VA Surgical Implants: Purchase Requirements Were Not Always Followed at Selected Medical Centers and Oversight Needs Improvement
Published: 2014-01-13T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: VHA spending on surgical implants--such as stents and bone and skin grafts--has increased to about $563 million in fiscal year 2012. Clinicians at VAMCs determine veterans' needs and request implant purchases either from a contract or from the open market (i.e., not from an existing contract). VHA requirements--which implement relevant federal regulations--include providing justifications for open-market purchases.
GAO was asked to evaluate implant purchasing by VHA. This report examines (1) factors that influence clinicians' decisions to use particular implants when multiple, similar items are available; (2) selected VAMCs' compliance with pertinent VHA requirements for documenting open- market purchases; and (3) VA's and VHA's oversight of VAMC compliance with implant purchasing requirements. GAO visited four VAMCs that serve large veteran populations and are dispersed geographically. GAO interviewed clinicians at the VAMCs, reviewed pertinent statutes, regulations, and policies and reviewed a sample of implant purchases from different vendors. These results cannot be generalized to all VAMCs but provide insights. GAO also interviewed VA and VHA officials and reviewed agency documents.
section_title: What GAO Found
paragraphs: Clinicians at the four Department of Veterans Affairs Medical Centers (VAMC) GAO visited said that patient need and their clinical expertise were the main factors influencing their decisions of which surgical implants to use. Also, clinicians in certain specialties said they typically used one of the implants available on VA-negotiated national committed-use contracts, which generally establish a fixed price for several models of nine types of surgical implants that the Veterans Health Administration (VHA) commits to using nationally. VHA recognizes the need for expanding items covered under these contracts to fully leverage its purchasing power but, as of October 2013, had not identified additional implants to include on such contracts or established timelines for doing so. GAO also found that the availability of implants on VA-negotiated federal supply schedule (FSS) contracts rarely influenced clinicians' decisions on which implant to use. Clinicians were often not aware of the availability of surgical implants on FSS contracts, which are negotiated by one of VA's contracting offices, but for which VHA clinicians have little or no input. Clinicians told GAO that in some cases they may avoid implants on FSS contracts due to their concerns about the quality of these items.
In regard to compliance with VHA's requirements for justifying open-market purchases of surgical implants, which VHA adopted to promote adherence to relevant federal regulations, GAO found the following:
None of the four VAMCs fully complied with requirements for obtaining waivers for open-market purchases of surgical implants because they were focusing on other priorities or lacked awareness of the requirements, among other factors.
None of the four VAMCs fully complied with additional requirements for documenting open-market purchases that are part of a new process VHA implemented in fiscal year 2013 for surgical implant purchases over $3,000. VAMC and regional office officials attributed noncompliance mainly to insufficient VHA guidance and VA staff's inexperience in completing these requirements.
Three of the four VAMCs did not comply with a VHA requirement pertaining to agreements with vendors that provided surgical implants to them on consignment. These agreements, which clinicians likely established to ensure timely access to implants, do not comply with a VHA requirement that consignment agreements must be authorized by a VHA contracting officer.
The Department of Veterans Affairs (VA) and VHA have begun conducting oversight of surgical implant purchases over $3,000 to assess compliance with VHA's new requirements. However, VHA officials told GAO that VA and VHA have not ensured that corrective action has been taken to address identified noncompliance because of poor communication between VA and VHA and insufficient staffing to follow up on identified issues. Furthermore, VHA assesses each VAMC's performance on metrics established for surgical implant purchasing, but it does not have a policy governing how any identified deficiencies should be addressed nor the corrective actions to be taken by VAMCs and VHA's regional networks.
section_title: What GAO Recommends
paragraphs: GAO recommends that VA identify implants and establish a timeline to expand the volume that can be purchased from VA-negotiated contracts and improve compliance with and oversight of purchasing requirements. VA concurred with these recommendations.

section_title: Letter
paragraphs: The Department of Veterans Affairs (VA) Veterans Health Administration  (VHA) is one of the largest purchasers of surgical implants, which include  biological implants, such as skin and bone grafts, and non-biological  implants, such as cardiac pacemakers and artificial joints. Surgical  implants fall under VHA’s definition of prosthetics, which includes all items  that support or replace a body part or function. Federal law grants the  Secretary of VA the authority to procure prosthetics and related  necessary services in such manner as the Secretary may determine to be  proper, without regard to any other provision of law. VHA has exercised  this authority to limit competition when purchasing prosthetics—including  surgical implants— when doing so is necessary to meet veterans’ clinical  needs. Specifically, surgeons and other clinicians at VA medical centers  (VAMC) determine veterans’ needs for surgical implants. While VA has  negotiated competitive contracts for a variety of surgical implants, VAMCs  or VHA’s regional network contracting offices (NCO) can purchase a  specific surgical implant requested by a clinician from the open market  with appropriate clinical justification, rather than purchasing a similar item  through a competitive contract. VHA’s spending on surgical implants  increased about 28 percent over the last four years and was about   $563 million in fiscal year 2012.
At a recent congressional hearing, concerns were raised about the extent  to which VAMCs and NCOs purchase surgical implants from the open  market without appropriate justification, rather than purchasing such items  from competitive contracts—potentially at a lower cost. Concerns were  also raised about VHA’s oversight of VAMCs’ and NCOs’ purchases of  surgical implants, which may have allowed insufficiently documented  purchases of these items to go unnoticed. You asked us to review VHA’s  purchasing of surgical implants, including requirements for documenting  purchases from the open market and oversight of compliance with these  requirements. This report examines  1.  Factors that influence clinician decisions to use particular surgical  implants when multiple, similar items are available;  2.  Compliance at selected VAMCs with pertinent VHA requirements for  documenting surgical implant purchases from the open market; and  3.  VA and VHA oversight of compliance with surgical implant purchasing  requirements.
To examine the factors that influence clinician decisions to use particular  surgical implants when multiple, similar items are available, we visited  VAMCs in four locations: Indianapolis, Indiana; Los Angeles, California;  New York, New York; and Seattle, Washington. At each of the four  VAMCs, we interviewed at least one clinician from each of six clinical  specialties that typically use surgical implants to obtain information on the  factors they consider when choosing which surgical implant to use when   In total, we interviewed  multiple, similar types of implants are available.28 clinicians. In addition, we interviewed staff, such as the operating room  nurse manager, involved in managing surgical implants at the VAMCs.
To assess compliance at the four selected VAMCs with pertinent VHA  requirements for documenting surgical implant purchases from the open  market, we first identified the applicable requirements. To do so, we  reviewed VA’s statutory authority to acquire prosthetics—including  surgical implants, applicable federal regulations—including the Federal  Acquisition Regulation (FAR) and VA Acquisition Regulation (VAAR) and  implementing guidance issued by VA and VHA with respect to surgical  implant purchasing. To learn more about VA’s and VHA’s surgical  implant purchasing processes for surgical implant purchases from the  open market, we also interviewed procurement and prosthetics officials at  VA and VHA. To determine compliance with pertinent requirements,  applicable to surgical implant purchases from the open market at each of  the four VAMCs we visited, we reviewed documentation related to  selected purchases that occurred in the first 6 months of fiscal year 2013.  We reviewed the VHA data from which we selected 257 purchases. We  selected these purchases to obtain a diverse group of purchases from  different vendors. The purchases we reviewed represented from about   6 percent to about 83 percent of the applicable purchases at each VAMC   For each of the four VAMCs we  in the first 6 months of fiscal year 2013.visited, we also interviewed VAMC and network officials regarding  compliance with these requirements. Our findings on compliance are not  generalizable beyond the purchases we reviewed. To ensure that the  data we used to select purchases for review were sufficiently reliable for  our purposes, we conducted a detailed data reliability assessment of the  data that we used, which included checks for missing values and  interviews with a VHA official knowledgeable about the data. We  restricted these assessments, however, to the specific variables that were  pertinent to our analyses. Our review revealed some inconsistencies and  errors in the data that were attributable to data entry errors and  omissions. Overall, however, we found that all of the data were  sufficiently reliable for selecting our purchases for review.
To examine VA and VHA’s oversight of compliance with surgical implant  purchasing requirements, we obtained and analyzed VA and VHA  documentation on existing or planned monitoring activities, including audit  plans and reports documenting deficiencies in VAMCs’ purchasing of  surgical implants; interviewed VA and VHA procurement and prosthetics  officials and officials from the networks that oversee the four VAMCs we  visited; and assessed VA and VHA’s monitoring activities in the context  of federal standards for internal control.
We conducted this performance audit from April 2013 to January 2014 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. See appendix I for more  information on our scope and methodology, including additional  information on the four VAMCs we visited, the purchases we reviewed,  and the steps we took to assess data reliability.
subsections: section_title: Background
paragraphs: VHA provides health care services to veterans at VHA’s 152 VAMCs and  associated outpatient clinics. Such care can include providing surgical  implants, where required—including biological implants, such as skin  grafts, and non-biological implants, such as cardiac pacemakers.Surgeons and other clinicians at VAMCs determine veterans’ needs for  surgical implants and provide VAMC prosthetics purchasing staff with  documentation showing which item will be implanted in the veteran or has  already been implanted in the veteran (if the surgery has been  completed).
The prosthetics purchasing system is used to record the purchase of all prosthetics,  including surgical implants.
section_title: Clinicians Chose Surgical Implants Based Mainly on Patient Need, Their Clinical Expertise, and, To a Lesser Extent, Implant Availability on Purchasing Contracts
paragraphs: Clinicians at four VAMCs cited patient need and their clinical expertise in  using available surgical implants as the most important factors influencing  their decisions of which surgical implants to use. In addition, certain  clinicians stated that the availability of committed use contracts also  influenced their decisions, whereas the availability of FSS contracts  generally did not.
subsections: section_title: Clinicians Cited Their Clinical Expertise and Patient Need as the Most Important Factors Influencing Their Decision of Which Surgical Implant to Use
paragraphs: Many clinicians we interviewed at the four selected VAMCs stated that  the specific needs of the patient were one of the two main factors that  influenced their decision of which surgical implant to purchase and use.  Clinicians stated that even though different types of surgical implants may  appear to be identical to the lay person, there may be differences that can  affect patient outcome. For example, one clinician stated that a flexible  stent available through only one vendor was necessary to meet the needs  of a patient with arteries that were difficult to navigate.
Many of the clinicians we interviewed stated that the other main factor  influencing their decision of which surgical implant to use was their clinical  expertise, which they acquired through their training and clinical  experience, review of relevant literature, and interaction with vendors who  supply surgical implants:
Training and experience: Many clinicians we interviewed stated that  their experiences in using certain types of surgical implants during  their medical training and/or as a practitioner significantly impacted  their decision of which item to purchase and use. For example, one  clinician stated that his knowledge of different types of surgical  implants, including the different features of various implants, is the  result of 30 years of training and experience.
Review of relevant literature: Several clinicians stated that they  regularly reviewed relevant literature to help identify the surgical  implants with the greatest clinical efficacy. One clinician told us that  he recently switched to a different type of skin graft because a review  of the literature suggested that this item was more effective than the  one that he had been using.
Interaction with vendors: Several clinicians told us that they work  closely with vendor representatives who supply surgical implants (for  example, when implanting a pacemaker, a vendor representative may  be involved in testing and programming the device). Further, some  clinicians with whom we spoke said that their past experience working  with a particular vendor, including whether they believe that the  vendor representative is knowledgeable and reliable, helps drive their  decision of which implant to use. For example, a clinician stated that  the reliability of vendors was important in deciding which implant to  use, since some implants are not stocked at a VAMC and it is  important that implants are delivered by vendors in time for scheduled  surgical procedures.
section_title: Implants’ Availability on Certain Purchase Contracts Influenced Clinicians’ Decisions
paragraphs: Clinicians who performed surgical procedures for which implants were  available on a national committed-use contract stated that they typically  used one of the implants available on this type of contract, unless the use  of these items was not appropriate, for example, for certain complex  clinical indications. As of September 2013, nine types of surgical  implants—cardiac pacemakers and leads, implantable cardioverter- defibrillators, cardiac resynchronization treatment devices, remote  monitoring devices, coronary stents, artificial hips, artificial knees,  cochlear implants, and intraocular lenses—were available through  national committed-use contracts. In developing national committed-use  contracts, VHA solicits input from a group of VHA clinicians to determine  which items to place on national committed-use contracts and to review  them for clinical efficacy. Several different models of each type of  implant are available on national committed-use contracts—for example,  the contracts for pacemakers include models from three different  vendors—thereby providing clinicians with a choice of which implant to  use.
In 2011, VHA established a program executive office, including six program  management offices. Each of the six program management offices (surgery, medical,  clinical support, ancillary, advanced systems, and prosthetics) is expected to collaborate  with teams of clinicians and other stakeholders, who can provide insight on identifying  certain medical devices for standardization. The program management offices also  coordinate with VA’s contracting offices, which are responsible for establishing national  committed-use contracts for standardized items. a plan or timeline for establishing new contracts. Without the  establishment of national committed-use contracts for a greater number  of surgical implants, VHA is not fully leveraging its purchasing power as  one of the nation’s largest health care systems.
While availability of implants via national committed-use contracts  positively influenced their use by clinicians we interviewed, the availability  of implants via FSS contracts rarely did so for a number of reasons.  Clinicians at the four VAMCs we visited were often not aware of what  surgical implants were available on an FSS contract, even though these  contracts are preferred to open market purchases under the VAAR. For  example, some of these clinicians mistakenly believed that a biological  implant they were using was on an FSS contract, when in fact it was not.  Clinicians at the four VAMCs we visited also lacked awareness of how to  obtain information on which implants were available on an FSS contract.  In addition, network prosthetics purchasing officials told us that it is  difficult for both clinicians and prosthetics purchasing agents to use VHA’s  national database of FSS contracts to determine what specific items are  available on an FSS contract. For example, the officials stated that very  specific terms must be entered in the database’s search field in order to  obtain a useful list of items available on FSS contracts. Some clinicians  stated that it would be helpful to have a user-friendly list of surgical  implants available on FSS contracts, including the implant’s attributes— such as its shelf life and approved clinical indication—for each surgical  specialty. Clinicians at the four VAMCs we visited noted that such a list  would allow them to consider FSS contract availability in making their  decisions on which implant to use. We found that one VAMC we visited  had begun developing a list of skin grafts available on FSS contracts,  which included their attributes—such as whether the grafts had to be  stored in a freezer—to help raise awareness of items available on FSS  contract.
Some clinicians at the four VAMCs we visited also stated that if there is  not sufficient data to support the clinical efficacy of an implant on an FSS  contract, they would not feel comfortable using it. For example, at one  VAMC, a clinician noted that a specific vendor who had an implant on an  FSS contract questioned why the implant was not being purchased. The  clinician asked for clinical efficacy data, which—according to the  clinician—was never provided, and therefore the clinician decided not to  use the item. Senior VHA prosthetics and contracting officials stated that  clinicians are not involved in determining which surgical implants should  be available on FSS contracts, and therefore the items available on FSS  contracts may not always be those that clinicians prefer to use based on  their expertise and experience. Additionally, these officials expressed  concern that an evaluation of the clinical efficacy of an item is not  conducted in awarding FSS contracts. These officials further stated that  VHA prefers to develop national committed-use contracts, for which a  clinical efficacy evaluation is conducted. The director of a VHA clinical  program that uses surgical implants further emphasized that clinician  decisions on which implants to use should be based on proven clinical  efficacy rather than inclusion on an FSS contract.
section_title: Selected VAMCs Did Not Fully Comply with VHA Requirements for Documenting Surgical Implant Purchases from the Open Market
paragraphs: We found that among the four VAMCs we visited: (1) none fully complied  with requirements for obtaining waivers for open-market purchases of  surgical implants; (2) none fully complied with additional requirements for  documenting open-market purchases, which are part of VHA’s new  process for surgical implant purchases over $3,000; and   (3) three of the four did not comply with a requirement related to  consignment agreements with surgical implant vendors.
subsections: section_title: Selected VAMCs Did Not Fully Comply with VHA Requirements for Obtaining Waivers for Open-Market Purchases of Surgical Implants
paragraphs: None of the four VAMCs we visited fully complied with VHA requirements  for obtaining waivers for open-market purchases of surgical implants. We  found that one VAMC partially complied with each requirement, while the  others did not comply. Current VHA requirements applicable to the four  VAMCs stipulate that all open-market purchases of non-biological implants require a waiver  approved by the VAMC Chief of Staff—regardless of the purchase  price—when a comparable item would have been available through a  national committed-use contract, and all open-market purchases of biological implants require a waiver  approved by VHA’s Procurement and Logistics Office—regardless of  the purchase price—when a decision is made to purchase an item  from the open market rather than from an FSS contract.
On each of these waivers, VAMCs are required to document why the  clinician chose not to use a surgical implant that is available on an  existing, higher-priority contract—for example, because the clinician did  not believe that the implant met a patient’s need or because the clinician  had concerns about the quality of the items available on contract.
Specifically, compliance with these waiver requirements was as follows at  the four VAMCs we visited:
We found that only one of the four VAMCs we visited partially  complied with the waiver requirement for open-market purchases of  non-biological implants, when a comparable item was available  through a national committed-use contract. At this VAMC, we found  that waivers were obtained for 27 of the 30 purchases we reviewed;  however, 20 of the 27 waivers were incomplete, as they lacked the  approving signature from the VAMC Chief of Staff. A VAMC official  told us that the Chief of Staff had granted certain clinicians the  authority to approve their own waivers for open-market purchases;  however, VHA prosthetics officials told us that the Chief of Staff may  not delegate this authority and the VAMC was unable to provide  documentation to support this claim. The other three VAMCs did not  comply with the requirement, meaning that they did not obtain waivers  for any of the purchases we reviewed. Two of these three VAMCs  had a relatively high percentage of open-market purchases of non- biological implants in the first two quarters of fiscal year 2013 based  on VHA data (33 percent and 35 percent, respectively) and one had a  low percentage of such purchases (2 percent). Officials at two of the  VAMCs told us that these waivers were not routinely obtained  because they were focusing on other priorities instead, such as  implementing VHA’s new process for surgical implant purchases over  $3,000. At the third VAMC, a prosthetics official told us that clinicians  did not always fill out a waiver when asked to do so. Furthermore,  because certain clinicians practice at the VAMC on a very limited  basis, the official said it is difficult to ensure that they are aware of the  waiver requirement and comply with it.
We found that only one of the four VAMCs we visited partially  complied with the waiver requirement for biological implants when a  decision is made to purchase an item from the open market rather  than from an FSS contract, whereas the other three VAMCs did not  comply. Officials from the three VAMCs that did not comply with the  requirement told us that they did not obtain these waivers because  they did not understand under what circumstances a waiver is  required or were focusing on other priorities instead—such as  implementing VHA’s new process for surgical implant purchases over  $3,000. The VAMC that partially complied with the waiver requirement  for the purchases we reviewed had waivers on file, but the waivers did  not include the required justification as to why a waiver was needed  and did not have the required approval from VHA’s Procurement and  Logistics Office. Prosthetics purchasing officials at this VAMC told us  that they had only recently begun to establish compliance with this  waiver requirement.
Without consistent and appropriate completion of waivers for open market  purchases of surgical implants, VHA lacks information regarding why  surgical implants were not being purchased from higher-priority sources  such as a national committed use contract or an FSS contract. This  information would help VHA determine whether clinicians raised concerns  about the quality or efficacy of the items available through these existing  contracts, which could help VHA improve future implant purchases, and  could provide a basis for holding clinicians accountable for complying with  VHA requirements and procurement best practices.
section_title: Selected VAMCs Did Not Fully Comply with Additional VHA Requirements for Documenting Open- Market Purchases of Surgical Implants over $3,000
paragraphs: The FAR provides several different methods for determining whether the vendor’s price  is fair and reasonable when using simplified acquisition procedures. Where possible, the  contracting officer is to base price reasonableness on competitive quotations or offers.  However, if only one response is received, the FAR requires a statement of price  reasonableness in the contracting file, which may be based on such things as conducting  market research, comparing the quoted price with the price of similar items in a related  industry, or comparing the quoted price with prices found reasonable on a previous  purchase, among other methods. See 48 C.F.R. § 13.106-3(a). (2) VA’s special authority under 38 U.S.C. § 8123 to acquire  prosthetics without regard to other provision of law.
Depending on the VAMC, these documentation requirements were either  completed by VAMC prosthetics purchasing staff or a contracting officer  at the corresponding NCO.
Compliance with these requirements was as follows at the four VAMCs  we visited:
Fair and reasonable price determination: The fair and reasonable  price determination was not on file for between 7 and 36 percent of  the applicable purchases we reviewed at three of the four VAMCs. It  was on file for all applicable purchases at the fourth VAMC. However,  we found that the documentation on file did not provide reasonable  assurance that the price was fair and reasonable for the majority of  purchases we reviewed. We found multiple instances where the  documentation indicated that the determination was based on “prior  experience purchasing similar items” but did not cite any prior pricing  information. Not citing any prior pricing information leaves open  questions about the thoroughness of the analysis conducted to  determine price reasonableness. We also identified cases where the  contracting officer or prosthetics purchasing agent documented the  price as “fair and reasonable” when it fell within a broad range of  prices. For example, a contracting officer determined that about  $6,000 for a bone graft purchased from the open market was fair and  reasonable because the sales prices for “similar” items was typically  between $3,000 and $20,000. VAMC and NCO officials we interviewed stated it is difficult to determine price reasonableness for  surgical implants, in part, because they need to be knowledgeable of  the exact characteristics of the item in question in order to effectively  evaluate price reasonableness. They also said they believed that as  contracting officers gain more experience in purchasing surgical  implants, they will learn to more effectively complete this  documentation. Furthermore, an NCO official stated that specific  guidance from VHA on how to effectively complete the fair and  reasonable price determination for surgical implants would be helpful.  Ineffective market research and determination of price  reasonableness may result in VHA overpaying for surgical implants.
JOFOC: During our review of selected open-market surgical implant  purchases over $3,000, we found two issues with respect to those  purchases made on a sole-source basis for which a JOFOC was  required under VHA’s new purchasing process. First, the JOFOC was  not on file for between 5 and 29 percent of the applicable purchases  we reviewed at the four VAMCs we visited. Second, at three of the  VAMCs we visited, we found that the officials responsible for  completing the JOFOC selected the “unusual and compelling  urgency” justification for each of the purchases we reviewed, even  though some officials told us that they did not have a full  understanding of which justifications applied. Specifically, we found  the following:
Officials from two of these VAMCs told us that they were unclear  about which justification to cite on the JOFOC for each purchase  because they believed VHA guidance on this matter was  insufficient. For example, one official responsible for completing  the JOFOC stated that he did not understand the difference  between the justifications and therefore picked the one that made  the most sense to him.
Officials at another VAMC stated that they chose the “unusual and  compelling urgency” justification because the contracting package  for surgical implants is typically completed after the item has  already been implanted and therefore this justification made the  most sense to them. Furthermore, officials at this VAMC stated  that a VHA draft directive on surgical implant purchasing  discourages the use of VA’s acquisition authority under 38 U.S.C.  § 8123 to justify sole-source awards of surgical implants on the  open market. Because they were discouraged from using this  justification on the JOFOC, they tended to rely on the “unusual  and compelling urgency” justification instead.
Moreover, while VHA requires each JOFOC to include sufficient facts and  rationale to support why a specific justification was cited, only one of the  four VAMCs fully provided this information for any of the purchases we  reviewed. At two VAMCs, no rationale was provided for the justification  selected. Furthermore, the JOFOCs at these two VAMCs were frequently  missing required information, such as the contracting officer’s signature,  or were not completed until several months after the purchase. At the  fourth VAMC, each JOFOC for the purchases we reviewed typically  included a generic paragraph stating that the purchase was justified  based on the determination of the clinician who requested the implant,  regardless of which justification was cited. VAMC and NCO officials told  us that clinicians’ surgical implant purchase requests often do not contain  sufficient information to support why the clinician was requesting the  particular item. Because the JOFOCs we reviewed were often  incomplete, VHA lacks assurance that support existed for the sole-source  awards pursuant to VHA’s policies at these four VAMCs.
As we discuss later, VA and VHA both identified more widespread areas  of noncompliance (in the areas we describe above)—beyond the 4  VAMCs we visited—through oversight efforts they conducted at  numerous VAMCs and NCOs nationwide. For example, VA’s oversight  identified extensive noncompliance, including inadequate fair and  reasonable price determinations and missing or improperly completed  JOFOCs.
VHA officials stated that they were familiar with the challenges that  VAMCs and NCOs were experiencing with complying with the  requirements of VHA’s new process for surgical implant purchases over  $3,000 and acknowledged that some of these challenges stem from a  lack of sufficient guidance for implementing this new process. To address  these challenges, VHA officials stated that VHA has developed additional  guidance to facilitate the purchase of these items. This guidance includes  (1) revised JOFOC templates to help ensure that the correct purchasing  justification is cited and that an appropriate rationale is provided for using  each justification and (2) additional guidance on completing the fair and  reasonable price determination, which, as of November 2013, had not yet  been issued. Moreover, VHA contracting officials stated that VHA plans to  provide training on the documentation of purchases over $3,000;  however, as of November 2013, this training had not yet been approved.  In addition, VHA is developing a directive and associated standard  operating procedure that outline the processes VAMCs and NCOs are  expected to follow when completing contracting packages for surgical  implant purchases over $3,000, including a JOFOC in the event of a sole- source purchase. As of November 2013, VHA was still in the process of  providing its draft directive and standard operating procedure to  stakeholders for review, and there are no established timelines for  finalizing this directive and standard operating procedure, according to  VHA officials. VHA officials stated that there had been disagreement  between VHA prosthetics and contracting officials concerning the details  of the directive and standard operating procedure–for example, which  specific requirements would be the responsibility of VAMC prosthetics  purchasing staff and which would be the responsibility of NCO contracting  officers. According to VHA officials, these disagreements delayed the  completion of these documents and disseminating them to VAMCs and  NCOs.
VHA officials also told us that they are considering ways to streamline the  documentation requirements for purchases over $3,000 in response to  concerns from VAMCs and NCOs about the resources required to  complete a contracting package for each purchase and potential delays in  making purchases for surgical implants, which could result in the  postponement of needed medical procedures. For example, VHA officials  stated that they are considering providing VAMC prosthetics purchasing  staff with ordering officer delegations, which would allow them to  purchase surgical implants from national committed-use contracts,  without having to work with a contracting officer to complete a contracting  package for such a purchase. They told us that this would free up  contracting officers’ time to work on documenting open market purchases  and help ensure that these purchases are appropriately documented.  However, VHA officials told us that they were still in the process of  evaluating the feasibility of delegating ordering authority to prosthetics  purchasing staff, including addressing technical challenges with the  prosthetics purchasing system, which they said currently prevent VHA  from effectively implementing this change. Again, no timelines have been  established to complete streamlining efforts, according to VHA officials.
section_title: Three of Four VAMCs Did Not Comply with a VHA Requirement Pertaining to Consignment Agreements with Surgical Implant Vendors
paragraphs: Officials at three of the four VAMCs we visited told us that the VAMCs  had purchasing agreements with open-market vendors to provide surgical  implants to the VAMCs on consignment, but that these agreements were  not always in compliance with a VHA requirement that consignment  agreements be authorized by a VHA contracting officer. Under a  consignment agreement, the vendor maintains vendor-owned items at the  VAMC, and the VAMC purchases only the items actually used. VAMC  and network officials told us that clinicians likely made these unauthorized  agreements with vendors to ensure that they had timely access to the  surgical implants that they preferred to use. However, they could not tell  us when these agreements had been established, who had authorized  them, and what the terms of the agreements were. These officials told us  that the unauthorized agreements with vendors have resulted in  unauthorized commitments, vendors not being paid in a timely manner,  and surgical implants not being tracked in the VAMCs’ inventories.  Furthermore, because these unauthorized agreements covered surgical  implants from the open market, and the purchase prices were not  negotiated, the VAMCs may have overpaid for these items.
To address these unauthorized consignment agreements, officials at  each of these VAMCs or the corresponding networks stated that they  were in the process of establishing authorized consignment agreements  which include an agreed-upon price and quantity for each surgical  implant. Having authorized consignment agreements in place may be  useful in instances where the requirement for a surgical implant is  immediate and it is not possible to predetermine which of several types or  models are required. Establishing such agreements involves determining  the types of surgical implants that clinicians need to have available on a  consignment basis and obtaining a contracting officer’s authorization for  the VAMC to enter a consignment agreement with the vendors. At the  time of our review, VHA was developing a standard operating procedure  to assist VAMCs and NCOs in developing authorized consignment  agreements, however, as of November 2013 they were unsure as to  when it would be finalized and rolled out to the VAMCs.
section_title: VA and VHA Did Not Ensure that Corrective Actions Were Taken when Noncompliance with Surgical Implant Purchasing Requirements Was Identified
paragraphs: As a result of their oversight efforts, VA and VHA found noncompliance  with surgical implant purchasing requirements, but did not ensure that  NCOs or VAMCs took corrective action. Furthermore, VHA assesses how  each VAMC is performing on key aspects of the surgical implant  purchasing process, but it did not ensure that VAMCs took corrective  action to address deficiencies identified or require networks to do so.
subsections: section_title: VA and VHA Found Noncompliance with Requirements for Surgical Implant Purchases over $3,000 but Neither Took Steps to Ensure that Corrective Actions Were Taken
paragraphs: Oversight of VAMCs’ and NCOs’ compliance with VHA’s new process for  surgical implant purchasing over $3,000 includes efforts by both VA’s  Office of Acquisition and Logistics and VHA’s Office of Procurement and  Logistics. However, this oversight was not fully effective because  neither VA nor VHA ensure that corrective action is taken to address  noncompliance.
Recent VA and VHA oversight activities that identified significant  noncompliance issues included the following:
VA oversight: In February 2013, VA’s Office of Acquisition and  Logistics began assessing compliance with its January 9, 2013,  memorandum, which required VAMCs that had not fully implemented  VHA’s new process for surgical implant purchasing over $3,000 to  complete an abbreviated contracting package, including a fair and  reasonable price determination and, if applicable, a JOFOC. This  oversight effort, which examined several hundred purchases between  February 2013 and August 2013, identified extensive noncompliance,  including inadequate fair and reasonable price determinations and  missing or improperly completed JOFOCs, which were similar to the  issues we identified in our assessment.
VHA oversight: In April 2013, VHA began conducting oversight of  surgical implant purchases over $3,000 for the seven NCOs (and the  VAMCs associated with those NCOs) that had fully implemented the  new process. Additional oversight is planned for fiscal year 2014 for  all NCOs. An audit team from VHA’s Procurement and Logistics Office  is using a checklist consisting of nine questions, which assess various  requirements of the purchasing process, such as whether the fair and  reasonable price determination and a JOFOC, if applicable, is on file  for each purchase. VHA’s oversight identified noncompliance  including various missing or incomplete documentation in the  contracting packages for surgical implant purchases over $3,000.
While VA and VHA both conducted oversight and identified instances of  noncompliance, they did not ensure that corrective action was taken.  Consistent with the federal internal control standard for monitoring, which  states that actions should be taken promptly in response to findings or  recommendations, VA and VHA should have taken steps to ensure that   A senior official from  noncompliance is addressed in a timely manner. VHA’s Procurement and Logistics Office told us that VA’s Office of  Acquisition and Logistics did not provide VHA with information on the  VAMCs at which noncompliance was identified, which—according to the  official—would have allowed VHA to take steps to address  noncompliance at the appropriate VAMCs. The official also told us that  VHA’s oversight is largely intended to be consultative in nature and that  VHA’s Procurement and Logistics Office is not sufficiently staffed to  ensure that corrective action is taken. Therefore, while VHA asked NCOs  to correct areas of noncompliance, VHA did not require NCOs to  document how they addressed, or plan to address, noncompliance  identified in VHA oversight activities. Because neither VA nor VHA have  taken steps to ensure that corrective actions are taken to address VAMC  and NCO noncompliance, they lack assurance that this noncompliance is  being appropriately addressed.
See GAO/AIMD-00-21.3.1 and GAO-01-1008G.
section_title: VHA Assesses VAMCs’ Performance on Metrics Established for Surgical Implant Purchasing, but Has Not Required Networks to Ensure that VAMCs Address Deficiencies Identified
paragraphs: VHA assesses how each VAMC within VHA’s 21 networks performs on  metrics established for surgical implant purchasing, and provides the  results of its assessments to the prosthetics representative at each  network. According to VHA prosthetics officials, VHA’s assessments  cover the following metrics:  the extent to which VAMCs purchased surgical implants from a  national committed-use contract or obtained a waiver allowing  clinicians to use an alternative item;  the extent to which VAMCs entered the serial number and lot number  for each surgical implant purchase;  the timeliness of each surgical implant purchase—that is, the time  from which a clinician requests a surgical implant to the time the item  is purchased;  the extent to which clinicians’ purchase requests for surgical implants  have been fulfilled; and  the extent to which amounts obligated for surgical implant purchases  have been recorded in the prosthetics purchasing system.
Network prosthetics representatives at two of the four networks we visited  told us that they regularly monitored the results from VHA’s assessments  and took steps to ensure that VAMCs address deficiencies VHA  identified, such as correcting data entry errors. At the other two VAMCs,  network prosthetics representatives did not take such steps. In both  networks that did not ensure that VAMCs address deficiencies, VHA’s  metrics identified a relatively high rate of noncompliance with surgical  implant purchases from national committed-use contracts (28 percent at  one network and 13 percent at the other network in the first three quarters  of fiscal year 2013). At one of these networks, this noncompliance  included a high percentage of purchases missing serial numbers or lot  numbers (16 percent in the first three quarters of fiscal year 2013). The  failure to address deficiencies uncovered through VHA’s assessments  may lead to higher costs for VHA and may have patient safety  implications. For example, not recording the serial number or lot number  for a surgical implant makes it difficult to systematically determine which  veteran received an implant subject to a subsequent manufacturer or  Food and Drug Administration recall.
As of November 2013, VHA did not have a policy governing how  deficiencies identified through these assessments should be addressed.  Accordingly, VHA officials told us that they have not required VAMCs to  address deficiencies—i.e., if VAMCs do not meet an established  threshold for each metric—nor did they require network prosthetics  representatives to do so. Consistent with the federal internal control for  monitoring, VHA or networks should establish a process to ensure that  deficiencies are addressed. According to VHA officials, the directive on  surgical implant purchasing that VHA is developing will require network  prosthetics representatives to review each metric and ensure that  deficiencies are addressed.
section_title: Conclusions
paragraphs: To its credit, VHA has established national committed-use contracts for a  number of surgical implants, which can help VHA effectively leverage its  purchasing power. We found that an implant’s availability on this type of  contract positively influenced clinicians’ decisions to use that implant, but  these types of contracts are only available for a limited number of surgical  implants. Establishing national committed-use contracts for a greater  number of commonly used surgical implants could help reduce the  number of open-market purchases of these items and ultimately reduce  the costs for VA. Furthermore, steps could be taken to improve clinicians’  awareness of high quality surgical implants available on FSS contracts,  which may also lead to a further reduction in open-market purchases.
While VHA has requirements in place to document surgical implant  purchases from the open market, selected VAMCs did not fully comply  with these requirements and VA and VHA’s own oversight found similar  issues at other VAMCs nationwide. Greater compliance with these  requirements would provide VHA with information needed to determine  why VAMCs are purchasing surgical implants from the open market; it  would also help provide assurance that VHA is paying a fair and  reasonable price for surgical implants.
VA’s and VHA’s oversight of compliance with surgical implant purchasing  requirements does not ensure that corrective action is taken to address  identified noncompliance, which could lead to potentially serious issues  remaining unaddressed. For example, while VHA identified that at one  VAMC a high number of serial numbers for surgical implants were not  recorded—as required—in the prosthetics purchasing system, VHA did  not ensure that this problem was addressed, resulting in potential patient  safety issues remaining unresolved. Providing effective oversight of  surgical implant purchasing, which includes ensuring that noncompliance  is addressed, would help VA and VHA improve compliance with its  applicable requirements, while potentially lowering costs for surgical  implants, and improving patient safety.
section_title: Recommendations for Executive Action
paragraphs: To expand the volume of surgical implants purchased from existing,  higher-priority contracts and to improve compliance and oversight related  to purchasing requirements, we recommend that the Secretary of the  Department of Veterans Affairs take the following five actions:
Create a plan that includes timelines for evaluating the benefits of  developing additional national committed-use contracts for surgical  implants and establishing these contracts.
Explore options to increase clinicians’ awareness of high quality  surgical implants available on FSS contracts, including developing a  user-friendly list for VAMC clinicians of surgical implants available on  FSS contracts for each surgical specialty.
Re-emphasize to VAMCs that waivers must be completed for open- market purchases of surgical implants, provide clear guidance to  VAMCs on when and how to complete these waivers, and establish  internal controls to ensure VAMCs’ compliance with waiver  requirements.
Provide additional training to VAMCs and NCOs on how to properly  document open-market purchases of surgical implants over $3,000,  including those awarded on a sole-source basis.
Enhance information sharing on noncompliance between VA and VHA  and revise existing guidelines to require that VAMCs and NCOs  document the measures they are taking to address noncompliance  and report their progress (via corrective action plans) in achieving  those measures through the VHA and VA management chains of  command.
section_title: Agency Comments
paragraphs: VA provided written comments on a draft of this report, which we have  reprinted in appendix III. In its comments, VA generally agreed with our  conclusions, concurred with our five recommendations, and described the  department’s plans for implementing each of our recommendations. For  example, VA will create a plan for evaluating the benefits of developing  additional national committed-use contracts for surgical implants; develop  and disseminate a list of surgical implants available on FSS contracts;  emphasize the FSS waiver process through webinar trainings and  standard operating procedures guidance; develop a checklist for proper  documentation of open-market surgical implant purchases over $3,000;  and require documentation of measures taken to address noncompliance  identified in audits. VA also provided a technical comment, which was  incorporated as appropriate.
We are sending copies of this report to appropriate congressional  committees and the Secretary of Veterans Affairs. The report is also  available at no charge on the GAO website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or williamsonr@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs are on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix IV.
section_title: Appendix I: Scope and Methodology
paragraphs: To conduct our work, we visited Department of Veterans Affairs (VA)  medical centers (VAMC) in four locations: Indianapolis, Indiana; Los  Angeles, California; New York, New York; and Seattle, Washington. We  selected these four VAMCs because they are all classified by the  Veterans Health Administration (VHA) as surgically complex facilities,  serve large veteran populations and are located in different regional  networks (See table 2).
To examine the factors clinicians consider when choosing which surgical  implant to use, when multiple, similar types of implants are available, at  each of the four VAMCs, we interviewed at least one clinician from each  of the following six clinical specialties that typically use surgical implants:  cardiology or cardiac surgery; general surgery; orthopedic surgery;  neurosurgery; podiatry; and vascular surgery. In total, we interviewed   28 clinicians. During each interview, we discussed the factors that  affected clinicians’ surgical implant purchase decisions and their  knowledge of surgical implants available on national committed-use  contracts and federal supply schedule (FSS) contracts. In addition, we  interviewed staff involved in managing surgical implants at the VAMCs,  such as the operating room nurse manager, surgical implant coordinator,  or sterile processing service technician.
To assess compliance at the four selected VAMCs with pertinent VHA  requirements for documenting surgical implant purchases from the open  market, we first identified the applicable requirements. To do so, we  reviewed VA’s statutory authority to acquire prosthetics—including  surgical implants, applicable federal regulations—including the Federal  Acquisition Regulation (FAR) and VA Acquisition Regulation (VAAR) and  implementing guidance issued by VA and VHA with respect to surgical  implant purchasing. To learn more about VA’s and VHA’s surgical  implant purchasing processes and, in particular, surgical implant  purchases from the open market, we also interviewed procurement and  prosthetics officials at VA and VHA. For purposes of our review, we  selected pertinent VHA requirements for documenting surgical implant  purchases from the open market. We assessed compliance with these  requirements at the four selected VAMCs as follows:
To assess compliance with the requirement that a waiver be obtained  and approved by the VAMC Chief of Staff for open-market purchases  of non-biological implants, for which a comparable product is available  on a national committed-use contract, we selected 20 purchases at  one VAMC and 30 purchases at another VAMC made between  October 2012 and March 2013 for which data from VHA’s National  Prosthetics Patient Database (NPPD) indicated that such a waiver  was obtained. These selected purchases represented about 35 and  80 percent, respectively, of all applicable purchases at each VAMC  during this time period. We subsequently reviewed whether those  waivers were, in fact, on file at the two VAMCs and whether they were  complete. We selected the purchases for our review to obtain a  diverse selection of purchases from different vendors. At the two  other VAMCs we visited, the NPPD data indicated that no waivers had  been obtained, even though there were open-market purchases of  non-biological implants, for which an alternative product was available  on a national committed-use contract. At these two VAMCs, we  interviewed VAMC and network prosthetics staff about why the  waivers had not been obtained.
To assess compliance with the requirement that a waiver be obtained  when a decision is made to purchase a biological implant from the  open market rather than from a Federal Supply Schedule (FSS)  contract, at each VAMC, we selected 20 to 30 purchases of biological  implants made between October 2012 and March 2013 which, based  on NPPD data, appeared to have been purchased from the open  market because the NPPD data did not indicate the purchase was  associated with a contract, and assessed whether a waiver was on file  for those purchases, and if so, whether the waiver was complete. We  selected the purchases for our review to obtain a diverse selection of  purchases from different vendors. We selected 110 purchases in  total representing from about 9 percent to about 83 percent of all  applicable purchases meeting our selection criteria at each VAMC  during this time period.
To assess compliance with VHA’s requirements for open-market  surgical implant purchases over $3,000, including (1) a statement  affirming that the vendor’s quoted price is fair and reasonable and   (2) a justification for other than full and open competition (JOFOC) in  the case of a sole-source award, we reviewed a selection of open- market purchases over $3,000 from each VAMC to determine whether  the required documentation was on file and whether it was complete.  At three of the four VAMCs, which had implemented VHA’s new  process for surgical implant purchases over $3,000 by the beginning  of fiscal year 2013, we selected 30 purchases made between October  2012 and March 2013 which, based on NPPD data, appeared to have  been purchased from the open market because the NPPD data did  not indicate that the purchase was associated with a contract. At the  fourth VAMC, we selected 15 purchases made between January 9,  2013, and March 31, 2013, which, based on NPPD data, appeared to  have been purchased from the open market, because this VAMC had  not yet implemented VHA’s new process for surgical implant  purchasing over $3,000 and therefore was not required to complete  the VHA requirements until January 9, 2013. We selected the  purchases for our review to obtain a diverse selection of purchases  from different vendors. We selected 97 purchases in total  representing from about 6 percent to about 8 percent of all applicable  purchases at each VAMC during this time period.
To ensure that the NPPD data we used to select purchases for review  were sufficiently reliable for our purposes, we conducted a data reliability  assessment of the data that we used, which included checks for missing  values and interviews with a VHA official knowledgeable about the data.  We restricted these assessments, however, to the specific variables that  were pertinent to our analyses. Our review revealed some inconsistencies  and errors in the data that were attributable to data entry errors and  omissions. Overall, however, we found that all of the data were  sufficiently reliable for selecting our purchases for review. We cannot  generalize our findings on compliance beyond the purchases we  reviewed.
We also reviewed documentation and interviewed VAMC and network  officials at the four VAMCs we visited regarding compliance with these  requirements.
To examine VA and VHA’s oversight of compliance with surgical implant  purchasing requirements, we obtained and analyzed VA and VHA  documentation on existing or planned monitoring activities, including audit  plans and reports documenting deficiencies in VAMCs’ purchasing of  surgical implants; interviewed VA and VHA procurement and prosthetics  officials; and assessed VA and VHA’s monitoring activities in the context  of federal standards for internal control. The internal control standard for  monitoring refers to an agency’s ability to assure that ongoing review and  supervision activities are conducted, with the scope and frequency  determined by the level of risk; deficiencies are communicated to at least  one higher level of management; and actions are taken in response to  findings or recommendations within established timelines.
We conducted this performance audit from April 2013 to January 2014 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.
section_title: Appendix II: Veterans Implant Tracking and Alert System
paragraphs: According to Veterans Health Administration (VHA) officials, in 2008, the  Department of Veterans Affairs’ (VA) Office of Information Technology  began developing the Veterans Implant Tracking and Alert System  (VITAS), which was designed to track and retrieve identifying  information—including the lot and serial number—of surgical implants  placed in patients VHA-wide. VITAS was developed to address  shortcomings in VHA’s existing ability to track surgical implants, which  may limit VHA’s ability to identify and locate patients who received an  implant in the event of a manufacturer or Food and Drug Administration  recall. According to VHA, these shortcomings include the following:
As we noted previously in this report, the lot number and serial  number of items implanted in patients is not always entered into the  prosthetics purchasing system, as required.
While VHA clinicians from most specialties track identifying  information of items implanted in their patients using standalone  systems or spreadsheets that are particular to the clinicians’  specialties, VA found that information on surgical implants recorded in  these systems is not standardized nor is it shared across VAMCs.  Furthermore, VA found that identifying information on surgical  implants used in certain clinical specialties, including  gastroenterology, interventional radiology, and pulmonary, is not  tracked in any system.
According to VA and VHA officials involved in the development of VITAS,  the development of this system was suspended as of the end of fiscal  year 2012 due to data-reliability and interoperability challenges. As of  December 2013, VA and VHA had not decided whether to resume the  development of VITAS.
section_title: Appendix III: Comments from the Department of Veterans Affairs
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Kim Yamane, Assistant Director;  Ashley Dixon; Cathleen Hamann; Jennifer Whitworth; and Michael Zose  made key contributions to this report.