommendations as a package. As a result, recommendations for some needed new hospitals 

and outpatient clinics were accepted. Most of those to change, realign, or maybe close the mission of other facilities were rejected. 

I know that the difficulties of agreeing to such a procedure for 

Members of Congress cannot be overstated. Having served as the 

Chairman of the 2005 Defense Base Closure and Realignment 

Commission, BRAC, I know firsthand from visiting many of the 

military installations slated for closure or realignment now trying 

this process can be for you and your states. The closure and realignment are easy to write on paper but they have profound effects on communities and the people who bring those communities 

to life. But VA is simply spending too much money on bricks and 

mortar rather than doctors and nurses. 

VA’s current budget request is $186.5 billion. In my last year as 

Secretary, in 2005, that figure was $69.4 billion, a 268 percent increase. We are doing a disservice to the veterans VA is charged to 

serve and to the American people if those resources are not used 

wisely and well. Our Nation simply cannot afford to maintain a 

vast infrastructure built for a different time and healthcare delivery that was to care for tens of millions of veterans as they returned from World War II, Korea, and Vietnam, and even from earlier conflicts. 

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One other area in which there is an opportunity for both enhancing and using taxpayer dollars more wisely is for VA and DoD to 

more widely share facilities and services at local levels. There are 

many DoD hospitals that have very low inpatient census as well. 

This is one of the CARES Commission’s recommendations and 

more can be done in this area. 

A full review of VA’s infrastructure, Members of the Committee, 

is the right thing to do. A review that is open, transparent, and 

apolitical. Those impacted by the decisions deserve no less. Thank 

you very much. 

[THE PREPARED STATEMENT OF ANTHONY PRINCIPI APPEARS IN

THE APPENDIX]

The CHAIRMAN. Thank you, Mr. Secretary. Mr. Butler, you are 

recognized for five minutes. 

STATEMENT OF ROSCOE G. BUTLER 

Mr. BUTLER. Thank you, Mr. Chairman. Each year since 2003 

the American Legion System Worth Saving Program has conducted 

site visits to VA healthcare facilities across the country. One thing 

we find in common is that VA has enormous amounts of aging 

buildings that are either underutilized or vacant. VA has a large 

inventory of buildings that are over a half century old, resulting in 

significant costs for upgrades and needed replacements of many 

parts of the facilities’ aging infrastructures. 

As I mention in my written statement, GAO has been reporting 

on this issue dating back to 1991, or probably even earlier. GAO 

published a report title, VA Struggling to Respond to Asset Realignment Challenges. It has been 26 years since the 1991 GAO report was issued and we are here again today to have an open and 

candid discussion on how to address VA’s capital asset needs. 

Good morning, Chairman Roe, Ranking Member Walz, and Members of the Committee. On behalf of our National Commander 

Charles E. Schmidt, and the over three million voting members of 

our largest wartime veterans service organization, we want to say 

thank you for conducting this hearing that addresses VA’s capital 

asset needs. 

Today the Veterans Health Administration is the largest integrated healthcare system in the United States, providing care at 

over 1,233 healthcare facilities, including 168 medical centers, and 

1,065 outpatient sites of care of varying complexities serving more 

than 8.9 million veterans. In spite of the exceptional healthcare VA 

provides, its aging infrastructure with a number of buildings being 

underutilized or vacant, creates problems for VA to maximize the 

use of its capital assets. 

According to information provided by VA in fiscal year 2016, VA 

had 403 vacant buildings at an annual operating cost of $6,674,227 

and 784 underutilized buildings at an annual operating cost of 

$20,266,271. VA defines an underutilized building as an individual 

building that is occupied and in use, but the functions housed there 

do not require the full amount of space in the building to operate. 

If there was unlimited funding the easy answer would be to dispose of all of VA’s vacant buildings and build new modern facilities. 

But the reality is that funding is not unlimited and there are no 

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easy answers to these questions. Which is why everyone is here 

today to have an open and candid discussion to address VA’s aging 

capital asset portfolio. 

In 2016 the American Legion renewed Resolution 136, Strategic 

Capital Investment Planning Program, which urges Congress to 

provide increased appropriations annually to address Department 

of Veterans Affairs construction deficiencies and gaps identified by 

VA’s strategic capital investment planning program. VA includes 

activation costs in their future SCIP cost projections and allocations so that VA’s budget will not have to offset this lack of funding 

and VA continues to be transparent about SCIP’s progress by publicly posting information about projects and costs on an annual 

basis. 

Based on the American Legion’s review, addressing VA’s capital 

asset need is not a new phenomenon. There have been numerous 

government reports over the last 26 years addressing the same topics. However, countries around the world have placed high value in 

their historic properties, such as historic capitals, and the United 

States visitors frequently visit Washington’s monuments and the 

Lincoln Memorial for its historic contributions to this Nation’s historic value. In the past, our System Worth Saving team has visited 

the Hot Springs, South Dakota medical facility, which was designated as a historic national property. Subsequently, VA was pursuing to close that facility until Dr. Shulkin overturned the former 

administration’s decision. The American Legion calls on Congress 

and VA to place high value on VA’s historic national properties. 

The American Legion is concerned that VA has not routinely, actively engaged veterans service organizations in the discussion 

about their plans to address VA’s capital asset needs. VA must do 

better involving VSOs in these discussions. 

Twenty-six years later, we are still trying to find solutions to 

VA’s capital asset needs. The American Legion hopes it does not 

take another 26 years to find solutions to VA’s capital asset needs. 

The American Legion thanks this Committee for this opportunity 

to explain the position of the over three million voting members of 

the American Legion. Thank you. 

[THE PREPARED STATEMENT OF ROSCOE G. BUTLER APPEARS IN

THE APPENDIX]

The CHAIRMAN. Mr. Butler, thank you. And full disclosure, I just 

mailed my 2018 dues in before I came back. 

Mr. BUTLER. Thank you, sir. 

The CHAIRMAN. Ms. Draper, you are recognized for five minutes. 

STATEMENT OF DEBRA DRAPER 

Ms. DRAPER. Chairman Roe, Ranking Member Walz, and Members of the Committee, thank you for the opportunity to be here 

today to discuss VA’s capital asset program, including our recently 

issued report that examined VA’s efforts to align its medical facilities with veterans’ needs. 

VA is one of the largest property holding agencies in the Federal 

government. In 2014 VA reported that its inventory included more 

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ties are underutilized and outdated, creating a variety of challenges 

for alignment. 

As we discussed in our recent report, there are a number of factors that affect the department’s alignment efforts. First, VA 

projects a 14 percent decrease in the veteran population by 2024. 

And as the map on the screen shows, up on the board, it also expects a continued migration of veterans from the Northeast and 

Midwest areas of the country to areas in the South and West, a 

trend that also mirrors that of the general population. 

Second, similar to trends in the healthcare industry overall, VA’s 

model of care continues to shift away from inpatient to outpatient 

settings of care, the latter of which VA generally houses in converted inpatient space or in a growing number of outpatient clinics. 

The photo is of a closed inpatient wing at the Brooklyn facility. 

Third, although VA has traditionally provided care primarily 

through its own facilities, it is increasingly relying on care provided 

in the community. 

Fourth, an aging infrastructure affects facility alignment because 

many VA facilities are not well suited to provide care in the current environment, as the photo of an outdated double occupancy 

room at the Manhattan facility shows. The average age of a VA 

medical facility is 60 years, which is five times older than that of 

an average not for profit hospital building. 

Facility planning officials told us that it is often too difficult and 

costly to modernize, renovate, and retrofit older facilities. Photos 

from the Waco facility illustrate these challenges. 

And finally, the historic status of some VA properties adds to the 

complexity of alignment. VA has approximately 3,000 historic 

buildings, structures, and land parcels, the third most in the Federal government. In some instances renovations may be more expensive but demolition and rebuilding may not be an option given 

the historic designation. These photos of buildings, of structures 

designated as historic from the Kerrville, Chillicothe, and Waco facilities provide good examples. 

VA has recognized the need to improve planning and budgeting 

for modernizing its aging infrastructure and aligning its facilities 

with veterans’ needs. A previous effort at doing this, known as 

CARES, was never fully implemented and was halted about eight 

years ago. VA has more current efforts to align its facilities with 

veterans’ needs, including the SCIP process and the integrating 

planning process. However, both of these have limitations. 

VA relies on the SCIP process to plan and prioritize its capital 

projects. But limitations, such as subjective narratives, long timeframes, and restricted access to information underlie VA’s ability to 

achieve its goals. For example, the time between when facility 

planning officials begin developing the SCIP narratives and when 

they are notified that a project is funded has taken between 17 and 

23 months over the past six fiscal years’ SCIP submissions. While 

some of the budget timing is outside of VA’s control, delays in reporting of the SCIP results has made it difficult for local officials 

to understand the likelihood that their projects would be funded. 

The integrated planning process also has limitations. Among 

other goals, it is intended to produce facility master plans for every 

VA medical center at a total cost of more than $100 million when 

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complete. A significant limitation to this process is that it assumes 

that all future growth in services will be provided directly through 

VA facilities, an inaccurate assumption given the increasing role of 

care in the community. Some local VA officials told us that they bypass the integrated planning process and instead contract for their 

own facility master plans. 

Additionally, VA has faced stakeholder challenges to its facility 

alignment actions, including from veterans, state, local, and Federal officials, employees, historic preservation groups, and others. 

We found that VA has not consistently followed best practices for 

effectively engaging stakeholders in these decisions or evaluated 

the effectiveness of their stakeholder communication strategies. 

In conclusion we have made several recommendations that if implemented could improve VA’s ability to plan for and facilitate its 

alignment efforts. Specifically we recommended that VA improve 

the SCIP process; discontinue or improve the utility of the integrated planning process; and improve communications with stakeholders. 

Mr. Chairman, this concludes my opening remarks. I am happy 

to answer any questions. 

[THE PREPARED STATEMENT OF DEBRA DRAPER APPEARS IN THE

APPENDIX]

The CHAIRMAN. Thank you, Ms. Draper. Thanks very much. And 

Mr. Sullivan, you are now recognized for five minutes. 

STATEMENT OF JAMES M. SULLIVAN 

Mr. SULLIVAN. Good morning, Chairman Roe, Ranking Member 

Walz, and Members of the Committee. I am joined by my colleague, 

Dr. Regan Crump, and we are here today to discuss VA’s capital 

asset needs, and we acknowledge the many challenges that face us 

as we attempt to modernize the VA healthcare system. 

VA’s mission is distinct compared to other agencies. We operate 

the largest integrated healthcare system in the Nation, with 135 

national cemeteries, 1,700 hospitals, clinics, and facilities used to 

provide benefits and services to our veterans. Our portfolio consists 

of approximately 180 million square feet, 86 percent of which is 

owned, and in many cases the average age of a facility exceeds 60 

years. 

Most of our infrastructure is in need of repair and replacement 

and requires considerable investment. VA has more than $50 billion in capital needs to upgrade existing facilities or replace existing facilities to meet modern healthcare standards. 

Secretary Shulkin has made it one of his top five priorities to 

modernize the VA system. We are supporting his priority by getting rid of buildings that are no longer needed to provide services 

to veterans. We have identified 430 individual vacant buildings, totaling six million square feet across the country. It costs VA an average of $7 million a year to operate these buildings and we want 

to redirect these resources to services. 

We are initializing disposal and reuse actions for these 430 vacant buildings over the next two years. VA will begin performing 

due diligence, ensuring compliance with applicable laws and regulations, and initiate disposal or reuse transactions. In the last 30 

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10 

days alone, we commenced the process for 71 vacant buildings 

through an enhanced use lease for repurposing buildings at Perry 

Point, Maryland, 54 buildings, and we completed the excessing 

process to GSA of the hospital in Pittsburgh, Pennsylvania, which 

was 17 buildings. 

While we are working with an aggressive timeline to address our 

vacant buildings, we anticipate hurdles that may slow us down. 

Some challenges that can impact our timeline include the lengthy 

processes associated with the National Historic Preservation Act, 

the National Environmental Policy Act, and the location and condition of buildings, and local and national stakeholder concerns. VA 

welcomes any support from Congress to streamline these processes 

so that we can more efficiently and effectively manage our assets. 

While challenges do exist, and there are many, we have made 

some progress in reducing unneeded buildings. Since 2004 we have 

disposed or reused over 1,000 buildings, totaling approximately 

eight million square feet and about 1,000 acres. One of the most 

successful tools we have experienced using is our enhanced use 

lease authority. EUL allows VA to out-lease assets to private and 

public sector entities for repurposing. Currently we can out-lease 

vacant buildings and excess land in return for supportive housing 

for homeless veterans and their families. This program has provided significant benefits to VA in terms of cost savings, improved 

facilities, and increased services to our veterans. 

To date over four million square feet has been out-leased through 

EUL and we have in place 2,700 operational housing units across 

the country. VA previously had a broader EUL authority but that 

expired in 2011, and our 2018 budget includes legislation requesting the reintroduction of a broader scoped EUL. 

VA needs your help and welcomes any new or expanded tools to 

address our most challenging issues that we have. Our 2018 budget 

includes proposed legislation to increase VA’s flexibility to meet 

some of these needs. The budget includes proposals, one, to increase the threshold for the minor construction program to $20 million; eliminate statutory impediments acquiring joint VA facilities, 

much as Secretary Principi mentioned in his testimony; expanded 

EUL authority; and providing for the authorization of 28 major 

medical leases to serve the outpatient needs of our veterans. In 

terms of addressing recommendations of the independent assessment, the Commission on Care, and GAO, VA agrees with the majority of these recommendations and recognizes we need to do better. We are working towards that goal of a high performing 

healthcare network that takes into account current and future veteran demand. VA partnered with private sector experts to conduct 

objective assessments and develop local healthcare modernization 

optimization plans. The primary outcomes of this assessment will 

be plans for each market across the country to develop a high performing healthcare network which will then feed into VA’s capital 

planning process, SCIP. Once the market assessments are complete, recommendations may include needed capital investments, 

divestitures, partnerships, and other approaches to modernize VA’s 

infrastructure. These investments then will be prioritized and included in future budget requests. VA expects the market area optiLeonard.horne on VACREP0180 with DISTILLER

11 

mization plans will address many of the issues raised by GAO, the 

commission, and the independent assessment. 

Mr. Chairman, Ranking Member, and Members of this Committee, this concludes my statement. We welcome any suggestion 

and as we confront this major challenge facing the VA. I am happy 

to respond to any of your questions. 

[THE PREPARED STATEMENT OF JAMES M. SULLIVAN APPEARS IN

THE APPENDIX]

The CHAIRMAN. Thank you, Mr. Sullivan. And I thank all of the 

members of the group that is here today. And I want to start by 

just saying a couple of things. 

One, this is very hard. And this is not glitzy stuff but this has 

got to be done. And I appreciate what each one of you bring to the 

table. And as I said in my opening remarks, that the private sector 

is undergoing exactly the same thing. The hospital that my two 

children were born in in Memphis was at the time the largest private hospital in the world, 2,000 beds, Baptist Memorial Hospital. 

That hospital is gone. It has been dropped. And they have now 

downsized to a more efficient, you know, 21st Century model where 

care can be given. And there were just hundreds and hundreds of 

empty beds in that hospital. And they realized years ago they had 

to change their model. And I think the VA is undergoing exactly 

the same thing as the private sector is doing now. 

And Mr. Butler, you brought up some great points about the historic buildings. And I think we need to look at public-private partnerships, what we can do with these. We have one in my local VA 

at home that is a medical, basically a museum that could be used. 

But if you engage the private sector and let them maintain the 

building, there are a lot of options out there that we could do to 

maintain these historic buildings and have them used for other 

purposes. And certainly not just bulldoze them. I think there are 

many communities that would love to do that and share that rich 

culture in their community. 

I think Walter Reed is an example. We realized that fixing Walter Reed just was not, I mean, as much as I loved going over there, 

it was just too much of an investment for modern healthcare. So 

we moved it out to Bethesda and to a more modern facility. So I 

think the DoD has done some of that and I think VA is going to 

do that. 

And let me just ask, any of you can answer that, how can you 

elaborate on how patient care is impacted by aging infrastructure? 

And would it be fair to say that access to care is in some cases negatively impacted by the limitations of an aging VA medical facility? 

And any one of you can take that question. 

Mr. PRINCIPI. I will start, Mr. Chairman. I certainly think that 

is the case. If you are devoting scarce resources to bricks and mortar, you are taking care away from veterans. And I think first and 

foremost we have to provide high quality care to veterans, whether 

it be in a high tech inpatient facility, outpatient clinic, or the community. Public-private partnership, as this Committee has advocated. So I think there is an impact on quality of care. And unless 

changes are made I think it will continue to do so. 

The CHAIRMAN. Mr. Butler? Yes, sir? 

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12 

Mr. BUTLER. Hot Springs, South Dakota is a prime example, 

where that facility is a national historic designated facility. And it 

was a facility that was designated to be closed. The community was 

in uproar because of that decision. It would place veteran having 

to drive much further to other facilities to obtain their care because 

care in the local community was not available for them. And so I 

think you have to look at everything in totality to make sure that 

when you make those decisions, you are taking everything that 

needs to be considered in play to make sure that the veterans’ care, 

they can receive the best care. Regardless of it is in a VA facility 

or it is outside the VA facility. But you have to ensure that if you 

are closing, if the recommendation is to close a facility, that the 

veteran can obtain that quality care elsewhere that is convenient 

for the veteran and does not cause hardship to the veteran. 

The CHAIRMAN. I could not agree more. I think if you are doing 

that, you should be able to show that actually that quality of the 

care will go up, not lose quality. I could not agree more with that. 

Mr. Sullivan, how much total resources are spent maintaining 

space that is either vacant or largely vacant across the entire, you 

may not know this, across the entire VA system? 

Mr. SULLIVAN. The cost we are spending is about $7 million annually. If we include what is underutilized as well, it comes to 

about $29 million. 

The CHAIRMAN. And so that is a building that is there, that is 

very underutilized or— 

Mr. SULLIVAN. It is a building, if you look at the example, if you 

had a clinic that had 100,000 square feet and your real requirement based upon veteran need is 10,000 square feet, but you are 

using 100,000 to serve them, then that is what an underutilized facility would be. 

The CHAIRMAN. They did not start the clock on me until some 

time, so I think I have run out of time. I am not sure. So I am 

going to yield to Mr. Walz. 

Mr. WALZ. He is kind, I agree. So well thank you all. And great 

testimony, and I think teeing up where we are at. So I am going 

to cut right to the chase, Mr. Secretary, with you is in your opinion, 

I think we all probably know the answer but it is important I think 

to hear it in this setting, what was the biggest barrier towards the 

implementation of the full CARES Commission? And how would 

you suggest we do not make that same mistake? 

Mr. PRINCIPI. Well I think the clearest limitation, and I might 

add I was very proud of the CARES process. I think the team did 

an extraordinary job. It was data driven. It was based on sound information. And very importantly, I insisted that there be listening 

sessions. That they travel around the country and talk to the communities, talk to labor, talk to management, and really get their 

insight because it is a difficult process. But the clearest, and the 

veterans organizations were fully behind the CARES process and 

they stood with me when the decisions were made. But obviously 

unlike the DoD process, when you do not have some teeth behind 

it, it will fail. The pluses were good but those that wanted to realign or close a facility became difficult because of the political 

process, which I enormously respect. It becomes very, very difficult. 

And I tried to point that out in my testimony. 

Leonard.horne on VACREP0180 with DISTILLER

13 

So I think that this Committee, I urge this Committee to create 

a commission. Allow the Secretary, who I think is doing a great job, 

allow him to come up with the recommendations, submit them to 

a bipartisan commission, and give the commission some teeth 

based on their decisions. Submit the plan to Congress and let the 

Congress vote on the plan up or down, rather than singling out individual facilities. 

Mr. WALZ. No, I appreciate that. Mr. Butler, I am, up here I was 

just showing the photo around. I am very familiar with Hot 

Springs. I lived in Chadron, Nebraska and then in Pine Ridge for 

a while. I think people need to know that facility is drawing from 

South Dakota, Nebraska, and Wyoming and it is pretty open out 

there. And that is probably one of the most beautiful VA buildings. 

The administration building is gorgeous. So I think trying to balance these things about how do we save some of these assets in 

terms of their historic value but that one always comes up with me 

because of the massive number of beds. And I think that one might 

be utilized three beds a night because of this change. So I am very 

cognizant of that. 

I want to come back to the process, and maybe this is for Ms. 

Draper, and to you, Mr. Sullivan, about what we are trying to get 

to. And Ms. Draper, first of all, based on what you know, are either 

the VAIP or the SCIP processes truly reflective of veteran need, VA 

resources, and stakeholder concerns when managing capital assets? 

Is this the best practice way to do this? 

Ms. DRAPER. Well we have found limitations with both, as I 

talked about. But one of the issues with the SCIP process, it is supposed to be a ten-year planning process but the emphasis is really 

on the first year. So what local facilities told us is they often to address gaps identified through the SCIP process, they often put 

projects in out years that they never intend to actually undertake. 

So really the focus is on the first year. It is not a long term planning process, as we found and we talked about in our report. 

There are also many limitations with the integrated planning 

process. One is that it does not account for the care in the community, which is a major assumption that should be considered because you do not want to simultaneously develop new capacity 

while you are also getting it delivered in the community. But it 

also has other limitations. For example, the costs do not include all 

the life cycle costs of a project. So there are operating costs that 

are not included that, you know, which OMB recommends they be 

included. There is a lack of standardization in the facility master 

plans. So they have different contractors doing the master plans. 

And so there is a lot of variation. So it is really difficult to determine how comparable they are. And then the other thing, and I 

think we have talked about this, is accountability. So there are recommendations that come out of the integrated planning process but 

there are no requirements for those to be implemented. 

Mr. WALZ. That is the question, and I think, ma’am, I am going 

to leave it to my colleagues. They will have questions to ask because obviously in this, and I am sure Mr. Coffman will bring up, 

in this planning process was certainly the Denver VA facility. And 

this year I am wondering how does all this fit together? When we 

see the VA’s budget request a cut to construction by 4.3 percent, 

Leonard.horne on VACREP0180 with DISTILLER

14 

was that budget crafted by looking at these things, putting it together, deciding how we are going to dispose of these buildings? 

How we are going to repurpose? And what we need to do to build? 

I just wonder, and I know it is out there and I do not want to be 

that person who drives by a construction project and thinks, I know 

better than how it is done, or why it was decided to do that, but 

I as a Member of this Committee am having a hard time understanding how we are making those decisions. So I want to just 

leave that lay out there. That I think we need to know how did we 

come up with our budgeting number? How do we know what we 

really need? Because I am still not convinced we know how to utilize that. And I yield back. 

The CHAIRMAN. I thank the gentleman for yielding. Dr. 

Wenstrup, you are up. 

Mr. WENSTRUP. Thank you, Mr. Chairman. Thank you all for 

being here today. And I think it is important to note that this Committee is dedicated to the care of our veterans as well as respecting 

the history of the VA and this Nation. So as we move forward, we 

are going to be facing challenges. 

One of the things I have harped on since I have been here is 

really knowing how productive we are when it comes to patient 

care. And I have always talked about relative value units, RVUs, 

and using that as one standard of measure. So Mr. Sullivan or Dr. 

Crump, maybe you can answer for everyone, how exactly doctors 

that are providing for our veterans in the Choice program, how are 

they paid? 

Mr. CRUMP. Today in the Choice program doctors are paid based 

on a fee basis. And so we are using the Medicare rates for— 

Mr. WENSTRUP. Which is RVUs, correct? Relative value units? 

Mr. CRUMP. Well some of the basis of the fees is RVUs. 

Mr. WENSTRUP. Right. 

Mr. CRUMP. But it is a fee basis. 

Mr. WENSTRUP. Okay. So we are tracking that. We know how we 

are paying them and what they are producing. So do we track 

RVUs for all of our producers across the entire VA? Do we know 

what they are producing? And I am going back to something I 

think GAO did a couple of years that ended up evaluating what it 

cost in certain facilities for a primary care visit. And it came down 

to when you add up all the expenses of the facility, etcetera, that 

it was really around $400 to $600 per office visit in certain locations. So I think it is important that we are tracking productivity 

as we do this review. So are we able at this time to track RVUs 

of every provider in the VA? 

Mr. CRUMP. What we are doing right now is changing some of 

our methodologies for tracking productivity and we are incorporating the use of RVUs on a national basis. 

Mr. WENSTRUP. But so far that has not been done as like a requirement? 

Mr. CRUMP. It has been done to some extent. 

Mr. WENSTRUP. Because I think, to some extent, I think that is 

really something we have to look at when we are looking at our assets, is how much is actually being produced in a certain facility. 

Maybe it is a physical limitation, or maybe we are just spending 

way too much. It is I think an important tool as we are taking on 

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15 

this challenge to understand what is going on. Because for example, if I was paid $100 per RVU to pay all of my bills in a private 

practice, I could not sustain that very long. And so I think that we 

have to look at that and say, you know, look at our productivity 

per cost. And the other question I have is are there incentives right 

now in the VA management to reduce costs or increase productivity? In other words, reduce costs without reducing productivity? 

Or to increase productivity in some way that we are getting more 

bang for out buck? Are there incentives for that in our management? 

Mr. CRUMP. Dr. Wenstrup, there are provider incentives for productivity. And we are also in the process of one of the largest modernizations of VA healthcare in history. And so improving employee 

performance and productivity is a part of that process. 

Mr. WENSTRUP. But can you take a second to describe what that 

incentive is for a provider? 

Mr. CRUMP. I do not think I would be able to describe the exact 

specification of that methodology today. But we can get back to you 

on it. 

Mr. WENSTRUP. And does it vary? Or is it across the board, do 

you know? 

Mr. CRUMP. It is across the board. 

Mr. WENSTRUP. Okay. Well thank you. Because I think this is 

going to be an important thing going forward. And if it takes us 

mandating that this be one of the tools that we have as we evaluate our assets, then I think that we should do that right here and 

put that into legislation where we understand what we are actually 

producing. And then hopefully at a local level you will have people 

be able to make some decisions that make sense, where you are actually looking at what you are getting. What is your bang for the 

dollar, bang for the buck that we are getting? 

So with that, I want to yield back. But I thank you for that 

input. And I do not know if you have anything to add to that, Ms. 

Draper? 

Ms. DRAPER. I do not. I know that they are working on, you 

talked about productivity, but they do not measure RVUs for every 

specialty that way. So I think they are in the process of looking at 

that, as Dr. Crump talked about. 

Mr. WENSTRUP. Thank you. And I yield back. 

The CHAIRMAN. I thank the gentleman for yielding. Mr. Takano, 

you are recognized for five minutes. 

Mr. TAKANO. Thank you, Mr. Chairman. Mr. Sullivan, of the 430 

buildings that the VA has designated as vacant, how many provide 

some type of direct care to veterans? 

Mr. SULLIVAN. None. 

Mr. TAKANO. None? Okay. How many, how does the VA plan to 

ensure the veterans’ ability, so really, since none of them provide 

direct care, we do not really have a concern about how the VHA 

is going to provide, the veterans, who have, so we do not have veterans that are receiving direct care— 

Mr. SULLIVAN. No. A few of them have some support, some administrative support in them. That will be relocated. 

Mr. TAKANO. Okay. 

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Mr. SULLIVAN. But there is no direct care in any of those buildings. 

Mr. TAKANO. Okay. How was the VA able to determine the percentage of utilization for the 430 vacant buildings? 

Mr. SULLIVAN. It was based upon the folks on the ground, in the 

field, identifying those buildings as vacant or having minimal use. 

Mr. TAKANO. Okay. And of these buildings, so that we mentioned 

that we intend to either dispose or reuse, how many have been determined to be unsuitable for the provision of services to homeless 

veterans? 

Mr. SULLIVAN. In conducting the due diligence, that is one of the 

items that will be looked at. 

Mr. TAKANO. Okay. So it has not really been determined yet? 

Mr. SULLIVAN. There has been an initial review annually to see 

if any of those buildings are candidates for homeless housing. And 

some of them, for example in Perry Point, as I mentioned earlier, 

54 of those buildings are in the 430, came off because we could 

reach a private sector developer to handle the housing of those 

buildings. So there are some, but a lot of them are such condition 

that it really becomes cost effective— 

Mr. TAKANO. So the evaluation is not really complete for all of 

the 430? 

Mr. SULLIVAN. Correct. 

Mr. TAKANO. Okay. Are there current barriers regarding the 

usage of an EUL to ensure the property is determined to be suitable for the purpose of providing services to homeless veterans? 

This question is kind of wordy. So are there barriers regarding the 

usage of an EUL to ensure that the property is determined to be 

suitable for the purpose of providing services to homeless veterans 

are utilized quickly and efficiently? 

Mr. SULLIVAN. The only barriers are actually the financing. So 

from a legislative standpoint, the fix that was made to this program a couple of years eliminated most of the barriers in terms of 

housing. What the barrier would be is if you wanted to go to a 

medical EUL model, which is I think what people have talked 

about earlier, which really probably is the future at VA. If we can 

bring in private sector expertise and private financing to provide 

state of the art facilities, that would require a change to that program or additional authority to that program or a complementary 

program so that we could use that to go out and get needed medical facilities right now where we are restricted to just homeless 

housing or support housing. 

Mr. TAKANO. So , the current statutory framework kind of constrains us to serving the homeless. But if we were to expand into 

a— 

Mr. SULLIVAN. That is correct. 

Mr. TAKANO [continued]. —partnership in the health area, this 

would greatly expand our ability to— 

Mr. SULLIVAN. That would be one of the tools to fill the gap, especially as I believe GAO and others have testified here, we know 

there is not a limitless pot of money to deal with VA facilities. So 

we have to look at another source. And I think tapping private sector financing is the long term solution to our capital needs. And not 

only the capital piece of it in terms of their finance ability that they 

Leonard.horne on VACREP0180 with DISTILLER

17 

would bring to it, but also using some of their expertise using local 

codes and standards, using local practices in the community, so 

when we came in and put a clinic in or a support facility we use 

those standards and those practices there. So that they would be 

financeable and they would also, should VA not have a use for 

them in the future or as time went on, they would easily be reusable by the private sector because we were using their script for 

doing this. And I think that is absolutely key as we go forward. 

And I know we are working within the administration hopefully in 

the President’s infrastructure bill to submit that kind of a proposal 

to Congress. 

Mr. TAKANO. Well Mr. Sullivan, with this in mind, what is the 

status of the public-private partnership pilot program? 

Mr. SULLIVAN. Right now we do not have a true public-private 

partnership program. What we have is the CHIP IN Act, which is 

a donation program that Congress gave us which we really appreciate for five pilot sites. What we would see is a better model, or 

not a better model, but an additional model would be an expanded 

EUL or a true P3 program that would allow us to tap private sector financing and private sector expertise. And I think in this instance there is not one single tool that is going to give us this. I 

think we need to look at it with multiple tools, whether it is EUL, 

P3, other models which other folks on the Committee may have 

ideas on as well. I mean, we need to look at a whole suite of tools 

to be able to deal with this huge challenge we have. 

Mr. TAKANO. Speaking to Members who have districts with some 

of these aging facilities, I mean, I think you are right. I think there 

is a lot of folks that are looking at all sorts of ways they can reuse 

these properties which I believe would not have to be to the detriment of providing the current healthcare needs of the veterans 

that are being served. I yield back, Mr. Chairman. 

The CHAIRMAN. I thank the gentleman for yielding. Mr. Coffman, 

you are recognized for five minutes. 

Mr. COFFMAN. Thank you, Mr. Chairman. And I thank you, Mr. 

Principi, for being here today and for your service to our country 

as the former Secretary of the VA. There are 430 buildings, VA 

buildings, vacant for the most part. Now it is my understanding 

that the Secretary, when you were Secretary, and the Secretary 

now, does not have the unilateral authority to close any of these 

facilities or dispose of any of these facilities, am I correct in that? 

Mr. PRINCIPI. I believe he does have the authority. 

Mr. COFFMAN. He does have the authority? 

Mr. PRINCIPI. Yes, absolutely. And again, it could be stopped or 

rescinded by Congress if they elect to do so. But I believe I had the 

authority to close or realign VA facilities or buildings subject to 

certain limitations. 

Mr. COFFMAN. Okay. Mr. Sullivan? 

Mr. SULLIVAN. Yes. That is absolutely correct. What we are talking about here are individual buildings, and there is no prohibition 

on the closing of individual buildings, except complying with historic, environmental— 

Mr. COFFMAN. Right. 

Mr. SULLIVAN [continued]. —and other regulatory issues that do 

take some time. But there is no prohibition on those. 

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18 

Mr. COFFMAN. But I understand closing, but disposing of? 

Mr. SULLIVAN. There is no prohibition. 

Mr. COFFMAN. Okay. 

Mr. SULLIVAN. We will either reuse it through one of our tools 

or we will do a report of excess and give it to GSA as we have, for 

example, just on the Pittsburgh hospital. 

Mr. COFFMAN. So why have you not moved on the 430 buildings 

that now stand vacant? 

Mr. SULLIVAN. We have. In this case, we have moved on, in the 

last 30 days we have moved on about, I can give you the exact 

number, it was about 71 of them. We expect to move on an additional 71 of them within six months, and within another year about 

288 additional ones. So by the end of two years we will do the entire 430 will be commenced in that process, whatever it is. 

Mr. COFFMAN. And how long does that process take to go 

through? Or is it fairly variable— 

Mr. SULLIVAN. It is really market driven— 

Mr. COFFMAN. Yeah. 

Mr. SULLIVAN [continued]. —based upon, if we are going to GSA 

to sell it, it is going to be based upon the market, what GSA can 

get for those buildings and how hard they find to do it. If we find 

a partner to reuse it, it could move pretty quickly. If it is a simple 

demolition, depending upon historic and environmental issues at 

the site, it can, you know, be anywhere from six months to 18 

months depending upon that process. It is very locally driven and 

in each state, for example, the historic preservation entity in some 

states are very cooperative with VA and look to move forward. In 

other states it is more of a challenge and that takes more time. 

Mr. COFFMAN. Does GSA, once you turn it over to GSA, do they 

take it from there? Or is it, do you have to, is it a cooperative— 

Mr. SULLIVAN. It is cooperative but they really have the ball. 

Mr. COFFMAN. Okay. Good. 

Mr. SULLIVAN. They are the ones who do this all the time. They 

have an office set up that just does this as their single focus. And 

that is why we took Pittsburgh, for example, and gave it to them. 

We plan to have two or three other hospitals that have been vacant 

for a long time moving to GSA pretty quickly. 

Mr. COFFMAN. Why has it taken so long to get this process started? It just seems like you have identified the 430 but then we are 

just, it seems like we are just starting on this process. 

Mr. SULLIVAN. Well now since 2004, I think I can give you the 

figures— 

Mr. COFFMAN. Right. 

Mr. SULLIVAN [continued]. —I think we have gotten rid of eight 

million square feet through this process. We did not use GSA, quite 

honestly, until the last year or two because prior experiences with 

GSA were not very receptive to moving properties. But I think they 

have retooled and refocused so I think it is a good opportunity. 

Mr. COFFMAN. Okay. What is the point of having a hotel in 

Paris? 

Mr. SULLIVAN. VA—I think you are referring to the Pershing 

Hall facility? 

Mr. COFFMAN. Yes. 

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Mr. SULLIVAN. Yes. Congress gave it to VA because at the time 

it had fallen dormant. There were squatters in the building. They 

gave it to VA after several other agencies attempted to maintain 

it. And we used a EUL like authority to put a hotel in place and 

VA receives $300,000 to $400,000 a year in rent from that hotel. 

And I know there is a proposal for folks who want to sell it. VA 

supports selling that. We do not have the authority to do it. And 

if it is, if we are given the authority, we would hope that the basis 

for the sale would be the market value of that asset, which we believe is somewhere between $30 million and $35 million, which we 

would hopefully in that legislation be given the authority to reinvest that money in care for veterans or in infrastructure improvements. So we were tasked by Congress to take it over and we did 

it. And there is no pride in ownership of that asset, I mean. 

Mr. COFFMAN. Thank you. Mr. Principi— 

Mr. PRINCIPI. Yes. 

Mr. COFFMAN [continued]. —was that under your watch? Or was 

that under— 

Mr. PRINCIPI. Actually, Mr. Sullivan knows it was on my watch 

when I was Deputy Secretary during Bush 41 and Chairman Montgomery of this Committee urged me to take possession. It was actually an American Legion, it is called Pershing Hall, it was an 

American Legion building. An absolutely extraordinary structure in 

the heart of Paris. And it was in really, as Mr. Sullivan indicated, 

really in a state of disrepair and magnificent artifacts were being 

stolen. And so I became the landlord, so to speak, and it became 

a hotel. And that is where it stands today. 

Mr. COFFMAN. Okay. Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. I thank the gentleman for yielding. Ms. 

Brownley, you are recognized for five minutes. 

Ms. BROWNLEY. Thank you, Mr. Chairman. And I too thank the 

panelists for being here this morning. I wanted to direct my line 

of questioning around leasing and what I believe to be advantages 

of leasing versus building brick and mortar facilities across the 

country. And particularly, when you look at our community clinics 

across the country. I know right now today we have 30 lease authorizations for facilities for clinics across the country, but yet we 

do not seem to get there. And I think there is a rationale behind 

that. But I was just wondering, Mr. Sullivan, you know, with 30 

lease authorizations out there for new facilities but not meeting 

that need, I mean, what do you think that delay is with regarding 

patient care? 

Mr. SULLIVAN. Right now we have 28 leases that are, 28 that are 

pending authorization. And that represents about 2.2 million annual visits of care. Many of these have been submitted in the budget for the last two years. We believe that, we have not had a case 

where a lease has closed. But we are very fearful that about 50 

percent of these are replacement leases for existing leases that are 

out there. And through a lot of good work and diligence by our real 

property people we have kept them all open. But at some point an 

owner of one of these leases can say, I do not want to, I do not 

want to stay anymore. So I mean, there is some risk there. We 

also, probably a bigger risk is that once we reach the end of some 

of these terms, we are at the mercy of the person who owns it. In 

Leonard.horne on VACREP0180 with DISTILLER

20 

a lot of cases they have increased the rents and we have no choice 

but to pay it. So, I mean, it is a big issue for us in terms of creating 

that additional access. And we believe leasing is better, not in 

every case but in a lot of cases, than building and owning so that 

we can walk away at the end of a lease term if we have it. 

Ms. BROWNLEY. Well thank you. And I agree. I think leasing 

based on the map that the GAO showed in terms of changing demographics across the country, I think leasing gives us the appropriate flexibility that we need to be able to change and move given 

the movement and where the greatest needs are. And I know that 

currently the GSA scores leasing for veteran facilities differently 

than they do for any other Federal government buildings. And can 

you comment on, I know I have a piece of legislation to try to fix 

that, but that seems to be one of the big barriers in terms of authorizing these leases, is that they, if it is a 20-year lease or a 30- 

year lease it is scored for the full cost of 20 years or 30 years in 

the first year, and that is the barrier. So can you comment on that? 

And do you recognize that there needs to be a fix? 

Mr. SULLIVAN. Absolutely recognize there needs to be a fix. Secretary Shulkin challenged us a couple of months ago to meet with 

CBO, who is the scorer, as many people know, of these transactions. And we met with CBO and they told us in no uncertain 

terms that the way our leases are structured, and even if we 

change the way they are structured, there is nothing we can really 

do to the transaction that would have them change their score. So 

that is the legislative holdup. And I think the score on the legislation is probably around $1 billion, I think, is what they came up 

with. 

Ms. BROWNLEY. I apologize. I said GSA. 

Mr. SULLIVAN. That— 

Ms. BROWNLEY. I mean CBO. 

Mr. SULLIVAN [continued]. —CBO, sorry. 

Ms. BROWNLEY. But to Ms. Draper, do you have any comments 

on how these leases are scored and where you think improvements 

might be, or not? 

Ms. DRAPER. We have, I have not really looked at that. So I 

would be unable to comment on that. But I could see if we have 

done work on that and provide you some additional information. 

Ms. BROWNLEY. Okay. I think, you know, I just, I again just personally believe that this is something that we have got to fix. That 

this, the way it is scored, I do not know if anybody on the panel, 

Mr. Principi, maybe you know the history behind this? And why it 

was changed? I am not even sure exactly when it changed. But I 

have been told that it was changed a while ago, specifically just for 

VA facilities and no changes for any other Federal buildings. 

Mr. PRINCIPI. Yes. I do not recall exactly when it was changed. 

I thought it was done by OMB in the 2000 timeframe, I believe. 

Maybe Mr. Sullivan knows. I do not. 

Ms. BROWNLEY. Nobody knows the rationale for it, though? 

Mr. SULLIVAN. CBO about four years ago, five years ago, just 

changed the way in which they treated these as operating leases 

and started scoring them over the entire term of the lease. I cannot 

come to explain how they changed their interpretation. I leave that 

to them to explain. 

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21 

Ms. BROWNLEY. Well I think it is an important piece of this kind 

of overall discussion, is trying to really focus on this. And as we 

move forward in evaluating facilities and evaluating I think the advantages of leasing over building permanent structures so that we 

do have this nimbleness and flexibility. With that, I will yield back. 

The CHAIRMAN. I thank the gentle lady for yielding. I will just 

make a quick comment that the way this is scored we have to give 

the CBO the Forrest Gump Award, stupid is as stupid does. Nobody in the world would score—anyway, I will yield now to Mr. 

Higgins. 

Mr. HIGGINS. Thank you, Mr. Chairman. Mr. Sullivan, you have 

addressed the enhanced use lease program greatly to my colleagues. I would like to add that my office requested data from the 

last couple of months regarding identifying actual structures that 

were perhaps targeted for sale or destruction and ultimately last 

night we found that there was one in my state and none in my district. So my comment may apply more to my colleagues than to myself. But during the course of researching what we would do with 

those facilities if they existed in my district, we are concerned 

about veteran homelessness and transitional housing for our veteran brothers and sisters that struggle to, with reentry into civil 

endeavors when they leave the military. And many of these facilities have, you know, many rooms that could be considered a small 

apartment. They have kitchen facilities and laundry facilities and 

meeting facilities. And they could be remodeled into transitional 

housing for homeless veterans. So in the process of researching 

this, I spoke with veteran owned construction companies in my district, and every one of them was adamant that they would be willing to donate their services and their own private capital to remodel and restore these facilities. We also spoke with charitable 

services that work with homeless and indigent Americans. And 

they would be willing to lease the properties and maintain them 

once they were remodeled over a 20- or 30-year lease. So I would 

suggest that common sense solutions like this be considered regarding the structures that exist that are targeted for sale or destruction. Perhaps the relationship between the VA and the VHA 

and the public and private sector can include solutions that would 

cost the people’s treasure virtually nothing and yet would provide 

an invaluable service for transitional housing for homeless veterans 

across the country. It does not affect my district because I do not 

have any structures. But perhaps some of my colleagues may consider this approach. 

Ms. Draper, my question is for you regarding the means by 

which money is assessed, and personally I believe the money 

should follow the veteran, and I believe that we should move away 

from the mother ship structure that historically the VA and VHA 

has maintained. My district represents the highest density of veterans in the state but we do not receive the highest percentage of 

money. And this money is assessed according to the veteran population that is registered within the VA. But the veterans because 

of the need to travel to the mothership hospital, in in my case Alexandria, the veterans have lost faith in the system so they are not 

counted. They are not counted. The veteran himself is not counted. 

They are only counted and the money is aligned according to those 

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22 

that are registered within the system. But we seem to be blind to 

the fact that so many thousands and thousands of our veteran 

brothers and sisters have become disenfranchised with the system. 

That is the problem that we are trying to fix here. So can you 

please speak to whether when assessing where assets are most 

needed, the VA considered the entire eligible veteran population or 

solely the enrolled veteran population? As we work to expand more 

care to veterans I think it is important that this money be assessed 

based on reality. 

Ms. DRAPER. Well they use a couple of models. One is the veteran population model, vet pop, and then you know, looked at another model of demand for care and the resources that would be 

needed to supply that demand. 

One of the things that we talked about in terms of the SCIP 

process, the long term planning process, is that try and match or 

align the need of facilities for services for the veteran population, 

one of the key weaknesses that we found is that sometimes writing 

the SCIP narratives, which is a third of the scoring process or the 

score, it really is often dependent on the ability of the writer to 

meet some of the goals of what VA has laid out rather than the 

merits of the project itself. So we found cases in the field where 

some facilities never had a SCIP project funded. So you know, 

there needs to be, that is the limitation of that planning process 

as well. It needs to be, you know, looking at the merits of the 

project itself versus somebody’s ability to write the narrative. 

Mr. HIGGINS. Thank you for your answer, ma’am. In the interests 

of time, I would like to ask that could my office provide questions, 

more detailed questions to you, ma’am, that we could expect answers to? And perhaps get to the bottom of this? Mr. Chairman, 

thank you for the time. I yield back. 

The CHAIRMAN. I thank the gentleman for yielding. Ms. Kuster, 

you are recognized for five minutes. 

Ms. KUSTER. Thank you very much. And I just want to pick up 

on my colleague’s suggestion. We have an opioid crisis in New 

Hampshire. And one of the issues is transitional housing after 

treatment to continue the intensive outpatient treatment but to 

have a place to live. So I like your idea quite a bit. 

My question about these 430 buildings that we are trying to address is that a significant hurdle for disposal of vacant and underutilized buildings is finding lessees and buyers, as you talked 

about, because of the condition of the buildings. And my question 

is have you considered whether the VA would actually spend 

money to bring some of the buildings up to code? Or make them 

more usable perhaps for this type of transitional housing? Or other 

uses? And if so, or do you intend to simply demolish the buildings 

and use them, just sell the land? And the question relates to 

whether you have made any cost projects and whether you need 

any additional authorities or appropriations to take that approach? 

Mr. SULLIVAN. At this point we do look at all the alternatives. 

As I think I mentioned earlier, we are going through a due diligence process on all of these 430-some odd buildings. And we will, 

you know, there has been an initial cut that has looked at the potential for both transitional and permanent housing and have not 

found a particular need as identified at the local level. But that 

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23 

will be double checked as they go through due diligence. And if 

there is, then we would welcome in any of these places if there is 

a need and we can put together an operator and a developer to run 

these and to finance these that would be the perfect solution to us. 

We have encouraged it. We have done about 100 of these projects 

across the country. The more we can do and especially since they 

are all third party financed, you know, it does not take away from 

our core mission of having those resources to directly to veterans’ 

care. So we would continue to do that. In terms of a cost estimate 

we, as we are doing the due diligence process we are developing a 

cost estimate based upon what the chosen course of action is in 

each of those buildings. 

Ms. KUSTER. So I would just sing the praises of a program in my 

district in Nashua, New Hampshire, Harbor Homes, that has been 

a game changer for our veterans. We have recently achieved a 

functional zero for homelessness for our veteran population due in 

large part because of the transitional housing that is available. And 

I certainly know from the incredible stories of meeting with veterans how this has changed their life. I got to know one particular 

veteran, there was sort of a camp, they were living under a bridge. 

He was an older gentleman. But come to find out he was diabetic 

and he had no access to medication and no access to treatment. 

When he got into the transitional housing, got the treatment he 

needed, got some counseling, some job skills training, total turned 

his life around. And we learned that he had been middle management in a high company in our area. So he was reunited with his 

family. It is an incredible story. 

The question that I have around this that concerns me, however, 

is that VA’s request to cut the construction budget for fiscal year 

2018 by 4.3 percent, or $45 million, and what will this do in terms 

of your capital assessment for these properties going forward? And 

how can we help to make sure that you have both the authorities 

and the resources that you need? 

Mr. SULLIVAN. Sure. The fiscal year 2018 budget for minor and 

major construction is what you are referring to. That would not 

have an impact on the disposal of these buildings. 

Ms. KUSTER. So which budget would you be taking those funds 

from? 

Mr. SULLIVAN. Depending upon the amount of money, it would 

probably come out of the non-recurring maintenance budget. And 

in 2018 I believe it is a $809 million increase in 2018 to, I can get 

the exact, I think it is 1.8. 

Ms. KUSTER. Okay. 

Mr. SULLIVAN. But I do want to, you know, because it was raised 

earlier, the budget. I think the major and minor construction budget figures were based upon a total discretionary dollar figure that 

was given to VA. And VA in these limited budget resource times 

had to prioritize between direct medical care, research, and other 

things. And it was a functioning of balancing the appropriation request to Congress to live within a total cap and those, you know, 

these accounts were on the lower end of the scale, if you would. 

Ms. KUSTER. Well I would agree with the Secretary that every 

tax dollar is sacred and we need to spend it wisely. But we want 

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24 

to make sure that you have the resources to serve the veterans. So 

thank you. My time is up. I am yielding back. 

The CHAIRMAN. I thank the gentle lady for yielding. General 

Bergman, you are recognized for five minutes. 

Mr. BERGMAN. Thank you, Mr. Chairman, and thanks to all of 

you on the panel for being here today. This is so important because 

all the questions you have heard everybody is trying to make a 

positive difference. Mr. Sullivan, CBOCs, I see as a drive around 

the First District of Michigan, we have some nice new CBOCs that 

are built. Are they owned or leased? 

Mr. SULLIVAN. They are all, they are all leased I think except for 

two or three. 

Mr. BERGMAN. Okay. In the leasing process, could anyone tell me 

if they considered, regardless of where in the country, if they considered possible already existing space? Many of us have Native 

American tribes who have the health clinics that have excess space. 

Were those facilities in conjunction with our tribes considered before building or leasing a CBOC? 

Mr. SULLIVAN. When we go out, and I am not the contracting expert and I can get you more details, but my understanding is that 

when we go out for a lease solicitation the first option that we ask 

people to consider is existing building, existing space somewhere 

rather than having to do a build to suit project. And some of the 

smaller leases, we do see that. Most of what I think people here 

were talking about earlier were all leases over a $1 million. The 

smaller CBOCs that are managed and contracted for at the local 

medical center or VISN level, they do look at existing space first. 

Mr. BERGMAN. But were the tribes given any priority? 

Mr. SULLIVAN. I would have to check with contracting. 

Mr. BERGMAN. Okay. I would like— 

Mr. SULLIVAN. I do not— 

Mr. BERGMAN. I would like you to take that for the record— 

Mr. SULLIVAN. But we can get back to you. 

Mr. BERGMAN [continued]. —and get back to me. Because as you 

know, our tribal members have a high, high, high participation 

rate, especially in wartime. And I believe we have a, not only an 

obligation but an opportunity to partner with those already existing medical facilities that are provided for. So that is, I would like 

you to look at that very closely going forward. 

Mr. SULLIVAN. And there might also be the opportunity for a 

sharing agreement with the tribes or other entities instead of a 

real property instrument to be able— 

Mr. BERGMAN. Absolutely. And thank you for using the word, because the more we get into the idea of shared services, shared services are something that are, number one, going to provide a higher 

quality of care or the housing. And number two, it is going to save 

those valuable dollars. We know that. And thank you for going 

down the shared pathway. 

Different, kind of a different tack here, GAO claims, Mr. Sullivan, you are still the winner here. 

Mr. SULLIVAN. Sure. 

Mr. BERGMAN. That in, GAO claims that in 2016 VA reported 

370 buildings that were either vacant or less than 50 percent occupied. However, last month the VA announced an initiative to begin 

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25 

either repurposing or disposing of 430 vacant buildings over the 

next two years. Why did so many more buildings become vacant in 

the last year? And how many more buildings do you expect to become vacant or largely so in the next year? And why? 

Mr. SULLIVAN. I think the reason why is can be fairly easily explained. Each year we go out to the local users of all of our facilities and we do an assessment and ask them to give us the status 

of their assets. All the spaces we own, all the owned space, and all 

the leased space. And in that data call we go out and ask them to 

say identify facilities that are vacant. So each year, and it closes 

at the end of the fiscal year, we get a report. And it takes about 

two months to process. So each December we put out a number of 

what the number of vacant buildings are and it is based upon the 

submissions that came in that year. So each year you will see some 

are added, some are taken off, because we have been disposing of 

about 100 of these a year over the last ten years. So the numbers 

will flex. 

Mr. BERGMAN. Is there a checklist or anything that you, the VA 

works through when you start this process that, you know, some 

of us could view if we say, okay, here is what triggers it and we 

ask the following questions or the criteria? 

Mr. SULLIVAN. Yes, I believe there is a validation process when 

they go out to validate the data in the field. I would be happy to 

provide whatever we have to you. 

Mr. BERGMAN. Okay. Ms. Draper, was GAO able to determine 

costs for maintaining equipment, beds, and utility usage in unused 

portions of the VA medical centers? 

Ms. DRAPER. We did not look at that for this current work. 

Mr. BERGMAN. Okay. Thank you. And that is my last question. 

Mr. Chairman, I yield back. 

The CHAIRMAN. Thank you, General Bergman. Mr. Correa, you 

are recognized for five minutes. 

Mr. CORREA. Thank you, Mr. Chairman. First of all, I want to 

thank all of you, the panelists for being here today and to all the 

veterans here. Thank you for your service to our country. 

I wanted to follow up on some of the questions of my colleagues, 

which are shared services and also in my district and my state 

thinking about how many vacant buildings do we have in California, Southern California? Number two, have we reached out to 

local, state, county, city services, governments to address again the 

issue of homeless vets? And are we looking at operating in silos or 

have we actually worked with a lot of those folks? Local municipalities, local counties, and the state, they are all raising taxes right 

now to address this homeless issue that continues to explode in our 

backyards. We are talking about 430 buildings here underutilized. 

Mr. SULLIVAN. Yes, we do. One of the hallmarks I think of working with an enhanced use lease, especially on permanent or temporary housing, is that we actually work with the local public housing authority and work with the local cities and towns. Because in 

many of the cases some of the funding sources could come from tax 

credits locally or from other funding sources, as well as the operator of the facility has to be familiar with the local area and with 

the local providers. And in almost every case it is a local on the 

ground community provider who will come in and do that. I know 

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26 

in California we have done that in West L.A. We opened up a facility in West L.A. a couple of weeks ago. We have four more that are 

slated, that are in process there, where we have developers— 

Mr. CORREA. That is the West L.A. UCLA property? 

Mr. SULLIVAN. Yes, working there with developers, nonprofits, to 

put in homeless housing for another 300 or 400 units in the next 

two years. 

Mr. CORREA. Any other facilities in Southern California that you 

are working on? 

Mr. SULLIVAN. I would have to get the list. I— 

Mr. CORREA. I would love to see that data, if you have it. 

Mr. SULLIVAN. Sure. 

Mr. CORREA. And also in terms of the 430 facilities, we are all 

looking at taxpayer dollars here. We are all looking at cash flows, 

annual budgets. Yet I cannot help but think at the local level 

where in Southern California, my district, school districts 30 years 

ago where enrollment went down, sold a bunch of the schools. Enrollment went up. We had to go buy properties back at three or 

four times the price to make sure we had the capacity for new and 

emerging enrollment. I just want to make sure, and I am sure you 

are looking at that from a financial perspective, as you move 

ahead, you have got to make sure you budget yourself, save those 

taxpayer dollars, but also looking to the future in terms of our capacity to take care of our vets. 

Mr. SULLIVAN. We are. 

Mr. CORREA. Thank you, Mr. Chair. I yield back my time. 

The CHAIRMAN. I thank the gentleman for yielding. Let us see, 

Miss Gonzalez-Colon, you are recognized for five minutes. 

Miss GONZALEZ-COLON. Thank you, Mr. Chairman. And thank 

you, all Members of the panel, for being here. Mr. Butler, your testimony rightly notes that many of the VA medical centers are landlocked, which prevents them from expanding. Do you have any recommendations on how to assist those facilities to grow? 

Mr. BUTLER. Well I think the VA should, those facilities should 

use existing processes in terms of SCIP and so forth to evaluate 

their current needs and then follow that process all the way 

through. The concern that we have is that process takes too long. 

And so VA needs to refine the process to ensure that whatever 

model facilities are using, that model can rapidly respond to the urgent and emergent needs available at the time. 

Miss GONZALEZ-COLON. Thank you. Ms. Draper, in terms of your 

report, you make some reference to the short term growth in demand for the VA healthcare services followed by an eventual decline in the veteran enrollment. How would you suggest that the 

VA plan for that in the years ahead? And are you aware of any 

other Federal agency that are making plans for those kinds of declines in those kinds of enrollment, or similar challenges? 

Ms. DRAPER. I think it gets to a lot of the discussion about ensuring that there is flexibility in what type of health services are being 

provided, either through bricks and mortar or through care in the 

community. And you know, as we reported in our report, there are 

some limitations with the process as it currently stands. You know, 

you are setting up a situation by not having an assumption in the 

planning process that a lot of the care is being shifted to care in 

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27 

the community. So you are simultaneously developing capacity both 

in terms of what VA is doing and then what care in the community 

is being done. So, you know, when the population is starting to decrease then you are going to be left with some situations where you 

have over capacity and that is a concern that we explained in our 

report. 

Miss GONZALEZ-COLON. Thank you. Mr. Sullivan, and this is 

kind of the same matter, with the problems we are facing with the 

recruitment of physicians and personnel to attend that demographic decline we are having in the veteran patients, what kind 

of strategic planning is the VA doing for new recruitment for 

healthcare services? 

Mr. SULLIVAN. I am sorry. That is a little out of my lane. I do 

not know if Dr. Crump here— 

Mr. CRUMP. Is your question about recruitment for providers? 

Miss GONZALEZ-COLON. Yes. 

Mr. CRUMP. There is a very aggressive approach. Even Dr. 

Shulkin, the Secretary, has been out speaking with medical 

schools, speaking with large organizations, requesting that people 

apply. We are also looking at flexibilities to be able to directly appoint medical center directors and VISN directors. So it is a very 

aggressive effort to recruit new providers into VA because we have 

a constant turnover. 

Ms. DRAPER. And I can also address that. We actually have a report that will be coming out later this summer that looks at provider, physician recruitment and retention. 

Miss GONZALEZ-COLON. We face that problem on the island. We 

lack a lot of specialists on the island and we are even bringing 

them from so many states. They do not want to move to the island. 

And we are attending not only the people from the island, but from 

the Virgin Islands, too. And in that manner, it is a little bit difficult to attend the patients that we have with the shortage of physicians. 

In another area, I was a little bit surprised, Mr. Sullivan, to hear 

that VA is behind only from the DoD in terms of the, and the Department of the Interior, in terms of the numbers of historic properties. In that matter, are there any statutory or regulatory 

changes that could be made to lessen the burden of historic properties on the VA capital asset planning that we can make? 

Mr. SULLIVAN. I think there are. I think we want to be fully compliant with historic preservation goals in the statutes that are required. I think what we would ask for is for a more expeditious 

process to speed that process up. Right now it can be extensive in 

some cases, which adds a lot of time to doing any transaction. 

Miss GONZALEZ-COLON. If you want to make any direct recommendation of changes, please provide it. 

Mr. SULLIVAN. Sure, we will. Thank you. 

Miss GONZALEZ-COLON. Thank you. Thank you, Mr. Chairman. I 

yield back. 

The CHAIRMAN. I thank the gentle lady for yielding. Ms. Rice, 

you are recognized for five minutes. 

Miss RICE. Thank you, Mr. Chairman. Mr. Principi? Is that how 

you say your name? I just want to go back to a comment that you 

made when you were asked about what happened with the CARES 

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program and its elimination. You said that there were some political concerns. Can you just expound on that? 

Mr. PRINCIPI. I think the problem is that politics got involves in 

some of the tougher decisions to close or realign medical centers. 

Canandaigua, New York, a 1,700-bed long term psychiatric facility 

built in 1932 at a time when we took veterans with serious psychiatric needs away from their homes, away from the cities, and 

placed them in a long term facility, much like we did with all 

Americans, not just veterans. And during the CARES process I 

noted that there were only, it had an average daily census of about 

166 patients, less than ten percent of this magnificent, this huge, 

100-acre campus with a 1,700-bed facility. Well when the decision 

was made to close that facility, it was stopped. And I think that 

is part of the process when there is not some teeth in this process. 

But I think it is important to bear in mind, Representative, that 

the VA healthcare system, although it predates World War II, like 

1932 and the 1920s when following treating tuberculosis in sanitariums those facilities became VA facilities in the twenties. Much of 

the infrastructure today was built after World War II to take care 

of 16 million veterans coming back from the War and then shortly 

thereafter the Korean War. So you have these facilities built in the 

forties and fifties when you needed 800-bed hospitals, maybe 2,400- 

bed hospitals in cities that you no longer need today because there 

has been such a significant shift in the way we care for people 

today. 

So although Mr. Sullivan talked about the cost of empty buildings and underutilized buildings, I do not think that takes in to 

consideration could we do with new, modern, one new, modern 

healthcare medical facility in a city, as to three that were built in 

1944? And I do not think the cost, I think the cost is much greater 

than the $9 million or $25 million the VA is spending today. And 

I think that is going to take a very comprehensive assessment, 

careful, open, transparent, data driven, visits to around the country 

to do it right. To look at the assessment, the needs, the medical 

needs of our veterans over the next ten to 20 years. I know that 

is difficult because healthcare changes daily. But I think you need 

an assessment like that and I urge the Committee to consider 

doing that. 

Miss RICE. Well I think it is a very good recommendation. And 

I am going to say what you were I think too cautious and respectful 

to actually say. You know, we, a lot of us up here spend a lot of 

time with panelists like you and say, what can we do to help you? 

Well in this instance, in the subject matter that we are talking 

about right now, I think it is really clear what has to be done 

through all of your hard work, recommendations, you implementing 

it, you making the recommendations, you having, all of you, your 

recommendations. What we have to do up here in my humble opinion, and I think that, I feel very confident that if there is any Committee in Washington, D.C. that has the political courage to do 

what is necessary it is this one. What you are saying, and you were 

talking about a facility in New York, is that you need politicians 

like us to be courageous enough to make the case for why certain 

facilities have to be closed for whatever reason and not make it 

about abandoning veterans in their time of need. And that has alLeonard.horne on VACREP0180 with DISTILLER

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ways been the hot potato that no one ever wants to touch. And I 

think we have to, it is not enough for us to just sit here and ask 

you, what can we do to help you? We know what we can do to help 

this realignment that has to happen if we are fully going to enable 

the VA to go into a 21st Century medical treatment mode. So I just 

want to throw that out, Mr. Chairman. And I want to say that I 

am very grateful that we have your leadership and the leadership 

of Ranking Member Walz to help us do the right thing here. Thank 

you, and I yield back. 

Mr. PRINCIPI. If I can just add very briefly, I think if we do not 

do that, and it would be collective, I think the VA will fail and will 

fail the needs of veterans. I do not think this can be sustained ten 

or 15 years. Looking at the demographics of the veteran population, 

World War II, all but gone; Korea, almost all but gone; my generation that fought in Vietnam, getting up there. There is going to be 

a dramatic decline in demographics of veteran population, the 

shifts in where they are moving to, this vast infrastructure, the 

cost to the taxpayer. I think we need to look at it very carefully. 

The CHAIRMAN. Well the Secretary is doing real well. He started 

talking about Vietnam here, guys. He is meddling now, when he 

was talking about our age guys. Mr. Poliquin, you are recognized 

for five minutes. 

Mr. POLIQUIN. Thank you, Mr. Chairman, very much. I would 

like to salute Miss Rice for what she said. We have got to have the 

guts to do what is right here. And it is all about taking care of our 

veterans. You know what really drives me crazy? Is that we were 

just dealing, Mr. Chairman, recently with a similar issue at the entire Federal government level. There are about 3,120 vacant and 

unused office buildings owned by the Federal government, not just 

the VA. You have about 340 of them, but it is about 3,100. It is 

costing the American taxpayers $1.7 billion per year to maintain 

3,120 vacant and unused office buildings. Office buildings, old barracks and what have you. You have got to keep, you have got to 

make sure they are heated, in some cases, right, if they are in the 

northern climates like Maine or Minnesota. Or you have got to 

make sure the roofs are not leaking. Then you have the liability 

with them. So what the heck could we do with that $1.7 billion per 

year? Instead we are hanging on to these darn things. 

Now let us drive down, Mr. Sullivan, a little bit and make sure 

I understand this. You folks have about 430 buildings that are vacant or unused. By the way, six of them are in Togus, Maine in Augusta, which is our only VA hospital. And we love Togus. We are 

watching them closely. But we love Togus. 

Mr. SULLIVAN. We do too. 

Mr. POLIQUIN. Good. And someone said that. I do not know who 

said that. But anyway. But we have six right there on campus. So 

my question is if you are spending about $7 million a year, or 

whatever you said, Mr. Secretary, $7 million a year to maintain 

these buildings, and you are going to get rid of them over the next 

couple of years. I understand that. Correct? And you have the authority to do that, right? David does. 

Mr. SULLIVAN. Correct. 

Mr. POLIQUIN. Secretary Shulkin has the authority to do that. 

Okay. Then what about this Paris Hotel? I want to close the loop 

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on this. I think Mike Coffman has a bill, Mr. Chairman, that gives 

Mr. Shulkin the authority to sell a hotel that you said, Mr. Sullivan, is worth $35 million— 

Mr. SULLIVAN. Correct. 

Mr. POLIQUIN [continued]. —and we are getting $350,000 a year 

in rent. That is a one percent return. What are we in that business 

before? That is the most ridiculous thing I have ever seen in my 

life. Right? But you have, Mike is going to drop that bill, right? So 

we can get rid of that hotel—okay. Good. So we are getting there. 

Now I think Jack Bergman asked this question, Mr. Sullivan. I 

want to make sure I get this. As you proceed along this process, 

or Mr. Shulkin does with your help, I want to make sure this Committee, if I may, Mr. Chairman, is informed on how you are doing. 

Because the next time you are going to be here, I am going to ask 

you that question. So is there a process in place so we know you 

are on schedule to dispose of these buildings? Because every dollar 

we save, every asset that we are not maintaining, can go back into 

helping our kids that come back from combat with wounds, and so 

forth, and so on. 

Mr. SULLIVAN. We plan to have a periodic update. Probably— 

Mr. POLIQUIN. What is periodic? 

Mr. SULLIVAN. Probably quarterly. 

Mr. POLIQUIN. Okay. 

Mr. SULLIVAN. That we are providing directly to the Secretary. 

And then we would be happy to provide that to the Committee if 

you desire. 

Mr. POLIQUIN. I desire. 

Mr. SULLIVAN. Okay. We will do it. 

Mr. POLIQUIN. Okay. With the Chairman’s blessing, I desire. 

Mr. SULLIVAN. And I would like to say, at Togus, you know, an 

example of, an enhanced use lease that we just, awarded about a 

month ago for these housing facilities that are up there— 

Mr. POLIQUIN. Great. 

Mr. SULLIVAN [continued]. —is a good example of— 

Mr. POLIQUIN. Yeah. 

Mr. SULLIVAN [continued]. —getting the community to come in 

and take in that case it was not unneeded buildings, it was 

unneeded land. 

Mr. POLIQUIN. Okay. 

Mr. SULLIVAN. And now they are now having permanent housing 

at that site. 

Mr. POLIQUIN. Great. And you know, what happens also, if I 

may, is when we are disposing of these buildings that we do not 

need and preventing us from taking better care of our men and 

women in uniform, is that these assets go back on the tax rolls in 

local towns and cities and they generate tax revenues if they are 

repurposed. That is good. We do not have a government unless we 

have tax revenues. Let us juice the tax revenues, right? It helps everybody. 

Next question. I represent one of the most rural parts of America. Tell me how you folks are retooling the VA to provide care for 

those in rural areas. Let us not forget rural America. About a third 

of our country lives in rural America and we provide a proportionately large number of our veterans, of those that serve in the miliLeonard.horne on VACREP0180 with DISTILLER

31 

tary from rural areas because we know how to use firearms and 

we know how to shoot straight. 

Mr. SULLIVAN. I would ask Dr. Crump to comment on that. 

Mr. CRUMP. I will give you two examples of what we are doing 

to address— 

Mr. POLIQUIN. Speak up, please. My ears are so bad. 

Mr. CRUMP. Sorry. I will give you two examples of what we are 

trying to do to address the needs of veterans in rural areas. First 

we have an Office of Rural Health. And one of the things they do 

is focus primarily on the needs of those veterans, looking at different methodologies, sometimes innovative ways. We are putting 

resources out there to all of the VA medical centers, giving them 

the opportunity to request additional funding for things like telehealth hubs for mental health, for primary care. 

Mr. POLIQUIN. I am almost out of time and Mr. Roe is very strict 

on time. So I am going to get right to the chase. 

Mr. CRUMP. Okay. 

Mr. POLIQUIN. When it comes to these assets that are underperforming assets and costing us money, how can this issue help rural 

veterans? 

Mr. CRUMP. We are conducting a plan for a methodology that— 

Mr. POLIQUIN. When is that plan going to be ready? 

Mr. CRUMP. September—to look at a market by market analysis— 

Mr. POLIQUIN [continued]. Okay. So that is three months. 

Mr. CRUMP. —market by market analysis of the services and the 

needs. The needs of the veterans and the services available in 

every market, and then optimize that plan so that we can deliver 

that care. A combination of direct care delivery by VA— 

Mr. POLIQUIN. Got it. 

Mr. CRUMP [continued]. —telehealth, partnerships, leases— 

Mr. POLIQUIN. Thank you, sir. And early September or late September? 

Mr. CRUMP. It will begin in September. 

Mr. POLIQUIN. When is it going to be done? 

Mr. CRUMP. Next September. That is to do 90— 

Mr. POLIQUIN. Why do you not start it now and finish it this September? 

Mr. CRUMP. We are completing the pilot and developing the 

methodology now. We need to socialize that with the veteran— 

Mr. POLIQUIN. Good. Our staff will be in touch with you folks to 

make sure we can see if there is any way we can speed this up. 

Thank you very much, doctor. 

The CHAIRMAN. Thank you, Mr. Poliquin. Mr. Banks, you are recognized for five minutes. 

Mr. BANKS. Thank you, Mr. Chairman. I will be brief. I know, 

Mr. Sullivan, you have already addressed questions about publicprivate partnerships. But I wonder if you could be more specific? 

Get into the weeds with us a little bit as policy makers on what 

greater flexibility can we provide you to enhance public-private 

partnerships to provide more opportunities for you to partner with 

the private sector on facilities across the country? 

Mr. SULLIVAN. Sure. A little bit in the weeds. But we believe that 

there is a great market for us out-leasing existing facilities or land 

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32 

to a private entity and having them either upgrade them or replace 

them or bring in another complementary private sector entity on 

the same campus, which would allow them to in essence cross-subsidize the development costs of renovating a building or providing 

a new building. 

Right now we do not have the authority to out-lease any of our 

property to undertake that. And if you are looking at developing or 

setting up financing, there has to be an interest in the property 

that the private entity can take to the bank, if you will, and get 

financing. So having that out-lease authority would allow us to do 

that and we would enter into an agreement where we could occupy 

all of the building or a portion of the building, or all of the campus 

or a portion of the campus, in the long term. 

That will work where there is a market for this. It will not work 

at every site. So that is when I said earlier we need a whole, if you 

will, suite of tools. Because if there is a market in the private sector for the property and it is valuable, you can trade off that to 

have a public-private venture done at that site. If you have property that is in some place that has very low real estate value, very 

low private interest in anything going on at the site, it is going to 

be pretty impossible to do a public-private venture unless someone 

is willing to come in and donate all of the money. 

Mr. BANKS. How can we help you and give you that out-leasing 

authority? Is that legislative? Is that— 

Mr. SULLIVAN. Yes, it is. It would require legislation. 

Mr. BANKS. Okay. Are you aware, have there been—I am the 

new kid on the block on the Committee. Have there been efforts 

to give you that authority? 

Mr. SULLIVAN. We had that authority at one point. It expired. It 

was renewed with this Committee’s help to focus on housing at the 

time. And again, CBO is a challenge to get this legislation through, 

as it is with many capital related items. So expanding the EUL authority in some form would help do that. And there are various 

gradations of that legislation. You know, the more you give us the 

higher the score may be for the legislation. 

Mr. BANKS. Right. I look forward to working with you on that. 

Mr. SULLIVAN. I am happy to work with anyone on that. 

Mr. BANKS. Thank you very much. Mr. Chairman, I yield back. 

The CHAIRMAN. I thank the gentleman for yielding. First of all, 

I want to thank the panel, for you all being here today. It has been 

very, very instructive and constructive. And I think this is the beginning of a dialogue that is going to, that needs to continue and 

will continue. I now will yield to Ms. Brownley for any closing remarks. 

Ms. BROWNLEY. Well I thank you, Mr. Chairman, for having the 

hearing. I think it has been a productive one and the beginning of 

a longer conversation that we are going to have to have over all 

of this. But I do think we need to expand the conversation from not 

just obsolete facilities but, what are the opportunities around public-private partnerships? The leasing issues? All of this I think is, 

under the same umbrella of, how we move forward and be in a 

mode of continuous improvement as it relates to our facilities. 

Where we, you know, as time goes on, how are we going to remove 

facilities and enhance facilities where they are needed in a more 

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33 

timely way? So with that, I would yield back, and thank you again 

for the hearing. 

The CHAIRMAN. Thank you all. And again, I appreciate the panel 

being here. You all have been very helpful. And this is a very complex, emotional issue. And it is going to have to be done, as Secretary Principi said, in a very thoughtful way, an open, transparent 

way, where all, everyone who is involved has input. And I can just 

tell you that when you live in rural America, and Mr. Poliquin 

mentioned this, you know, in rural America where I live we are 

seeing businesses shuttered. We do not see the growth that you see 

in other areas. And when you see a public facility, whether it is a 

post office or whether it is a school, an indication that your community is dying, and not growing. And you see a VA close or taking 

buildings down, it affects the whole community. I totally understand that. And we have to be sensitive to that. 

But we also have to be sensitive to the fact that the mission of 

the VA is to provide healthcare, the very top quality healthcare we 

can to our veterans, our servicemen and women who have served 

this great country. And I think Ms. Brownley brought up a great 

point, several great points, about using leasing where you can be 

more nimble and put the CBOCs and outpatient clinics where 

much care is given where the veterans are, actually are. And the 

demographics, as I think was pointed out, Ms. Draper pointed out, 

are changing. Not just for veterans, but for the American population. I mean, Texas in 2010 picked up four congressional seats. 

That is three million people that moved into Texas. That is more 

demand. Probably many of them are veterans. 

You know, I think the capital needs and we are looking at a $4 

billion a year, $50 billion deficit, it looks like. And we are spending 

around $2 billion a year. I think we need the information of where 

do we need those capital assets before we go out and just build a 

bunch of stuff and then realize, oops, we have put this in the wrong 

place. So I think that needs to be done. And the VA’s track record 

on capital has been spotty when you look at Denver, and New Orleans, and Orlando, and so forth. And we know we can do better. 

Just the leasing of a major lease, I read in the documents that I 

was given that it takes nine years from the time the VA plans it 

to the actual activation of the lease, whereas the private sector is 

three years. We have to get better, and we will. I think we certainly will with the leadership that we have. 

And I think one of the things you have to do is involve the veteran community when we are making these decisions. What do the 

veterans want the VA to look like and what services do they want? 

And I think they are actually telling us by where they are going 

to get their care. 

So I cannot thank you enough. This is not something that is 

going to get a lot of publicity and nobody is going to go home to 

the Kiwanis Club and say I am talking about VA assets. I mean, 

that is like talking about the fiduciary rule, what I got to talk 

about on the other Committee that I am on. But it is incredibly important for the future of the VA and how we care for our veterans. 

And with that, I ask unanimous consent that all Members have 

five legislative days to revise and extend their remarks and include 

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extraneous material. Without objection, so ordered. The hearing is 

adjourned. 

[Whereupon, at 11:46 a.m., the Committee was adjourned.] 

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(35) 

A P P E N D I X 

Prepared Statement of The Hon. Anthony J. Principi 

Mr. Chairman, Ranking Member Waltz and members of the Committee, good 

morning. Thank you for this opportunity to testify on an issue of great importance 

to the VA and our Nation’s veterans. 

Medical care is a key component of the benefits and services enacted by Congress 

in recognition of the sacrifices of the men and women whose service in uniform preserved and protected our Nation’s freedoms. 

Neither medical science nor the veteran population is static and unchanging, and 

VA must always provide veterans with modern, high-tech facilities to offer them 

high quality health care. 

The department will fail to honor our Nation’s commitment to its veterans if VA’s 

medical system does not evolve with the times. 

VA is a proud organization with a great history. I was honored to be associated 

with the department, both as Secretary and as Deputy Secretary. 

VA’s partnership with medical schools, begun in 1945, revolutionized the way 

medicine is taught in America. 

VA researchers led the way in developing effective treatments for tuberculosis, 

schizophrenia, and hypertension. 

Three VA researchers have won Nobel Prizes; seven have won Lasker awards. 

The department has made an enormous contribution to American health care-and 

has been a lifeline for tens of millions of veterans. 

But while VA has a storied past and a turbulent present, many VA medical centers were designed and built in an era in which medical care was synonymous with 

hospital care. It made sense, in the 20th Century, to define our nation’s health care 

commitment to most veterans as access to a hospital bed to the extent beds were 

available. 

But American medicine-and VA health care-has transformed itself from hospitalcentered to patient-centered treatment. Most veterans, like most Americans, see 

their physicians on an outpatient basis, and most treatment is provided by prescription drugs. 

VA medicine has kept up with, and sometimes led, these innovations. 

As a result, the number of VA outpatient visits increased from 46.5 million in Fiscal Year 2002 to 92.4 million in Fiscal Year 2014, while in that same period the 

number of inpatient admissions increased only from 564,700 to 707,400. 

While the practice of VA medicine has evolved, VA’s medical infrastructure has 

not kept pace. VA facilities are out of step with changes in the practice of medicine, 

with demographic changes in the veteran population, and with statutory changes in 

VA’s health care benefits packages. 

Mentally ill patients, for example, are no longer consigned to remotely located, 

thousand-bed asylums for the remainder of their lives. Treatment for tuberculosis 

no longer involves lengthy institutionalization. 

In addition, millions of veterans, following the population migration patterns of 

the nation, moved to the South, the West, and the Southwest. 

And as GAO noted in its recent report on VA Real Property, the new Choice program has also reduced the need for some facilities and services VA offers. 

If VA does not realign itself, and close its unneeded facilities, the current decline 

in the veteran population will make many VA medical centers museums of the pastnot the guideposts for the future they should be. 

When I became VA Secretary in 2001, President George W. Bush reminded me 

that every dollar my agency spent is a dollar taken out of someone else’s hardearned pay. It’s not how much money you are given in your budget that’s important, 

he said-it’s whether you spend that money wisely. 

We are stewards of the public trust, he concluded, and we must never forget that. 

I had the opportunity to recall his words a short time later, when I was stuck 

in traffic in New York City. As my car idled in front of VA’s Manhattan hospital, 

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36 

I looked up at the hospital’s patient bed tower. Among the hundreds of windows 

looking out on First Avenue, only a handful were lit. I didn’t know what to make 

of it. 

I learned the Manhattan VA hospital was one of many VA built in the 1950’s to 

handle the influx of ill and injured World War II and Korean War veterans. It once 

held 800 veterans, as did nearby hospitals in Brooklyn and the Bronx. I was told 

the three hospitals that night were caring for only 283 veteran patients-all together. 

All the other beds were empty-and there were tens of thousands of empty beds 

throughout VA’s system. 

Accordingly, I commissioned a comprehensive assessment of VA’s capital infrastructure and the demand for VA health care. The process was called Capital Asset 

Realignment for Enhanced Services (CARES), and it was modeled on DoD’s infrastructure review process. 

The CARES commission, which completed its work in 2004, offered sound recommendations for realignment and allocation of the Department’s capital assets to 

meet demand for VA’s services over the next twenty years. Unfortunately, the 

CARES and DoD processes differed in one specific way. Under CARES there was 

no requirement for Congress to adopt or reject the commission’s final recommendations as a package. 

As a result recommendations for some needed new hospitals and outpatient clinics 

were accepted; most of those to close or realign the mission of facilities were rejected. 

I know that the difficulties of agreeing to such a procedure for members of Congress cannot be overstated. Having served as Chairman of the 2005 Defense Base 

Closure and Realignment Commission I know firsthand from visiting many of the 

military installations slated for closure or realignment how trying this process is for 

them. 

The words ‘‘closure’’ and ‘‘realignment’’ are easy to write on paper, but they have 

profound effects on communities, and the people who bring those communities to 

life. 

But VA is spending too much money on bricks and mortar, rather than doctors 

and nurses. VA’s current budget request is for $186.5 billion; in my last year as Secretary, in Fiscal Year 2005, that figure was $69.4 billion-a 268 percent increase. 

We are doing a disservice to the veterans VA is charged to serve, and to the 

American people, if those resources are not used wisely and well. 

Our nation simply cannot afford to maintain a vast infrastructure built for a different time in health care delivery that was to care for tens of millions of veterans 

as they returned from World War II, Korea and Vietnam-and even from the Civil 

War, the Spanish American War, and World War I. 

A full review of VA infrastructure is the right thing to do. One that is open, transparent and apolitical. Those impacted deserve no less. 

Thank you. 

f 

Prepared Statement of Roscoe G. Butler 

Chairman Roe, Ranking Member Walz, and distinguished members of the committee, On behalf of our National Commander, Charles E. Schmidt, and the over 

2 million members of The American Legion, we thank you for this opportunity to 

testify regarding The American Legion’s views on ‘‘Care Where It Counts: Assessing 

VA’s Capital Asset Needs’’. 

Each year since 2003, The American Legion System Worth Saving (SWS) program 

has conducted site visits to VA Health Care facilities across the country and one 

thing we find in common is that VA has an enormous amount of aging buildings 

that are either underutilized or vacant. VA has a large inventory of buildings that 

are over a half-century old resulting in significant costs for upgrades and needed 

replacement of many parts of the facilities aging infrastructure. 

In 1866, the United States Congress established the National Home for Disabled 

Volunteer Soldiers (NHDVS), the precursor of the VA, to provide medical and other 

facilities for veterans of the American Civil War. Three centers were established in 

the following years: the Eastern branch in Togus, Maine, the Central Branch in 

Dayton, and the Northwestern Branch in Milwaukee, Wisconsin. The Dayton facility 

was the administrative center of the home and its principal commissary. Today 

these facilities still deliver health care to our nation’s veterans, and all have been 

designated by the National Historical Society as a historical site. 

Medical Centers like the Phoenix VA, which first opened its doors in 1951 was 

built on 27 acres of the Indian School Reservation. After the medical center had 

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1Military Times (February 2017): VA looking at its own version of BRAC 

2 VA news Release: VA announces plan to dispose of or reuse all its vacant buildings in 24 

months 3GAO Report No. 17–349 (April 2017): VA Should Improve Its Efforts to Align Facilities With 

Veterans Needs 

been built, the community was built around the medical center leaving the medical 

center landlocked resulting in VA’s inability to expand their footprint which is the 

case with a lot of VA properties. 

Today, the Veterans Health Administration (VHA) is the largest integrated health 

care system in the United States, providing care at 1,233 health care facilities, including 168 VA Medical Centers and 1,065 outpatient sites of care of varying complexity (VHA outpatient clinics), serving more than 8.9 million veterans. In spite of 

the exceptional health care VA provides, its aging infrastructure with a number of 

buildings being underutilized or vacant, creates problems for VA to maximize the 

use of its capital assets. 

In a 2015 House Veterans Affairs Committee (HVAC) budget hearing, Secretary 

McDonald said that the VA had 336 buildings across the country that are less than 

half-occupied, and many are not being utilized to their full potential. Additionally, 

it apparently costs more than 24 million dollars a year to maintain these buildings. 

Secretary McDonald stated ‘‘VA cannot be a sound steward of the taxpayers’ resources with the asset portfolio that we’re currently carrying,’’ McDonald told lawmakers. ‘‘No business would carry such a portfolio. Veterans deserve much better. 

It’s time to close the VA’s old substandard and underutilized infrastructure.’’ 1

According to information provided by VA in FY2016, VA had 403 vacant buildings 

at an annual operating cost of $6,674,227 and 784 underutilized buildings at an annual operation cost of $20,266,271. VA defines an underutilized building as an individual building that is occupied and in use, but the function(s) housed there do not 

require the full amount of space in the building to operate. 

If there was unlimited funding, the easy answer would be to dispose of all of VA’s 

vacant buildings and build new modern facilities but the reality is funding is not 

unlimited. Based on a June 22, 2017 VA news release, Dr. Shulkin announced plans 

to dispose of all of its vacant buildings over the next 24 months. 2 According to Dr. 

Shulkin, if it cannot sell, re-use or otherwise dispose of the property, the plan is 

to knock them down and clear the site for something else. The American Legion has 

reviewed the Government Accountability Office (GAO) April 2017 report entitled, 

VA Should Improve Its Efforts to Align Facilities with Veterans’ Needs. 3

The American Legion agrees that over time there has been many changes which 

have impacted VA’s ability to align its medical facilities and services in order to 

meet the needs of our nation veterans. According to GAO geographic shifts in the 

veteran population, changes in health care delivery, and an aging infrastructure affects the Department of Veterans Affairs’ (VA) efforts to align its services and real 

property portfolio to meet the needs of veterans. 

Since VA began treating veterans, eligibility has expanded from treating serviceconnected veterans to providing care to all veterans who are eligible to enroll in the 

VA Health Care System. As a result, the need for increased space in the VA 

healthcare systems across the country has not been able to keep up with the shifting veteran population. 

When The American Legion System Worth Saving team is out conducting System 

Worth Saving Site visits, VA employees often express concerns about the lack of 

space, the amount of time it takes to acquire lease space, and the time it takes to 

build a new facility or community-based outpatient clinic. VA employees express 

concerns about VA’s Strategic Capital Investment Planning (SCIP) process. According to GAO, VA is aware of many of the limitations of the SCIP process-as the Independent Assessment found many of the same limitations and made recommendations to address them, but VA has taken little action. Specifically, in 2015, the Independent Assessment found that SCIP’s scoring and approval processes and time 

frames undermined VA’s capital planning and prioritization process. 

In 2016, The American Legion renewed Resolution No. 136, Strategic Capital Investment Planning Program, which urges Congress to provide increased appropriations annually to address Department of Veterans Affairs construction deficiencies 

and gaps identified by VA’s Strategic Capital Investment Planning program; VA includes activation costs in their future SCIP cost projections and allocations, so VA’s 

budget will not have to offset this lack of national funding, and VA continues to be 

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4The American Legion Resolution No. 136 (Aug. 2016): Strategic Capital Investment Planning 

Program 5GAO Report No.T–HEHS–00–91 (April 2000): VA Is Struggling to Respond to Asset Realignment Challenges 6GAO Report No. T–HEHS–00–88 (April 2000): VA Is Struggling to Address Asset Realignment Challenges 7GAO Report (August 2003): VA Health Care: Framework for Analyzing Capital Asset Realignment for Enhanced Services Decisions 8GAO Report No. 05–429: (August 2005): Key Challenges to Aligning Capital Assets and Enhancing Veterans’ Care 9GAO Report No -09–686T (June 2009) Overview of VA’s Capital Asset Management 

10GAO report No. 17–349 (April 2017): VA Should Improve Its Efforts to Align Facilities with 

Veterans’ Needs 11http://www.goldenwest.net/veteranstown/doc/CARES—Final—Report.pdf 1GAO, VA Real Property: VA Should Improve Its Efforts to Align Facilities with Veterans’ 

Needs, GAO 17 349 (Washington, D.C.: Apr. 5, 2017). 

transparent about SCIP’s progress by publicly posting information about projects 

and costs on an annual basis. 4

Based on The American Legion’s review, addressing VA’s capital asset needs is 

not a new phenomenon. There have been numerous government reports over the 

last 26 years addressing this topic to include the following GAO reports: 

• 1991- GAO/T–HEHS–00–91, VA Is Struggling to Respond to Asset Realignment 

Challenges 5

• 2000 - GAO/T–HEHS–00–88 - VA Health Care: VA is Struggling to Address 

Asset Realignment Challenges 6

• 2003 - GAO–03–1103R - VA Health Care: Framework for Analyzing Capital 

Asset Realignment for Enhanced Services Decisions 7

• 2005- GAO–05–429, Key Challenges to Aligning Capital Assets and Enhancing 

Veterans’ Care 8

• 2007 - GAO–07–048, Overview of VA’s Capital Asset Management • 2009 - GAO–09–686T, Overview of VA’s Capital Asset Management 9

• 2017 - GAO–17–349, VA Should Improve Its Efforts to Align Facilities with Veterans’ Needs 10

In 2004, the Veterans Affairs Capital Asset Realignment for Enhanced Services 

Commission (CARES) delivered their report to Congress. 11 All of these reports included recommendations for improvements. Since the 1999 report was issued, GAO 

continues to report on deficiencies in the Department of Veterans Affairs Capital 

Alignment and Asset Needs. 

The American Legion is concerned that VA has not routinely engaged Veteran 

Service Organizations (VSOs) in discussions about their plans to address VA’s capital asset needs. VA must do a better job in engaging VSOs in these discussions. 

Twenty-six years later, and we are still trying to find solutions to VA’s Capital Asset 

Needs. For God and Country, The American Legion hopes it doesn’t take another 

twenty-six years to find solutions to VA’s Capital Asset Needs. 

Conclusion 

As always, The American Legion thanks this Committee for the opportunity to explain the position of the over 2 million veteran members of this organization. For 

additional information regarding this testimony, please contact Mr. Matthew 

Shuman, Director at The American Legion’s Legislative Division at (202) 861–2700 

or mshuman@legion.org. 

f 

Prepared Statement of Debra Draper 

VA REAL PROPERTY 

Planning and Communication Improvements Could Help Better Align 

Facilities with Veterans’ Needs 

Chairman Roe, Ranking Member Walz, and Members of the Committee: 

I am pleased to be here today to discuss our April 2017 report on the Department 

of Veterans Affairs’ (VA) efforts to align its medical facilities and services. 1 As you 

know, VA operates one of the largest health care systems in the United States, providing care to more than 8.9 million veterans each year. VA is also one of the largest federal property-holding agencies. In September 2014, VA’s reported inventory 

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2GAO, High-Risk Series: An Update, GAO 15 290 (Washington, D.C.: February 2015). GAO 

maintains a high-risk program to focus attention on government operations that it identifies as 

high risk due to their greater vulnerabilities to fraud, waste, abuse, and mismanagement or the 

need for transformation to address economy, efficiency, or effectiveness challenges. See, for example, GAO, VA Health Care: Actions Needed to Improve Newly Enrolled Veterans’ Access to 

Primary Care, GAO 16 328 (Washington, D.C.: Mar. 18, 2016) and GAO, VA Mental Health: 

Clearer Guidance on Access Policies and Wait-Time Data Needed, GAO 16 24 (Washington, 

D.C.: Oct. 28, 2015). See also, for example, Department of Veterans Affairs, Office of Inspector 

General, Veterans Health Administration, Review of Alleged Patient Deaths, Patient Wait 

Times, and Scheduling Practices at the Phoenix VA Health Care System, Report No. 14–02603– 

267 (Washington, D.C.: Aug. 26, 2014) and VA, Department of Veterans Affairs Access Audit, 

System-Wide Review of Access, Results of Access Audit Conducted May 12, 2014, through June 

3, 2014. 3See GAO, High-Risk Series: Federal Real Property, GAO 03 122 (Washington, D.C.: January 

2003). 4See GAO, Standards for Internal Control in the Federal Government, GAO/AIMD–00–21.3.1 

(Washington, DC: November 1999), and GAO, Standards for Internal Control in the Federal 

Government, GAO 14 704G (Washington, D.C.: September 2014), Office of Management and 

Budget, Circular No. A–11: Preparation, Submission, and Execution of the Budget, July 2016, 

and GAO, Streamlining Government: Questions to Consider When Evaluating Proposals to Consolidate Physical Infrastructure and Management Functions, GAO 12 542 (Washington, D.C.: 

May 23, 2012). 

included 6,091 federally-owned and 1,586 leased buildings. However, in recent decades, the veteran population and preferences have shifted. VA has recognized this 

and the need to modernize its aging infrastructure and align its real property assets 

to provide accessible, high-quality and cost-effective services to veterans. 

Aligning VA facilities to improve veteran access to services integrates two of 

GAO’s high risk areas: veterans’ health care and federal real property. In 2015, 

GAO placed veterans’ health care on its High Risk List due to persistent weaknesses and systemic problems with timeliness, cost-effectiveness, quality, and safety 

of the care provided to veterans. 2 In 2003, GAO placed federal real property management-including management of VA real property-on its High Risk List due to 

long-standing challenges including effectively disposing of excess and underutilized 

federal property. 3

Today I will summarize the findings from our April 2017 report including (1) the 

factors that affect VA facility alignment, (2) the extent to which VA’s capital-planning process facilitates the alignment of facilities with the veteran population, and 

(3) the challenges VA faces in its alignment activities. In addition, I will highlight 

key actions that we recommended in our report that VA can take to improve its 

ability to plan for and facilitate the alignment of its facilities with veterans’ needs. 

For our report, we reviewed VA’s facility-planning documents and data and interviewed VA officials in headquarters and at seven medical facilities selected for their 

geographic location, veteran population, and past alignment efforts. We also evaluated VA’s actions against federal standards for internal control, federal capital-acquisition guidance, and GAO-identified best practices for capital planning. 4 Additional information on our scope and methodology is available in our report. The 

work on which this testimony is based was conducted in accordance with generally 

accepted government auditing standards. Those standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and conclusions 

based on our audit objectives. 

Facility Alignment Is Affected by Shifting Veteran Populations, Evolving 

Health Care Delivery, and an Aging Infrastructure 

Geographic shifts in the veteran population, changes in health care delivery, and 

an aging infrastructure affect VA’s efforts to align its services and real property 

portfolio to meet the needs of veterans. For example, a shift over time from inpatient to outpatient care will likely result in underutilized space once used for inpatient care. In such instances, it is often difficult and costly for VA to modernize, renovate, and retrofit these older facilities. In June 2017, VA reported that its facility 

inventory includes 430 vacant or mostly-vacant buildings that are, on average, more 

than 60 years old, and an additional 784 buildings are underutilized. 

The historic status of some VA facilities adds to the complexity of converting or 

disposing of them. In 2014, VA reported holding 2,957 historic buildings, structures, 

or land parcels-the third most in the federal government after the Department of 

Defense and the Department of the Interior. In some instances, it may be more expensive to renovate than demolish and rebuild outdated facilities. In other cases, 

however, there may not be an option to demolish if these buildings are designated 

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5 Established in 2010, the goal of SCIP is to identify the full capital needed to address VA’s 

service and infrastructure gaps and to demonstrate that all project requests are centrally reviewed in an equitable and consistent way throughout VA, including across market areas within 

VA’s health care system. Annually, planners at the medical facilities develop 10-year action 

plans for their respective facilities, which include projects to address gaps in service identified 

by the SCIP process. Medical facility officials then develop more detailed business plans for the 

capital improvement projects that are expected to take place in the first year of the 10-year action plan. These projects are validated, scored, and ranked centrally based on the extent to 

which they address the annual VA-approved SCIP criteria using the assigned weights. 6The scoring of submitted projects includes both narrative responses that are evaluated 

(about one-third of the overall score) and data-driven scoring based on gap closure (the remaining two-thirds of the overall score). 

as historic. For example, planning officials at four medical facilities in our review 

told us that state historic preservation efforts prevented them from demolishing vacant buildings, even though these buildings require upkeep costs and pose potential 

safety hazards. (See fig. 1.) 

Limitations in VA’s Capital-planning Processes Impede Its Alignment of Facilities 

Two of the planning processes VA uses to align its facilities-VA’s Strategic Capital 

Investment Planning (SCIP) and the VA Integrated Planning (VAIP)-have limitations. 5

Implemented in fiscal year 2011 as a pilot project, the VAIP process’s goal was 

to identify the best distribution of health care services for veterans; where the services should be located based on the veterans’ locations and referral patterns; and 

where VA should adapt services, facilities, and health care delivery options to better 

meet these needs as determined by locations and referral patterns. 

SCIP Process 

VA relies on the SCIP process to plan and prioritize capital projects system-wide, 

but SCIP’s limitations-including subjective narratives, long timeframes, and restricted access to information-undermine VA’s ability to achieve its goals. For example, the time between when planning officials at VA medical facilities begin developing the SCIP narratives and when they are notified that a project is funded has 

taken between 17 and 23 months over the past 6 fiscal-year SCIP submissions. 6

(See fig. 2.) As such, VA routinely asks its facility planners to submit their next 

year’s planned project narratives before knowing if their project submissions from 

the previous year have been funded. 

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41 

7See GAO 14 704G. 

(a) Although planning officials at VA medical facilities obtain initial information 

from SCIP about what gaps they need to address, they do not officially start developing the narratives until they receive a request from VA to submit a project for 

SCIP scoring and approval. Officials from the office that oversees SCIP told us 

that facilities usually have access to the tools for submission about a week prior 

to the request date. 

(b) Medical facilities officially find out which major (over $10 million) and minor 

construction (under $10 million) SCIP projects are approved and will be funded 

when Congress passes the department’s budget for that fiscal year. Non-recurring 

maintenance SCIP projects-repairs and renovations within the existing square footage of a facility that total more than $25,000-are available for funding on the first 

day of the fiscal year for that project’s submission because they have advance appropriations. 

An official from the office that oversees SCIP told us that the timing of the budgeting process, which is outside VA’s control, contributes to these delays. While these 

aspects are outside of its control, VA has chosen to wait about 6 to 10 months to 

report the results of the SCIP scoring process to the medical facilities. This situation 

makes it difficult for local officials to understand the likelihood that their projects 

will receive funding. A VA official said that for future SCIP cycles, VA plans to release the scoring results for minor construction and non-recurring maintenance 

projects to local officials earlier in the process. At the time of our review, however, 

the official did not have a timeframe for when VA would do this. Although VA acknowledges many of these limitations, it has taken little action in response. Federal 

standards for internal control state that agencies should evaluate and determine appropriate corrective action for identified limitations on a timely basis. 7 If VA does 

not address known limitations with the SCIP process, it will not have reasonable 

assurance that SCIP can be used to accurately identify the capital necessary to address its service and infrastructure gaps. In our April 2017 report, we recommended 

that VA address identified limitations to the SCIP process, including limitations to 

scoring and approval, and access to information. VA partially concurred, noting that 

it generally concurred with the recommendation to address limitations in the SCIP 

process, but limited its concurrence to addressing the limitations that are within its 

control. 

VAIP Process 

The VAIP process produces a market-level health services delivery plan for each 

Veterans Integrated Service Network (VISN) and a facility master plan for each 

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8 VA organizes its system of care into regional networks (VISNs), which are responsible for 

coordination and oversight of all administrative and clinical activities within its specified geographic region. As of January 2017, VA officials told us they had mostly completed the VAIP 

process in 6 of the 18 VISNs and had plans to start or complete the remaining VISNs by October 2018. 9 VA uses the services of non-VA providers in non-VA facilities under the following statutory 

authorities: 38 U.S.C. §§ 1703, 1725, 1728, 8111, and 8153. The Non-VA Medical Care Program 

includes the Choice Program and Patient-Centered Community Care. The Choice Program was 

authorized under the Veterans Access, Choice, and Accountability Act of 2014 (Choice Act), 

which appropriated $10 billion for the furnishing of non-VA care when veterans’ access to VA 

health care does not meet applicable timeliness or travel requirements. Pub. L. No.113–146, 128 

Stat. 1754 (2014). VA may authorize Choice Program care until such funds are exhausted. Pub. 

L. No. 115–26, § 1, 131 Stat. 129 (2017). Patient-Centered Community Care is a nationwide program where VA may authorize non-VA care when a VA facility is unable to provide certain specialty care services, such as cardiology or orthopedics, or under other conditions. To implement 

the program, VA utilizes two contractors, Health Net and TriWest, to establish networks of providers in a number of specialties-including primary care, inpatient specialty care, and mental 

health care. 10See Office of Management and Budget, Circular No. A–11. 11See GAO 12 542. 

medical facility-which VA has estimated to cost $108 million when fully complete. 8

However, the VAIP process’s facility master plans assume all future growth in services will be provided directly through VA facilities. This assumption is not accurate 

given that VA obligated about $10.1 billion to purchase care from non-VA providers 

in fiscal year 2015. VA can provide care directly through its medical facilities or 

purchase health care services from non-VA providers through both the Non-VA Medical Care Program (referred to as ‘‘care in the community’’ by VA) and clinical contracts. 9

The Office of Management and Budget’s acquisition guidance notes that investments in major capital assets should be made only if no alternative private sector 

source can support the function at a lower cost. 10 This consideration is particularly 

relevant as VA’s data projects that the number of enrolled veterans will begin to 

fall after 2024. Officials who oversee the VAIP process said that they were still 

awaiting other VA offices to complete analyses required by recently released VA 

guidance, but as a result of this and other limitations, some local VA officials said 

that they already bypass the VAIP process and contract for their own facility master 

plans. In our April 2017 report, we recommended that VA assess the value of the 

VAIP’s facility master plans as a facility-planning tool, and based on conclusions 

from the review, either (1) discontinue the development of VAIP’s facility master 

plans or (2) address the limitations of VAIP’s facility master plans. VA concurred 

with the recommendation and noted that all future VAIP facility master plans will 

embrace all recent and evolving guidance, especially regarding care in the community opportunities. 

VA Has Faced Challenges When Not Fully Engaging Stakeholders in Its Facility Alignment Efforts 

VA has encountered challenges to its facility alignment efforts, in part, because 

it has not consistently followed best practices for effectively engaging stakeholders. 

VA may align its facilities to meet veterans’ needs by expanding or consolidating 

facilities or services. Stakeholders-including veterans; local, state, and federal officials; Veterans Service Organizations; historic preservation groups; VA staff; and 

Congress-often view changes as working against their interests or those of their constituents, especially when services are eliminated or shifted from one location to another. 

We have previously identified best practices for stakeholder engagement in facility 

consolidation actions, recommending that stakeholder outreach begin well in advance of any facility changes and developing a two-way communication strategy to 

address concerns and explain the data, the rationale, and the overarching benefits 

behind decisions. 11 Failure to effectively engage with stakeholders about alignment 

changes can undermine or derail facility alignment. We found that VA has not consistently engaged stakeholders, and, in some cases, this resulted in adversarial relationships that reduced VA’s ability to better align facilities with the needs of the 

veteran population. In other cases, we observed two-way communication with stakeholders that resulted in more productive relationships and effective alignment efforts, such as with a medical facility that successfully closed an underutilized inpatient wing, closed a leased community based outpatient clinic, and relocated a domiciliary. 

This inconsistency in communication practices may result, in part, from a lack of 

VA guidance for incorporating best practices into stakeholder communication. FurLeonard.horne on VACREP0180 with DISTILLER

43 

12See GAO 14 704G. 

ther, VA officials stated that they do not monitor and evaluate their communication 

methods for effectiveness in reaching their intended audiences. This runs counter 

to federal standards for internal control, which note that agencies should monitor 

and evaluate their activities. 12 Without guidance that adheres to best practices for 

fully integrating stakeholders and without monitoring and evaluation of this process, VA does not have reasonable assurance that its staff are meaningfully or effectively engaging stakeholders in the capital alignment decisions that affect them. In 

our April 2017 report, we recommended that VA (1) develop and distribute guidance 

for VISNs and facilities using best practices on how to effectively communicate with 

stakeholders about alignment change, and (2) develop and implement a mechanism 

to evaluate VISN and facility communication efforts with stakeholders to ensure 

that these communication efforts are working as intended and align with guidance 

and best practices. VA concurred with our recommendations and outlined a plan to 

implement these recommendations. 

Chairman Roe, Ranking Member Walz, and Members of the Committee, this concludes my prepared statement. I am happy to answer any questions related to our 

work on VA’s efforts to align its medical facilities and services. 

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Dave Wise, Director; Keith Cunningham, Assistant Director; Jacquelyn Hamilton; 

Jeff Mayhew; Malika Rice, Michelle Weathers; and Crystal Wesco. 

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f 

Prepared Statement of James M. Sullivan 

Thank you, Chairman Roe, Ranking Member Walz, and Members of the Committee, for the opportunity to appear today to discuss the Department of Veterans 

Affairs (VA) capital asset program and address VA’s responses the findings in the 

Commission on Care report, the Independent Assessment, and Government Accountability Office (GAO) Report 17–349 ‘‘VA REAL PROPERTY - VA Should Improve its 

Efforts to Align Facilities with Veterans’ Needs.’’ Additionally, I would like to discuss VA’s ongoing efforts to dispose or reuse vacant buildings and the need for additional tools that will provide extended opportunities to reduce VA’s portfolio of vacant assets. 

VA Real Property Portfolio 

VA’s mission is distinct from other Federal agencies, in that we operate the nation’s largest integrated healthcare system, with more than 1,700 health service delivery sites, including hospitals, clinics, community living centers, domiciliaries, residential rehabilitation sites, and other types of facilities. Additionally, VA administers a variety of benefits and services, and operates 135 national cemeteries nationwide. 

The Department owns and leases real property in hundreds of communities across 

the U.S., and overseas. Overall, VA maintains approximately 155 million square feet 

(SF) in 6,274 owned buildings, and more than 35,000 acres of land. Approximately 

24.6 million SF of space has been acquired through over 1,926 leases for the Department. VA’s portfolio of nearly 180 million SF is one of the largest in the Federal 

Government and is unlike many Federal agencies; VA owns the majority of its portfolio - 86 percent of its square footage - which means real estate plays an important 

role in our overall asset management. Another aspect that separates VA from other 

Federal agencies is the fact that the average age of a VA owned building is approaching 60 years old. Managing a portfolio of that size and age is complex, takes 

a significant amount of resources, and requires a great deal of flexibility to both 

modernize and adjust to changing demographics of the Veteran population. 

VA’s Capital Asset Needs 

Most of the VA’s infrastructure portfolio is dated, in need of repair/replacement, 

and requires considerable investment. The need is exacerbated because the majority 

of VA facilities have out-lived their useful life-cycle. VA has more than $50 billion 

in capital needs, identified through VA’s Strategic Capital Investment Planning 

(SCIP) process, over the next 10 years to modernize and maintain its infrastructure. 

Specifically, VA’s fiscal year (FY) 2018 budget requests $512 million for major construction, $342 million for minor construction, $1.9 billion for non-recurring maintenance and $954 million in medical facilities funds for VA real property leases. VA’s 

FY 2018 request reflects VA’s commitment to modernize and fix its existing infrastructure by directing significant resources to projects that correct critical building 

and infrastructure deficiencies that are in need of repair. VA will also need flexibility to repurpose some facilities and develop partnerships or joint ventures with 

academic affiliates, the Department of Defense, and the private sector where appropriate. This flexibility will allow VA to assure both access and quality of care, and 

even expand access to care for Veterans in some markets. 

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VA Real Property Disposal 

One of Secretary Shulkin’s top five priorities is ‘‘Modernizing (VA) Systems’’ which 

includes focusing on infrastructure improvements and streamlining. In support of 

this priority, VA has identified 430 individual vacant buildings totaling 5.9 million 

gross SF that are geographically dispersed through VA campuses nationwide. On 

June 20, 2017, the Secretary announced VA’s plans to initiate disposal through demolition, sale or transfer; or reuse actions for these vacant buildings totaling 5.9 million square feet, over the next 24 months. These buildings are not being used to 

serve Veterans, and the $7 million in annual capital and operating expenses currently used to maintain these vacant buildings can be better utilized to serve Veterans. 

VA evaluated the 430 vacant buildings and categorized them for disposal based 

on data regarding several factors. These factors included whether the buildings were 

classified as historic or historic eligible, had environmental concerns, or if there 

were more complex issues preventing disposal or reuse of the buildings. VA welcomes support from Congress to streamline approval timelines and processes in 

order for VA to better align owned assets and make business decisions without 

undue statutory or regulatory constraints from environmental and historic preservation stakeholders who might unintentionally negatively impact cost effective disposal or reuse actions, while still maintaining good environmental outcomes. On 

June 20, 2017, Secretary Shulkin also announced that VA will review another 784 

non-vacant, but underutilized buildings to determine if additional efficiencies can be 

identified to be reinvested in veterans’ services. This effort will be incorporated as 

the Department works towards the goal of high performing healthcare networks 

Available Outleasing Tools 

VA has made progress in its efforts to reduce its vacant building footprint, and 

is continuing to aggressively pursue reuse and disposal strategies. Since 2004, VA 

has disposed or reused 1,059 assets totaling approximately 8.3 million gross SF and 

932 acres. One of VA’s most successful real property asset management tools is its 

Enhanced-Use Lease (EUL) authority. The EUL authority currently allows VA to 

outlease assets to private and public sector entities, and to transform vacant buildings into housing for homeless Veterans, at little or no long-term carrying cost to 

VA. The program has provided significant benefits to VA in terms of annual cost 

savings; improved facilities consistent with VA’s mission and operations; increased 

healthcare services; substantial private investment in VA’s capital facilities and infrastructure; creation of jobs; and increased tax revenues for local communities. 

VA is one of the few Federal agencies with an EUL authority, and VA manages 

one of the most successful versions of these programs within the Federal Government. Approximately 4.5 million SF of VA building space has been outleased in public-private partnerships through VA’s EUL authority. This has resulted in over 

2,700 operational housing units for homeless Veterans, Veterans that are at-risk for 

homelessness, and in some situations, their families. 

VA previously had broader EUL authority that allowed for mixed-use and other 

wide-ranging partnerships beyond supportive housing. Such uses were consistent 

with VA’s mission and operations. While that authority lapsed in December 2011, 

VA has submitted draft legislation to Congress that proposes to expand the EUL 

authority beyond the scope of supportive housing. This would allow greater reuse 

flexibility of unneeded assets, and to improve services for Veterans. 

Additionally, VA is embarking on a program authorized through the National Historic Preservation Act (NHPA) for Historic Outleasing and Exchange Actions that 

allows expanded ability for reuse of historic properties beyond housing. 

Public-Private Partnerships 

In addition to utilizing the EUL program, VA welcomes opportunities to explore 

other forms of public-private partnerships that can provide additional tools to supplement VA’s capital requirements and offer new methods to enhance the facilities 

used to serve Veterans and their families. VA could utilize additional public-private 

partnerships opportunities to support the right-sizing and adaptation of VA’s owned 

infrastructure. Further flexibility to engage potential partnerships to renovate or 

reuse existing facilities could provide VA with cost savings upfront and help support 

improved services for Veterans. 

Choice Act - Independent Assessment 

The Independent Assessment Recommendations related to facilities (Section K) focused on VA capital project selection/project portfolio; capital project delivery; utilization of existing infrastructure; and the use of transformative options to address 

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unfunded capital requirements. In response to language in the Fiscal Year 2017 Appropriations Bill requiring a National Realignment Strategy, VA began efforts to 

conduct objective assessments of the markets within the VA healthcare system. 

Commission on Care 

VA agreed that the Commission on Care’s recommendation on facilities was critical to enabling a successful transformation of VA’s healthcare system to a modern 

high-performing integrated network to better serve the needs of Veterans now and 

in the future. VA stated that a strong suite of capital planning programs, tools, resources, modernized facilities where appropriate, and proper dispositioning of outdated facilities, consistent with the Commission’s recommendations, would be needed to fully realize the benefits and Veteran outcomes expected from implementing 

an integrated healthcare network. Specifically, VA agreed with the Commission that 

it is critical for VA to determine the optimal mix of healthcare services to meet Veterans needs at the market level before realigning its infrastructure in concert with 

partner resources in the market. VA also agreed that greater statutory authority 

and tools are needed to address the Department’s real property needs and realign 

VA’s capital assets, including divestiture of outdated properties where appropriate. 

GAO Report 17–349 - VA REAL PROPERTY 

The report highlighted GAO’s findings related to VA’s SCIP process, the VA Integrated Planning (VAIP) process, and VA’s stakeholder communication efforts related 

to facility alignment decisions. In response to GAO’s report, VA partially concurred 

with the recommendation regarding the SCIP process, and agreed to address the 

limitations that are within VA’s control. Many of the items noted by GAO are found 

outside of the SCIP program’s purview, in areas where VA has limited ability to influence changes. The SCIP process is a data-driven, long-range planning tool that 

integrates all capital investment needs across VA. SCIP informs investment and annual budget decisions by annually setting capital investment policy direction and 

project priorities, but it is not a budget tool. It does not guarantee whether or when 

necessary levels of funding will be received or otherwise made available. 

To the extent possible, VA is implementing changes to the SCIP process to support better access to project data, improve the visibility and prioritization of 

sequenced projects, minimize administrative burdens, rationalize proposals based on 

the realities of Veteran Choice and shifting demographics, and to improve communication of SCIP results to VA planners as early as possible in the process. This also 

includes reducing the administrative burden of providing SCIP documents. 

Through the VAIP process, an estimated 60 Facility Master Plans (FMP) were 

completed on a Veterans Integrated Service Network (VISN) basis following development of Service Delivery Plans. These FMPs provided a guide for planning and 

development over a 10-year period. The FMPs were considered highly valuable at 

the time of inception. VA has considered the feedback from GAO’s report and in support of emphasis on Care in the Community, there will be a strategic pause in the 

VAIP process. VA is in the process of reassessing facility needs as a consequence 

of the assessment of local health systems during the market based health system 

optimization process. VA will evaluate service delivery opportunities in each market 

to build local high-performing integrated healthcare networks. 

GAO also stated that VA needs to enhance communication with stakeholders. To 

ensure consistency in stakeholder engagement efforts and address GAO’s recommendations, the Veterans Health Administration’s (VHA) Office of Communications is developing a standard operating procedure (SOP) for all VISN and facility 

public affairs officers to follow when there is a change in mission and/or realignment. The SOP directs that VHA use the template communications plan, including 

timeline for notifications, target audiences, and example key messaging. In addition, 

the SOP provides guidance for facilities to implement evaluation tools to measure 

the return on their communications investment in sharing information with stakeholders, including after action reports, media monitoring tools, and direct feedback 

from target audiences. The VHA Deputy Under Secretary for Health for Operations 

and Management disseminated the SOP through a memorandum to facility and 

VISN leadership on June 30, 2017, and the topic will be discussed on Network Director monthly conference calls and facility leadership calls, providing an opportunity for discussion and questions. VHA has also established a mechanism for 

sharing best practices. 

Way Forward - High Performing Healthcare Networks 

VA is working collaboratively to address the Independent Assessment Recommendations, the Commission on Care’s recommendation on facilities, and GAO 

Report 17–349. VA is working towards the goal of high performing healthcare netLeonard.horne on VACREP0180 with DISTILLER

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works that take into account current and future Veteran demand for medical care, 

and responsive services by integrating community care, telehealth services and VAprovided healthcare. VA is partnering with private sector healthcare experts to conduct objective assessments and develop local health system optimization plans. 

The assessment methodology was developed between the VHA Office of Policy and 

Planning, VHA Clinical Operations and the VHA Office of Community Care. The assessment methodology was subsequently tested in three pilot markets between April 

and July 2017. An acquisition process is underway to select a contractor to assist 

VA with using the pilot results to create a final methodology for use beginning in 

September 2017 to assess and recommend health system optimization in all 96 markets of the VA healthcare system by the first quarter of FY 2019. 

The primary outcomes of the assessments will be a plan for each market to develop a high performing healthcare network. Creating a high performing network 

will include an evaluation and potential use assessment of all market capabilities 

including VA, Department of Defense (DoD), Academic Affiliates, Federally Qualified Health Centers, and other community providers. Once the market assessment 

is complete, recommendations may include capital investments, divestments, leasing, public-private partnerships, and other approaches for modernizing VA services 

and infrastructure. In addition to the capital component, the plan will include programmatic/service-line recommendations, as well as opportunities to increase capacity from process improvement and integration of telehealth services. 

VA expects that these market area optimization plans will address the Independent Assessment, the Commission on Care recommendations, and GAO concerns 

by balancing demand for and supply of services in each local market by using government partners, academic affiliates, and private sector resources to provide Veterans improved access, excellent quality care, and greater satisfaction. In addition, 

the plans will encourage cost effective strategies for coordinating all aspects of a 

high performing healthcare network while eliminating duplicative and inefficient 

processes. 

Support from Congress 

In order to build upon VA’s success, continued support from Congress is needed. 

As the Secretary stated at his recent FY 2018 budget hearings, VA’s budget submission includes proposed legislative requests that, if enacted, would increase the Department’s flexibility to meet its capital needs. VA included proposals to: (1) increase from $10 million to $20 million the dollar threshold for minor construction 

projects; (2) modify title 38 to eliminate statutory impediments to acquiring joint facility projects with DoD and other Federal agencies; and (3) expand VA’s EUL authority beyond supportive housing. VA is also seeking Congressional authorization 

of 27 major medical leases in order to establish new points of care, expand sites of 

care, replace expiring leases, and expand VA’s research capabilities. The majority 

of these leases have been included in previous budget requests, some dating back 

to the FY 2015 budget submission. 

Conclusion 

VA has a complex real estate portfolio, and seeks to maintain the optimal mix of 

assets needed to provide high quality care, readily accessible services, and outstanding benefits to our Nation’s Veterans. VA welcomes new or expanded tools and 

the necessary flexibilities to address its infrastructure needs and reduce vacant real 

property assets, including establishing viable reuses where possible and saving taxpayer dollars. The Department will keep the Committee informed as progress is 

made on healthcare market assessments. 

Mr. Chairman, Ranking Member, and Members of the Committee, this concludes 

my statement. Thank you for the opportunity to testify before the Committee today. 

I would be happy to respond to any questions you may have. 

Æ 

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