House Veterans’ Affairs Committee Hearing

Good morning Chairman Miller, Ranking Member Brown, and Members of the Committee. Thank you for the opportunity to discuss the Department of Veterans Affairs' (VA's) execution of its Fiscal Year (FY) 2015 budget. I am accompanied today by Dr. James Tuchschmidt, Interim Principal Deputy Under Secretary for Health; Mr. Edward Murray, Acting Assistant Secretary for Management and Interim Chief Financial Officer; and Mr. Gregory Giddens, Principal Executive Director, Office of Acquisitions, Logistics, and Construction.

Caring for our Nation's Veterans, their Survivors, and dependents continues to be the guiding mission of VA. Each year, VA executes our budget to ensure we deliver timely, high quality services and benefits to fulfill this mission. As we emerge from one of the most serious crises the Department has ever experienced, we face continuing challenges to ensure our Veterans receive the timely care they have earned through their service. However, we believe that these challenges are surmountable and will continue to work with Congress to reach resolution and develop plans to move forward in achieving our mission.

IMPROVING ACCESS TO CARE

Before reviewing the challenges to VA's budget this fiscal year, it is essential to understand the context in which VA is executing its resources. In response to unacceptable delays in Veterans receiving medical services, in May 2014, VA launched the Accelerating Access to Care Initiative, which included immediate actions to improve Veterans' access to care. Our strategy has focused on four critical activities: staffing, space, productivity, and VA Care in the Community. While more work remains to be done, real progress has been made. For example:

In the area of staffing, the Veterans Health Administration (VHA) has increased onboard staff by 12,179 since April 2014, including 1,086 physicians, 2,724 nurses, and 4,671 other select critical occupations. As part of this initiative, VHA has hired over 3,700 medical center staff using the new resources provided in the Veterans Access, Choice, and Accountability Act ("Choice Act").

In order to create additional space, during the last fiscal year VA activated 80 new leases in VHA, totaling 1.3 million square feet and activated newly owned facilities totaling 420,000 square feet. We have dozens of emergency lease transactions in process to more quickly increase available space for Veteran care. Wherever possible, we are increasing the number of primary care exam rooms per provider in order to allow providers to see more Veterans each day.

We have extended clinic hours into nights and weekends in order to best use our limited space and enhance convenience for Veterans.

Our efforts to improve access to care have been successful. Nationally, VA completed more than 51.8 million appointments between June 1, 2014 and April 30, 2015. This represents an increase of 2.7 million more appointments completed than during the same time period in FY 2013 or FY 2014. In April 2015, VA completed 97 percent of appointments within 30 days of the clinically indicated or Veteran's preferred date; 93 percent within 14 days; 88 percent within 7 days; and 22 percent on the same day. Not only are more appointments being completed, but Relative Value Units (RVUs), a standard measure of clinical output, have increased 10 percent year over year, twice the increase in providers during the same time, confirming improved productivity.

We are managing to complete these appointments while more Veterans continue to come to VA for their care, even though 81 percent have Medicare, Medicaid, Tricare, or private insurance. While the number of Veterans using VA for care has grown about 2 percent per year, many locations where space, staffing, productivity, and community care enhancements have been emphasized are growing at multiples of that rate. Essentially, as we are improving Veterans' access to care across VA, Veterans are responding and seeking VA care at higher rates. Our workload has increased by 10.5 percent in total, for VA care and Care in the Community combined.

THE VETERANS CHOICE PROGRAM AND PURCHASED CARE REFORM LEGISLATION

The Veterans Choice Program is helping VA to meet some of the demand for Veterans health care in the short-term, and VA is thankful for the Choice Act's funding to help us address our access issue. In February 2015, when VA transmitted the 2016 Budget to Congress, we noted that the Choice Act investments provide the authorities, funding, and other tools to enhance services to Veterans in the short-term, while strengthening the underlying VA system to better serve Veterans in the future. We also noted that more resources in certain areas would be required to ensure that the VA system can provide timely, high-quality health care into the future.

As we gain more experience with executing the Choice Program, we continue to learn how the program can be improved to better serve Veterans. We appreciate Congress passing legislation regarding the driving distance calculation methodology and the increased flexibility for the Secretary to grant waivers for Veteran eligibility for the Choice Program; we hope Congress will consider the other requests we have made identifying solutions to help operate the Choice Program more effectively.

We are also focused on looking internally at the business rules and processes that govern the Veterans Choice Program. When we step back to revise our own practices and focus on long-term work plans, we are creating more efficient processes that will not only support providing better and timelier care to Veterans, but also provide better business relationships with our VA community care providers.

On May 1, VA sent Congress an Administration legislative proposal entitled the "Department of Veterans Affairs Purchased Health Care Streamlining and Modernization Act." This bill would make critical improvements to the Department's authorities to use provider agreements for the purchase of VA community medical care--in order to streamline and speed the business process for purchasing care for Veterans when necessary care cannot be purchased through existing contracts or sharing agreements. This proposal would ensure that VA is able to provide local care to Veterans in a timely and responsible manner, while including explicit protections for procurement integrity, provider qualifications, and price reasonableness. We urge your consideration of this bill, which will provide VA the right legal foundation on which to reform its purchased care program - which remains critical for Veterans' access to health care.

CARE IN THE COMMUNITY

For years, VA has used various authorities and programs in order to provide care to Veterans more quickly and closer to home. In FY 2014, Veterans completed 55 million appointments inside VA and 16.5 million appointments for Care in the Community. Each month, VA completes over 1 million appointments through doctors and clinics in the community, which represents over 20 percent of total appointments. We have succeeded in providing increased access to care by way of Care in the Community by issuing over 2.9 million authorizations in the last 12 months, which is a 44 percent increase over the same period in the previous year. This increase in authorizations will result in millions of additional episodes of care for Veterans should sufficient resources be available.

This unprecedented increase in Veteran access to care has come at a cost. VHA now expects to spend $10.1 billion in FY 2015 for Care in the Community[1], an increase of $1.9 billion (24 percent) from the $8.2 billion in FY 2014. Our FY 2015 Medical Services budget includes $7.3 billion for Care in the Community, and VA had expected the Choice Program to finance a surge in demand for Care in the Community.

In the past eight months of implementing the Choice Program, we accomplished a significant amount in a short period of time: we have produced and distributed over 8.5 million Veterans Choice Cards, determined Veterans' eligibility, authorized care, coordinated care and managed utilization, established new provider agreements, processed complex claims, and stood up a call center, all with the goal of providing Veterans with the best possible care-experience, while also meeting our obligations to be good stewards of the Nation's tax dollars. We have also been modifying our referral processes to create efficiencies in the system to ensure Veterans are able to receive care timely. We are proud of what we have accomplished; and Veterans are as well, with more of them coming to VA for their health care needs.

Unfortunately, the Choice Program has not fully absorbed the additional Veteran demand for care, both inside and outside of the VA. We have had challenges redirecting the flow of care from Care in the Community to the Choice Program. Part of this is due to the fact that, even prior to passage of the Choice Act, we were leveraging Care in the Community to ensure that Veterans were not experiencing excessive wait times. We understand that some of these challenges are also due to employees not fully understanding how the Choice Program works. We continue our outreach to VA facility leadership to improve employees' understanding of the Choice Program and to address any reluctance our staff may have to send Veteran patients into the community to use the Choice Program. Our staff are more familiar and comfortable with assisting Veterans with existing VA community care programs, many of which are long-standing. We must ensure they are just as adept with the Choice Program as well.

We also recognize that the number and different types of VA community care programs and authorities may be confusing to Veterans, our stakeholders, and our employees. We currently have 7 different programs that we utilize to provide care to Veterans, including:

1. Agreements with the Indian Health Service, Department of Defense, Other Federal Agencies, and Academic Affiliates;

2. Veterans Choice Program;

3. Patient Centered Community Care (PC3);

4. Project ARCH;

5. Other national contracts (such as dialysis);

6. Local contracts and local sharing agreements; and

7. Individual authorizations.

Navigating these programs to determine the best fit for a Veteran may be challenging. Therefore, we are currently working to streamline channels of care, billing practices, and mechanisms for authorizations, with the goal of creating a more unified and integrated approach to community care.

We are making efforts to improve how we are managing our Care in the Community program while continuing to do the right thing for Veterans and provide essential access to care. In order to continue these efforts, we have determined that, at the current rate, expected demand for Care in the Community in FY 2015 will cost approximately an additional $2.5 billion. We are currently taking the following actions to mitigate this need.

First, we have issued guidance to our facilities to maximize the use of the Veterans Choice Program by, to the extent possible, directing all eligible care to the Choice Program. We estimate that this could reduce the requirement by $500 million, although this estimate is highly uncertain and depends significantly on Veterans' desires to use the Choice Program instead of waiting for an appointment within VA.

Second, we have analyzed prior obligations for Care in the Community to determine whether the services provided were eligible for and met all of the requirements of the Choice Program; this analysis revealed approximately $24 million that could retroactively be recorded against the Choice Program.

Third, we have identified approximately $170 million in Medical Services resources, such as funds for travel and training and other areas deemed less critical than paying non-VA care bills that have been reallocated to the Care in the Community program without adverse consequences to patient care.

In addition, we plan to request a transfer of unobligated funds from the Medical Facilities account to the Medical Services account. This transfer will not have an immediate impact to any VA services provided to Veterans. To ensure Veterans are receiving their requested care, we request flexibility through limited authority to use funds from section 802 of the Choice Act to fund Care in the Community, to the extent these costs exceed our FY 2015 budget.

HEPATITIS C

One example of these evolving Veteran needs can be seen in the recent advancements in the treatment of the Hepatitis C virus (HCV). Studies indicate that when these new treatments are used in combination with existing treatment regimens, there is a higher chance of successful treatment in patients with HCV. VA is a leader in the U.S. in HCV care, including screening, treatment, and prevention. We want to ensure our Veterans are provided with the best treatment options available to them, so we successfully set up an infrastructure capable of ensuring treatment can be provided whenever appropriate. However, in providing this critical care, we are facing a funding shortfall for the cost of HCV treatment.

As you know, the Veterans Health Care Budget Reform and Transparency Act of 2009 (P.L. 111-81) established funding for VA's medical care accounts through an Advance Appropriation (AA). Under this process, VA must estimate funding needs two years in advance of their execution. While the AA provides VA with timely and predictable funding, the process can introduce additional risk of variance between projected and actual costs. The shortfall for HCV treatment is evidence of this risk that can be shown by a timeline of events:

* In the summer 2012, VHA developed the internal budget requirements for its FY 2015 AA request.

* In April 2013, we submitted our FY 2014 budget, which included the FY 2015 AA request for VA Medical Care.

* In summer 2013, VHA developed its internal budget requirements for its FY 2015 revised appropriation request, to be submitted with its FY 2015 budget.

* In November and December 2013, the Food and Drug Administration (FDA) approved two antiviral medications for use as part of combination regimens which offer shorter treatment durations and decreased side effects in addition to increased cure rates, but are more expensive than prior treatments.

* In January 2014, Congress passed the final FY 2014 appropriations bill (Consolidated Appropriations Act, 2014) which did not identify a specific amount of funding designated for HCV treatment as part of the FY 2015 AA.

* In March 2014, we submitted our FY 2015 budget, which included the FY 2015 revised appropriation request for VA Medical Care.

* In April 2014, we added the most recently approved FDA-approved treatments to our formulary.

* In September 2014, we alerted Congress to the impending FY 2015 shortfall in funding for HCV treatment in a "Sufficiency Letter" which provided an evaluation of the sufficiency of the FY 2015 AA request.

* In December 2014, the FDA approved additional HCV drugs that were proven to be more effective in treating HCV than the previous treatments. In December 2014, Congress passed the final FY 2015 appropriations bill (Consolidated and Further Continuing Appropriations Act, 2015) which did not identify a specific amount of funding designated for HCV treatment.

* In our September 10, 2014, Sufficiency Letter, VA stated that it had reviewed the capacity and resource requirements to determine if additional funding was required in FY 2015 for known emergent needs. We stated that we had "identified additional resource requirements that cannot be funded through the resources allocated in Public Law 113-146, or within existing resources" and estimated that new drug treatment for HCV would increase VA's drug costs in FY 2015 by $673 million. The Sufficiency Letter also noted that, due to the timing of the Food and Drug Administration's approval for new HCV medications, the Administration was unable to incorporate their impacts when developing the 2015 President's Budget.

To be clear, VA is committed to ensuring that patients with HCV receive the treatment they need. Therefore, to meet the unfunded need in 2015, VHA reallocated $697 million out of other activities to fund HCV treatments. However, this funding is not sufficient to ensure we are providing the best care to HCV-infected Veterans. We now expect the cost of HCV treatment to be approximately $1.1 billion in 2015. We are currently addressing the $400 million funding shortfall by referring Veterans who need HCV treatment to the Choice Program, but we are concerned that Veterans who would prefer to receive this care within the VA system are not able to do so. In addition, referring HCV-infected Veterans to the Choice Program is not the best model to provide care that meets both Veterans' needs and taxpayers' interests because of the increased costs, complexities, and requirements for coordination of care. It is in our Veterans' interest for VA to provide these life-saving treatments. This is a point where adding flexibility in the use of funds appropriated for the Choice Program could help Veterans receive care in timely fashion. For the reasons discussed above, we would like to continue our discussions with the Committee on this concept.

CONSTRUCTION

VA acknowledges the challenges we have experienced in building the Denver Replacement Medical Center facility in Aurora, Colorado. We are committed to doing what is right for the Veterans in the Colorado Region and completing this major construction project without further delay. VA is dedicated to getting the project back on track in the most effective and cost efficient manner possible.

As I have stated previously, the delays and cost overruns that have plagued the Denver Replacement Medical Center campus are inexcusable. In order to prevent a recurrence of the unacceptable mistakes made on the Denver project, VA is expanding its relationship with the U.S. Army Corps of Engineers (Corps) regarding management of future VA major construction projects. Out of the 15 major construction projects that VA anticipates will be in active construction within the next three years, five are already underway and past the logical transition point for the Corps to take over. VA expects to designate the Corps as our construction agent for seven other projects, which total 86 percent of the value of the 10 active major construction projects. In the future, VA believes that the Corps should be designated as our construction agent for all new medical facilities with a cost of $250 million or greater that have not yet started construction.

In addition, VA has also instituted a number of other specific reforms based on best practices from the private and public sector, including:

* Integrated master planning to ensure that the planned acquisition closes the identified gaps in service and corrects facility deficiencies.

* Requiring major medical construction projects to achieve at least 35 percent design prior to cost and schedule information being published and construction funds requested.

* Implementing a deliberate requirements control process, where major acquisition milestones have been identified to review scope and cost changes based on the approved budget and scope.

* Institutionalizing a Project Review Board (PRB) that is similar to the structure at the Corps District Offices. The PRB regularly provides management with metrics and insight to indicate if/when a project requires executive input or guidance.

* Using a Project Management Plan for accomplishing the acquisition from planning to activation to ensure clear communication throughout the project.

* Establishing a VA Activation Office to ensure the integration of the facility activation into the construction process for timely facility openings.

* Conducting pre-construction reviews wherein major construction projects must undergo a "constructability" review by a private construction management firm to review design and engineering factors that facilitate ease of construction and ensure project value.

* Integrating Medical Equipment Planners into the construction project teams. Each major construction project will employ medical equipment planners on the project team from concept design through activation.

* We believe that these reforms will allow us to avoid the mistakes of the past and ensure VA construction projects are executed in a manner that will better serve Veterans and American taxpayers.

BUDGET PROCESS IMPROVEMENTS

We fully recognize that there are areas where VA could have managed our FY 2015 budget more effectively. A continuing challenge is that historically, VA has not operated as an integrated enterprise and relies on old or inadequate enterprise-wide systems. For example, our financial management system is more than 20 years old; we require an integrated logistics system to provide supplies and services on an as-needed basis; and we require an integrated human resources system to fully manage our recruitment, hiring, and staffing processes. VA also does not have a modern medical claims management system for accurate, actionable data on obligations for Care in the Community. VHA relies on staff-intensive transactions to execute its budget for Care in the Community. Manual processes cannot keep pace with the unprecedented surge in demand that VHA is experiencing in FY 2015.

e future, we are taking a close look at our business practices for the Care in the Community program, with an eye to streamlining and automating processes. We also are pursuing a different approach to better identify resource requirements in the future and tie them to Veteran-centric outcomes.

CLOSING

Veterans are VA's sole reason for existence and our number one priority. In today's challenging fiscal and economic environment, we must be diligent stewards of every dollar and apply them wisely to ensure that Veterans--our clients--receive timely access to the highest quality benefits and services we can provide and which they earned through their sacrifice and service to our Nation. We also acknowledge the responsibility, accountability, and importance of showing measurable returns on that investment. You have my pledge that we will do everything possible to ensure that VA is a responsible steward of taxpayer resources, and that funds appropriated will continue to be used to improve the quality of life for Veterans and the efficiency of our operations. We are proud to be part of this VA team and feel privileged to be here serving Veterans at this key time in history. Thank you for the opportunity to appear before you today and for your steadfast support of Veterans.

Care in the Community includes all inpatient and outpatient care, as well as community nursing homes, dialysis, and emergency care (Millennium Bill) by providers outside the VA. It also includes CHAMPVA and other dependent programs, State Homes, Project ARCH, and Indian Health Service.

Read this original document at: http://veterans.house.gov/witness-testimony/the-honorable-sloan-gibson