HEARING ON VA/DOD SHARING

WEDNESDAY, OCTOBER 18, 1995

House of Representatives,

Subcommittee on Hospitals and Health Care,

Committee on Veterans' Affairs,

Washington, DC.

The subcommittee met, pursuant to call, at 9:30 a.m., in room 334, Cannon House Office Building, Hon. Tim Hutchinson (chairman of the subcommittee) presiding.

Present: Representatives Bishop, Clement, Mr. Smith of New Jersey, Edwards, Quinn, Stearns, Ney, Fox, and Flanagan.

OPENING STATEMENT OF CHAIRMAN HUTCHINSON

Mr. Hutchinson. Good morning. The subcommittee will come to order. A couple of announcements to the subcommittee. First of all, we have a card from all of us on the subcommittee to our colleague, Congressman Tejeda, who we all know is going through a lot of physical challenges right now and certainly needs our prayer, and our encouragements, so we will be passing this around this morning for everyone to sign to him.

I'll also announce that the subcommittee will be having an oversight hearing regarding the Columbia, MO VA Hospital situation and the unexplained deaths that occurred at that VA hospital and how dysfunctional management may have contributed to that very sad situation. That is scheduled for October 25 and I want the members to be aware of that.

The subject of this morning's oversight hearing is VA/DOD sharing and the related issues of the joint ventures and the TRICARE program. The sharing program was established by Congress in 1982. The guiding principle of theprogram was to maximize utilization of Federal health care resources to sharing between these two departments. Congress recognized that sharing offered opportunities that would be beneficial to both departments and would reduce costs to the Government by minimizing duplication and the underutilization of resources. The program covers any related hospital service.

During the last fiscal year, the most common types of agreements were for diagnostic services such as clinical pathology, CT scans and nuclear medicine. Exchanges of medical staff are widespread. Agreements also cover such diverse areas as transportation, equipment repair and police protection. Since the implementation of the 1982 program, seven distinct areas of sharing have evolved. They are purchasing services, joint ventures, which we will explore today, education and training programs, where Reserve units train and supplement VA medical center staffs, Armed Forces medical regulation office--through this arrangement the Air Force provides air transport to veteran patients around the country. Five, health information sharing through a Federal information sharing work group coordination council. This group focuses on identifying information resources and trying to develop solutions to technological and information differences between the two departments. No. 6, advance technology. This program supports the purchase and joint use of sophisticated medical equipment such as PET scanners and Cyclotrons. No. 7, CHAMPUS VA implementation. This issue, plus the integration of VA into the new TRICARE model will be explored during today's hearing, the subject that has interested me a lot, coming into Congress and of which I have little knowledge. I very much look forward to the testimony today.

I want to welcome and thank all of today's witnesses. We have an ambitious agenda of four panels this morning and I know that on the Republican side we have a conference called at 10 o'clock. We're going to stay in session here in the subcommittee during that time, but I suspect that some of my colleagues may be gone during that time, so I will explain their absence because of that conference.

The goal of the subcommittee is to gain a broad perspective of the issues facing those who develop, implement and benefit from sharing between these two departments.

Our first panel this morning will consist of representatives from the General Accounting Office. GAO has done extensive work on the issue of VA/DOD cooperation. Their role this morning is to provide an overview of the issue.

To reasonably accommodate all the witnesses this morning, I ask that each of you summarize your remarks in 5 minutes or less and we'll be glad to enter your complete written statements into the record.

I would now recognize Chet Edwards, ranking member for his opening remarks.

OPENING STATEMENT OF HON. CHET EDWARDS

Mr. Edwards. Thank you, Mr. Chairman, and in the name of time I will be very brief and would like to submit with your permission my opening statement.

Mr. Hutchinson. Without objection.

Mr. Edwards. I would just simply like to welcome all of the witnesses here and commend you, Mr. Chairman, for having this hearing. I think it's a very important issue. It's an outstanding group of witnesses. I'm here to listen and to learn.

I do think it's incumbent upon all of us, as we face limited Federal resources, to be creative and open-minded about finding ways to take the same number of dollars and utilize those dollars more efficiently and that applies to the Department of Veterans Affairs and to the Department of Defense, as strong a supporter as we are of those two agencies.

So I look forward from hearing from the witnesses and thank you, Mr. Chairman.

[The prepared statement of Congressman Edwards appears on p. 41.]

Mr. Hutchinson. Thank you, Chet. The chair now recognizes Mr. David Baine, GAO's Director of Health Care Delivery and Quality Issues and Mr. Baine, if you would introduce those who have accompanied you today and you're recognized.

Mr. Baine. I'd be glad to, Mr. Chairman. On my left is Mr. Jim Linz and on my right is Mr. Dave Lewis, both of whom have been involved in this issue for a fair number of years and who helped us put together our preparations for this hearing this morning.

Mr. Hutchinson. We welcome you to the panel and thank you for being here. You're recognized. Please continue.

STATEMENT OF DAVID P. BAINE, DIRECTOR, HEALTH CARE DELIVERY AND QUALITY ISSUES, HEALTH, EDUCATION, AND HUMAN SERVICES DIVISION, GENERAL ACCOUNTING OFFICE; ACCOMPANIED BY JIM LINZ, ASSISTANT DIRECTOR, HEALTH CARE DELIVERY AND QUALITY ISSUES; AND DAVE LEWIS, SENIOR EVALUATOR, HEALTH CARE DELIVERY AND QUALITY ISSUES

Mr. Baine. Mr. Chairman and members of the subcommittee, we appreciate the opportunity to discuss the status of Department of Veterans Affairs health care resources sharing with the DOD.

Health resources sharing, which involves the buying, selling, or bartering of health services, can be beneficial to both parties in the agreement and helps contain health care costs by making better use of medical resources. We've been involved in this issue, Mr. Chairman, for probably 15 to 20 years and over that period of time we've conducted a series of reviews that have identified various barriers to increased sharing.

Much of the progress that has been made in expanding VA sharing can be attributed to continued support of this committee in addressing the legislative barriers and encouraging the agencies involved to address administrative barriers.

I'd like to touch on three areas this morning. The first has to do with the evolution of the sharing legislation. VA has been allowed to share with DOD and other Federal agencies for more than 60 years. Initially, Federal hospitals were required to recover the actual costs of services provided to another Federal agency. In 1966, VA sharing authority was expanded to include sharing specialized medical services with its university affiliates. In 1978, we reported that significant barriers discouraged sharing among Federal agencies. These included the absence of a legislative mandate to do so, agency regulations that inhibited sharing and disagreements over how agencies would be paid for services provided.

The first major step in addressing these barriers occurred in 1982 through the enactment of Public Law 97-174, the VA/DOD Health Resources Sharing and Emergency Operations Act. This act gave increased flexibility to local hospital directors to enter into sharing arrangements. It made reimbursement provisions more flexible and allowed facilities to keep part of the reimbursements. Six years later, however, we went back and took a look at the amount of sharing that was going on and found out that there were other concerns and barriers that needed to be addressed, some of them legislative. For example, the law did not allow VA to treat dependents of active duty and required members of the Uniformed Services and military hospitals were reluctant to refer DOD beneficiaries to VA hospitals because they could not use CHAMPUS funds to pay for the care.

In 1989, the Congress authorized the use of CHAMPUS funds to reimburse VA. Three years later, the Congress gave temporary authority to treat the dependents of active duty and retired DOD beneficiaries.

Despite these congressional actions, differences between VA and DOD over provisions of a memorandum of understanding continued to prevent CHAMPUS beneficiaries from receiving services in VA hospitals. These differences centered mainly on whether VA hospitals would be treated as military hospitals or civilian CHAMPUS providers. Only after the direct intervention of former Chairman Montgomery was a memorandum of understanding signed.

The advent of DOD's TRICARE program, Mr. Chairman, ushers in a new error of VA/DOD sharing likely to supplant the VA CHAMPUS sharing. In June, 1995, VA and DOD completed work on an agreement that allows VA facilities to compete with private sector facilities to serve providers under TRICARE contracts. Like private sector providers, VA facilities will be allowed to apply to DOD's regional managed care contractors to serve as providers and those facilities will be required to meet the same cost quality and utilization review requirements as are any private provider under the term of the TRICARE contract.

I'd like to now turn to a little history of where interagency sharing has gone in the last 15 years. The number of sharing agreements between DOD and VA has increased from about 12 in 1983 to about 150 in 1995. Every VA facilitywithin 50 miles of a DOD facility now has one or more sharing agreements. VA has about seven times as many agreements to provide services as it does to acquire services from DOD. By contrast, VA buys about three times as many specialized services from its university affiliates, as it sells to those affiliates.

We're often asked, Mr. Chairman, as to what the monetary benefits are of sharing agreements and these are often difficult to quantify. You can quantify it in terms of one agreement or another, but to find out what the range is and what the extent of the sharing of services across the country is, is pretty difficult. This is because there is no centralized data base that provides that information. This is something that we're often asked and it's a tough question to answer.

I'd like to touch just for a second, if I could, on some other challenges that we think VA faces as it moves into the TRICARE sharing environment. VA will need to meet the billing, utilization review and quality assurance requirements of CHAMPUS, TRICARE and private sector health plans. This will be a departure from what VA has done in the past.

And as a buyer, VA will need to determine when it is more economical to buy services or provide them directly. In other words, it will need to know the costs involved in providing its own services so it can make good make or buy decisions.

The Asheville Agreement is a start in that direction because the Asheville Center had to set up the billing system and it had to set up a utilization review system acceptable to the CHAMPUS providers. That seems to us to be a good start toward getting some of the VA facilities in the mode of being able to deal with private sector providers and also with DOD.

In conclusion, Mr. Chairman, we believe that the medical resources sharing offers benefits to both those providing and those obtaining shared services. Although the primary legislative barriers to increased sharing have been overcome, some of the new challenges that I've just mentioned are still on the horizon. I think it will be some time until VA gets a little experience as a TRICARE provider before we'll know whether there's additional need for legislation of any kind or whether this can all be worked out through the contract provisions with the TRICARE contractor.

We'll be glad to take any questions that you might have.

[The prepared statement of Mr. Baine appears on p. 45.]

Mr. Hutchinson. Thank you, Mr. Baine. We appreciate your testimony. Since the issuance of the GAO report in October of 1994, has VA complied with your recommendations to actively identify VA services that could be candidates for these kinds of agreements?

Mr. Baine. My understanding, Mr. Chairman, is that VA and DOD had identified about eight different sites to try to develop an analog to the Asheville agreement that was signed in 1993. It's also my understanding thatthe agencies decided that for all but two of those sites they would rather wait until the TRICARE contract was put in place to finalize those agreements. So there are two additional sites, I believe, one in New York and one in Indiana, where there's an analog to the Asheville agreement. I hope that answers your question.

Mr. Hutchinson. Yes. How would you rate the Department of Defense's degree of interest in sharing agreements and in expanding these kinds of arrangements?

Mr. Baine. I've been involved in sharing issues for longer than I'd like to recall. And it's been my experience, Mr. Chairman, that the degree of interest in sharing depends a lot on the extent to which cooperation is undertaken by people at the top of the two organizations.

In the case of Dr. Joseph and Dr. Kizer, I think there's been a real attempt to foster enhanced interagency sharing between the two agencies. Having said that, it's also been our experience that much of the momentum for sharing is local and so it also depends on the personalities, the communications between the facilities themselves, in the local communities. So at the top of the organization there can be cooperation and whatever, but if there's not cooperation at the local facility, it's not going to come off. I think you'll find that the degree of cooperation varies from place to place around the country.

There are several instances where it seems to have worked fairly well. Down in Albuquerque, the Albuquerque joint venture is now touted is one of the success stories. The truth of the matter is it took a long time for all the agreements to be worked out for that to come to pass. I think there's one other point we should make in this whole thing. While a lot depends on the leadership and personalities and the communications between the local facilities, there's a lot of cultural issues that have to be overcome to make this work. That's something that I think Dr. Kizer and Dr. Joseph have recognized and are trying to change the culture of both organizations to kind of get away from this notion of we'd rather do it all ourselves. And I think that has made a big difference.

Mr. Hutchinson. But if I understand what you've said as far as quantifying savings, we haven't had enough experience yet to do that. There are other difficulties in trying to quantify the savings, being that we've been at this now for to one agree or another for 12 years and yet because of administrative barriers, legislative barriers, cultural barriers, it's expanded very, very slowly and there's nothing you feel that we can do to try to bring down those barriers to bring about more of these arrangements more quickly?

Mr. Baine. It's our sense, Mr. Chairman, that many of the legislative barriers have been addressed by this Committee and by the Congress as a whole through the legislation that I cited in my testimony. That took a while. When we first got involved in this issue it was 1978. It was 4 years later beforeany legislation was passed by the Congress to do anything. There were 3 or 4 years before the next improvements were made and it was 2 or 3 years after that that the last improvements were made. It's our sense, however, that most of the legislative barriers have now been overcome. Now it's a matter of an implementation plan. That's the short answer to your question.

Mr. Hutchinson. If we could just legislate away cultural problems, right?

Mr. Baine. That's a little tougher.

Mr. Hutchinson. Mr. Edwards.

Mr. Edwards. Thank you, Tim. That was one of the primary questions I wanted to ask, if this was more of a legislative problem or an administrative-cultural problem and I think you addressed that.

In terms of any changes in laws, Mr. Baine, is there a need for any changes in fiscal incentives through changes in the law? Are fiscal incentives a problem, a serious problem?

Mr. Baine. There shouldn't be. I believe there's a different interpretation in VA and DOD with regard to the extent to which and what portion of the proceeds from sharing agreements can be retained at the local facilities. The DOD has decided, I believe, through their General Counsel's Office, that a portion of the proceeds--that portion which relates to the operation and maintenance funds--can be retained by the local facility. But the military pay portion cannot, and therefore there's a front-end adjustment made in the budgets of the facilities.

It was my sense when the initial law was passed back in 1982 that that was sort of taken care of. However, I'm not a lawyer, but that was the interpretation of the DOD General Counsel, as I understand it. VA, on the other hand, allows their hospitals to retain the reimbursements from sharing agreements, and therefore provides that kind of incentive.

Mr. Edwards. Okay. You said you don't think we need any more legislative efforts to break down barriers. Do we need any legislative prodding? Is there any constructive way that Congress could prod the VA and DOD into being more aggressive in this area without trying to micromanage their decisions?

Mr. Baine. I think that's essentially what happened a year or so ago when the Asheville agreement was kind of hung up for one reason or another. Then Chairman Montgomery interceded in that particular instance and it was not 2 months after he interceded that that came to fruition and the agreement was signed and was underway.

Mr. Edwards. Very good. Thank you.

Mr. Baine. So I think the short answer to your question, continuing encouragement if that's the will of this subcommittee or the full committee to do this makes a lot of sense.

Mr. Edwards. Very good. Thank you, Mr. Baine.

Mr. Baine. Sure.

Mr. Hutchinson. Thanks, Chet. Mr. Ney, you're recognized.

Mr. Ney. I pass.

Mr. Hutchinson. Mr. Bishop.

Mr. Bishop. I pass.

Mr. Hutchinson. Mr. Fox, the gentleman from Pennsylvania?

Mr. Fox. Thank you, Mr. Chairman, I pass.

Mr. Hutchinson. All right, are there any other questions of the panel?

Chet, do you have any more? All right, we thank you very much.

Mr. Baine. Our pleasure, sir.

Mr. Hutchinson. The chair now recognizes Dr. Kenneth Kizer, Under Secretary for Health at the Department of Veterans Affairs and Major General George Anderson, the Deputy Assistant for Secretary for Health Services Operations and Readiness at the Department of Defense.

Dr. Kizer, it's good to see you again. General Anderson, we welcome you. Dr. Kizer, you are recognized.

STATEMENTS OF KENNETH W. KIZER, M.D., M.P.H., UNDER SECRETARY FOR HEALTH, DEPARTMENT OF VETERANS AFFAIRS; MAJ. GEN. GEORGE K. ANDERSON, USAF, MC, DEPUTY ASSISTANT SECRETARY OF DEFENSE, HEALTH SERVICES OPERATIONS AND READINESS, DEPARTMENT OF DEFENSE

Mr. Kizer. Good morning, sir. Good morning, members of the subcommittee. I'm pleased to be here to have this opportunity to discuss with you the subject of joint venturing and the sharing of health care resources between the VA and DOD.

Mr. Baine has commented some about the history of the sharing between the two departments, so I'm not going to say anything further about that, although I would correct the numbers that he cited for you. The actual number of agreements between the VA and DOD at this time is 605 for a total of 4,133 different services as opposed to, the much smaller number I think he cited.

As you well know, I am highly supportive of the concepts and underlying principles of VA/DOD sharing and joint venturing. That is the concept of working towards the most efficient use of the taxpayer dollars that support the two institutions.

During my 11-month tenure with VA, I have strongly encouraged our medical centers to expand resource sharing. We have already heard some brief discussion of the memorandum of understanding that I signed with DOD last June to expand our opportunities as a CHAMPUS provider under the TRICARE program. Indeed, the message that has gone out to our medical centers is that they should all get as involved in the program as they can, recognizing that certain preparatory efforts have to be made if we're going to be a successful player in that arena.

We've also signed agreements for our medical centers at Syracuse and Indianapolis to be CHAMPUS providers. I would note that there has been significant interest in expanding the number of these type of agreement, but pursuant to DOD's request that we work through the TRICARE providers, at this point we only have these two additional individual agreements. Otherwise, we will work through the TRICARE program.

I would also point out, just to put this in some context, that we have hundreds of other sharing agreements with our academic affiliates, as Mr. Baine mentioned. We have a smaller number with the Public Health Service and with local and State government entities. I see sharing and joint venturing as critical to the long-term success and viability of the Veterans Health Care system. Exemplative of that are some of the actions that we have taken in the past few months. As I think you're aware, we signed an agreement with the Juvenile Diabetes Foundation to create centers of excellence for research in diabetes. We have signed memorandums of understanding with the University Health Systems Consortium for technology assessment and clinical benchmarks development. We're currently exploring some opportunities to expand this agreement into other areas. We've signed a memorandum of understanding with the Agency for Health Care Policy and Research for clinical guidelines development. We're discussing a number of opportunities like this with other agencies as well.

I see joint venturing and sharing as a critical element of our future. Having said this, I think I should also express some of my concerns in this regard. I have some concerns about these joint ventures based on my experience in the private sector with mergers of companies, as well as my experience in academia and State government. I think a certain degree of caution is prudent when we enter into these sharing agreements.

There are many potential problems when you try to combine or blend entities that have separate missions, cultures and operating systems. In some cases, these are merely just logistical details that have to be taken care of--i.e., if you're motivated, the incentives are correct and the differences aren't too profound. However, these can be particular issues, e.g., in the case of mission, that can lead to some substantive problems. I want to come back to this issue in a moment.

You talked with the previous witness about culture and legislative issues that have been addressed to encourage sharing. There also is another important quality, particularly with regard to DOD and VA, having to do with our mission; sometimes this can be a barrier. Because the difference in missions between the two departments, i.e., Veterans Affairs being in the health care business, as well as education and research, as opposed to DOD's military readiness mission, can lead us at different fundamental incentives and motivations as we look at these. The health care mission of DOD is primarily in support of its military readiness mission, and that's not necessarily the same as it is with VA where you're taking care of an older population with multiple medical problems.

Just briefly let me conclude by saying that at least based on my experience elsewhere, as well as with my limited experience so far with the VA, if a joint venture is going to be successful, it has to be designed from the outset as much as possible to assure that the primary purpose of the joint venture is going to be achieved. In the case of running a hospital, whether it is to serve veterans or to take care of active duty military personnel, one would want to insure that whoever is designated as the host, or whoever has the lead responsibility for executing that joint venture, that their primary mission should be providing health care, hospital management and other things relevant in that regard. It is essential that you focus on the most intense needs or the highest acuity patients because it is much easier to provide for those with less intense needs, and fiscally it becomes an issue of working on the margin, if you focus on your highest need as opposed to what may be lesser need patients. If the focus is on those who have less intense need, then it becomes more difficult, and indeed often more expensive, to then go back and focus on those who have higher needs.

Let me just close by saying that having expressed this caution, I think this is an arena that we are fully committed to. It is a good thing. We have had success in the past, and we're going to continue to explore more opportunities in the future. Particularly with a new operational and managerial structure in the department, the incentives really are in place to foster and promote sharing and joint venturing, not only with DOD but with private sector entities, academic facilities and others.

Thank you.

[The prepared statement of Dr. Kizer appears on p. 63.]

Mr. Hutchinson. Thank you, Dr. Kizer. General Anderson.

STATEMENT OF MAJ. GEN. GEORGE K. ANDERSON, USAF, MC

General Anderson. Good morning. Mr. Chairman, I'm pleased to be here today to express to you and members of the subcommittee the Department of Defense's position on a very important subject, health care resources sharing between the Department of Defense and the Department of Veterans Affairs.

Mr. Chairman, I have a complete statement for inclusion in the record, however, in the interest of time, I will give a summary of that statement.

The Department of Defense views this sharing relationship as one of great importance and is firmly committed to its continuation and strengthening. Dr. Joseph, the Assistant Secretary of Defense (Health Affairs) and Dr. Kizer, the Under Secretary for Health in the Department of Veterans Affairs, have created a strong sharing climate within the departments. Evidence of that is in a recent jointly authored article in U.S. Medicine which sets the direction for the sharing relationship through a series of priorities. I have a copy of that article for inclusion in the record.

Since 1982, the two departments have worked hard to generate dramatic increases in sharing and associated cost savings. They have been successful, however, in the effect of base closures on the number of DOD facilities, diminishing Federal resources and a dynamic health care scene suggest that we should not be planning for the future based on the past.

We, in the Department of Defense, together with the Department of Veterans Affairs, are focusing our joint efforts on our long-range needs and areas of mutual benefit. Joint ventures are included in this planning where they are beneficial.

Today, there are eight joint ventures in various stages of development. Two of them are operational: the eight year old New Mexico Regional Federal Medical Center at Kirtland Air Force Base in Albuquerque, New Mexico and the one year old Nellis Federal Hospital, 129-bed community hospital at Nellis Air Force Base in Las Vegas, Nevada.

The nature of joint ventures is such that problems will surface that require work to resolve. This applies to the Nellis Federal facility. It has encountered some problems which are being worked out. A recent trip by a high level team from the Air Force and VA has accelerated resolution of these issues. The team's excellent report and its recommendations, now being implemented by DOD, demonstrates the ability of the two departments to work together in effectively fixing problems.

With regard to the future joint ventures, specifically looking towards the Elmendorf joint venture in Alaska, DOD is firmly committed to working out the details in advance to assure that we don't have similar problems in the future.

Another area addresses Veterans Affairs Medical Centers as providers under both managed care support contractor arrangements, as well as in providing specialized care, such as head trauma and rehabilitative care. Approximately a year and a half ago, a CHAMPUS provider model was implemented at the VA Medical Center in Asheville, NC and this time, similar models are being implemented in Indianapolis and Syracuse, NY, where Griffiss Air Force Base, Rome, NY, is being closed.

No more of these are planned because of the on-going change in our system. The Department of Defense is continuing to implement its 12 region TRICARE program where a lead agent in each region is primarily responsible for health care delivery, and a managed care support contractor is at risk for delivery of CHAMPUS beneficiary care within the region. This is a support contract, as I think you're all aware. The two departments have now signed a memorandum of understanding enabling Veterans Affairs Medical Centers that wish to be TRICARE network providers, to do so if they meet the contractor's cost access and quality criteria. Those facilities that become providers provide another option for DOD beneficiaries. They would function in the same fashion as private sector providers and the beneficiaries' costs would be the same as when they use a private sector provider. This new effort will be phased in with the 2-year contracting schedule.

As I think you're aware, we intend to stand up the whole TRICARE system before the end of 1997.

In closing, Mr. Chairman, the Department of Defense will continue to work closely with the Department of Veterans Affairs to pursue sharing opportunities to save Federal dollars, provide quality health care, and still be able to respond to the demands of its readiness mission.

Thank you very much.

[The prepared statement of General Anderson appears on p. 74.]

Mr. Hutchinson. Thank you, General Anderson. I'll ask the question that is so basic. There's a lot of us here who are new and could either of you give us a picture of how the TRICARE model would work in a given situation?

General Anderson. Mr. Chairman, in this last bit of verbiage in my testimony, I attempted to explain that we have placed the Veterans Affairs hospitals in a situation of qualifying as providers under the TRICARE contract support side of the equation. The way TRICARE is organized, these is the direct care system, in other words, the Department of Defense Hospitals. We try to optimize around that system in terms of using everything that we have in the Department of Defense to provide care for our enrolled beneficiaries under TRICARE.

In areas where we cannot meet that full demand in the direct care system, we have a support contractor that fills in from the private sector to do that. What we are doing in this new scheme with TRICARE is including the Veterans Affairs Hospitals and Medical Centers in that side of the equation, along with the TRICARE support contractors.

The difference here for the beneficiaries has to do with the payment schemes on that side of the equation in the TRICARE support contractor network, if you will.

TRICARE prime, specifically the enrollment, the enrollment part of TRICARE (which is a triple option), is health maintenance organization-like. We are enrolling beneficiaries in this plan. They also have an option of going to a preferred provider network or using CHAMPUS as it is currently configured, so it's really a triple option.

What I've tried to do here is basically give you a feel for what we're aiming at as we stand this up by 1997.

Mr. Hutchinson. Now any VA hospital could apply and if they met the criteria, could be accepted in to the TRICARE program?

General Anderson. Absolutely.

Mr. Hutchinson. Now, could CHAMPUS beneficiaries then utilize the VA hospital?

General Anderson. Yes.

Mr. Hutchinson. Okay, and how many do we have participating in this now?

General Anderson. We have Regions 9, 10 and 12 (what was the CHAMPUS reform initiative in California and Hawaii) and that is a fully stood up system. We now have Region 11 which is centered around Madigan Army Medical Center in the Northwest, in the Seattle area standing up and we're enrolling thousands of people in the system. Certainly, we could, for the record, give you the update numbers, but they are ticking off right now. The system is starting up in an enrollment phase.

As I said, the region by region stand up of the program is coming over the next 2 years.

Mr. Hutchinson. In the TRICARE, are you finding that the cultural barriers or what we've talked about before on each department wanting to do their own thing, is that less of a problem?

General Anderson. Mr. Chairman, we don't really have the experience to answer that question as yet relative to Veterans Affairs. I think that's a fair statement, isn't it, Dr. Kizer? We only have the sharing agreements. We have the experience in Albuquerque which is very good at this point, but that's not under the TRICARE model. So if we're talking about the TRICARE model, we still need future experience to see how that's going to work.

Dr. Kizer. I would add that from the VA's perspective, we're raring to go. The VA facility mangers are very enthusiastic and would love to participate in this. To some extent, we're limited by having to implement appropriate billing systems and other things already mentioned, which historically have not been part of the organization, but we are rapidly moving to do that. We're putting in cost accounting systems as our number one informatics priority. There is an agenda for that, and I think we have discussed that at some previous hearings. We're very enthusiastic about moving forward. I really don't see any cultural problems impeding this. One of the limiting, or rate limiting steps, is how quickly TRICARE comes on in the various areas. As was noted this will occur over the next 2 or 3 years. Also, I would note that we are within a matter of weeks of finalizing the agreement with the contractor for one of the TRICARE regions in the Texas area, that we're going to be able to do.

Mr. Hutchinson. Under the VISN structure is it the local hospital administrator that will make the inquirer request to participate? Do we have a lot of hospitals that are expressing interest to get into this?

Dr. Kizer. We have a lot of facilities that would be very interested in participating. One of the reasons is, of course, that we allow them to retain the funds so they can go back and improve services to our patients. Whether it's a VISN director or the hospital director that initiates things, I cannot say at this time. I expect it will probably be both as we move forward in developing the strategic plans for each of the VISNS. They're both going to be working on it.

Mr. Hutchinson. Now the administrative, I guess there are administrative barriers, the billing problems and the changes that you're making, how quickly are those going to be implemented? I mean how fast will we see an expansion in the TRICARE?

Dr. Kizer. Well, of course, the first and most important rate limiting step is how fast TRICARE comes on and how fast they get their contractors in place to then implement the program because we have to work through those entities.

As far as the VA system, the situation is variable. Some of our facilities are further along than others, as far as putting in place the billing systems, cost accounting systems, etc. You will hear testimony in a little bit I think, from some of our facility directors who can provide you a first-hand account of their experience in this regard.

I expect that as TRICARE providers come on line, our facilities will be ready, and we'll be part of the game.

General Anderson. Mr. Chairman, to get back to your cultural barrier, a comment or question, I would like to echo what Dr. Kizer has said and with a specific example. We did have a good deal of administrative barrier in the Asheville arena when that interaction occurred, but regarding the barriers, those were absolutely ironed out with enthusiasm on both sides. This is really the model for getting at the details of things like the billing procedures and so on. So, what we have experienced from the DOD side is a very enthusiastic approach to difficulties in breaking down the barriers very quickly, you know, weeks and months, not years.

Mr. Hutchinson. Thank you. Chet.

Mr. Edwards. General Anderson, I'd like to ask for your comment about the joint VA/DOD report of September 1 of this year. As a result of the study team that had looked at the Nellis situation, a report was issued, entitled "Financial Disincentives" and this is a direct statement from it. It says, "DOD budgeting at the national level anticipates VA revenue from deviate DOD sharing arrangements and offsets local budgets by the amount generated locally through these arrangements. Hence, local management derives no financial benefit from the sharing agreements."

Is that a correct statement or do you disagree with that statement?

General Anderson. I will not challenge the findings of that report at all. There are two things to think through though as you address this issue. One of them is the comment that Mr. Baine made before relative to the General Counsel and military pay. I assure you though that the Air Force itself who actually manages the budget, the Defense Heath Program budget, that goes to Nellis Hospital is addressing that. You'll note that one of the parties of that report was the Surgeon General of the Air Force and what they are doing in response to the report is, of course, addressing each of the findings and the recommendations of the report. Clearly, the Surgeon General of the Air Force has some flexibility in the way he oversees the budget distributions to that hospital. My belief is that this is in the hands of the Air Force and the Surgeon General of the Air Force is authority level to look at how the distribution of funds are made and to enhance the incentives accordingly. So to again very firmly say that, we stand behind what was reported in that report and those recommendations are being addressed by the Air Force on the Department of Defense side.

Mr. Edwards. Sir, are you saying that the Department of Defense recognizes that it is not a correct interpretation of the law passed in 1982 to take away estimated revenues coming from the VA? Is that what you're saying?

General Anderson. Yes.

Mr. Edwards. Let me be more specific. The law says very directly, "any funds received through such a reimbursement shall be credited to funds that have been allocated to a facility that provided the care or services."

The analogy I would use would be if an employer by the law is required to pay an employee time and a half overtime. The employer says if you want to be aggressive and take initiative, Mr. Employee, work extra hours every week because every week I'll pay you time and half. The only problem is I'm going to dock you the same amount of money from your regular paycheck. It seems to me that would be circumventing the Federal law.

Is it your opinion that the law is very clear and that it is not a correct and proper interpretation of it to be taking a dollar here for every dollar that comes in there?

General Anderson. It is my personal opinion and the position of the Department of Defense that the law is very clear relative to the fiscal incentives intended and that is being worked out according to what was found in this report. The action agency to do that is the Surgeon General of the Air Force and that is in their hands right now to do that.

I say that with the reservation relative to the comment that Mr. Baine made about the General Counsel and military pay lines and there are some accounting things that need to be looked at along that line and that is being accomplished also. That really is the extent of the comments that I can make. The answer to your question, yes sir, we recognize it.

Mr. Edwards. How long do you think it should take, General, to change the operating procedures and the financial incentives?

General Anderson. Weeks and months, yes sir.

Mr. Edwards. Thank you very much.

Mr. Hutchinson. Mr. Ney.

Mr. Ney. Thank you, Mr. Chairman. I had a question of Dr. Kizer. I think your testimony has a word of caution in it which is appropriate whenever you try to merge and on a state level in the past I've merged agencies and been involved in that type of process. You say in here on page 2 "if the involved parties are correctly motivated." I wanted to ask you how do you determine what type of problems are out there that have to be worked out? Do they go on to a list and the entities sit down? How does that work, the actual problems of merging. Are there technological or logistical or cultural--how is that put together? Do you get 1 through 10, are the problems that you have to work out?

Dr. Kizer. I think you're asking, if I understand it correctly, how do you determine potential problems when you merge entities, as for example, we began to do earlier this year with the merger of 17 of our hospitals under 8 management structures. Well, you look at the entities, determine what their mission is, and decide how you want to operate the merged facility. You basically make your list and say this is how we're going to address the new facility.

Mr. Ney. I know specifically you've got VA and DOD. When there's disagreements that happen, do those disagreements, maybe one is coming from VA and maybe one is coming from DOD, do they go on to some kind of list and there's a body that sits down and says here's five points that we have to work out? Does that happen?

Dr. Kizer. Ideally, that's what should happen, yes. You should have a mechanism designed into the process that will be the dispute resolution process. This should be designed up front because there absolutely will be disputes, and they're going to have to be resolved.

In the case of Nellis, one of the problems that surfaced was that there was not an effective mechanism for resolving disputes. Problems were surfaced or identified, and they languished. They basically didn't get dealt with. That, I believe is being addressed.

Mr. Ney. As this process goes through now, do we have something that will do that?

Dr. Kizer. Each facility, and I think that's what the General was saying except for the case of Elmendorf which is still on the drawing boards, that would be something that would be placed into it. Part of what was discussed there was how do we resolve those problems, how do we surface the problems, how do we then resolve them as well. There has to be a mechanism to do that going into it, otherwise, it will continue to generate problems, and we basically won't get them solved.

Mr. Ney. That's what I'm wondering. As far as the mechanism and I'd ask the question of you and the General, the bottom line of this and I think this has started out and proceeded well. I think it's a great idea, but the bottom line of it when you head into some of those head butting situations where there's a difference over here and a difference over here, who do you think in the end of it, who cuts bait? Who steps in to say you say one thing, you say another, who steps in, and I would like both of you to answer, to say who cuts bait?

Dr. Kizer. That actually goes to the point that I was making. If we're in the health care business, and the mission or the joint venture is health care, then in my judgment the person with the most experience in the business of health care should be the entity that ultimately should be in charge. If you're in the law enforcement business or the fire protection business or whatever it is, then you would go back to whoever has the most expertise in that regard, in my judgment.

General Anderson. You will hear some subsequent testimony here, I think, in the panels that follow from Alaska, particularly, but obviously when we have a problem in one joint venture such as we had at Nellis, we then look at what's on the horizon and clearly Elmendorf, the Alaska federal health picture is very important to us right now. There is a plan. There is a regular set of meetings that go on in Alaska to look ahead to exactly these difficulties with the idea that we will lay in place a process by which problems can be resolved at that level. If they can't, we are in direct contact here in Washington through Dr. Kizer's office and Dr. Joseph's office here. In the case of Alaska, that being an Air Force facility, the Air Force Surgeon General also gets involved in those things. So there are authority levels for resolution and we keep very close tabs on what's going on up there, as a specific example.

Mr. Ney. Thank you. I have one final question and I know the yellow light is on, General, in your testimony the beneficiaries who want the option can go to a VA medical center as long as it meets the requirements of TRICARE and its managed care contractors. That would be a private sector managed care component, I assume.

General Anderson. Yes.

Mr. Ney. So they have to basically approve the VA medical centers?

General Anderson. Yes.

Mr. Ney. Is there any structures in the VA that looks at DOD and approves it or something of that nature?

General Anderson. Let me address that in this way. We also hold the DOD facilities to exactly the same standards in this system. Now understand, we are operating from the DOD, the TRICARE system and this question has been one that we've talked over time and time again with the Veterans Affairs. I could understand some sensitivity here, but we really are all trying to meet the same standards, the same very high standards of quality of care in particular, and access to care.

Mr. Ney. If nobody objects, can I have 30 seconds?

Mr. Hutchinson. No objection.

Mr. Ney. Let me make a point here and I'm not saying who is right or wrong, better, etc. It brings out a good point if the VA doesn't have managed care if you have a managed care component that the VA agrees yes, it can look at us, why doesn't that managed care component basically certify the VA systems? Why have two systems? Because what starts to come to my mind, again, DOD has something that looks over VA to approve it, but what is coming from VA's end? I'm not criticizing anybody, but I'm just saying maybe we ought to have this existing system and make it to blend so that again we're breaking down barriers and there's a managed care component for everybody.

General Anderson. I understand very well the issue you're after. A practical answer to this is that we're handling this as 12 regions and they are under regional contract authorities with different contractors providing these services. The decision was made to put the VA in this system on the contractor side of the system, not on the direct care side. So having made that management decision, then you do get into this local phenomena of regionalization of the system.

Mr. Hutchinson. Mr. Bishop.

Mr. Bishop. Thank you very much. Let me again echo my support for the concept of DOD-VA sharing. I think it's an excellent concept for the delivery of health. I've listened and maybe I'm not entirely enlightened on it, but I wanted to ask the questions now with regard to the utilization of VA facilities for DOD personnel which would come under the TRICARE system which seems to be pretty much rolling along. My question comes for the frequency of the proposed utilization of DOD facilities for non-DOD vets, particularly in areas where veterans don't have access to VA hospitals. I note that you are consolidating in the VA a number of hospitals for efficiency and for necessary budget cuttings and I understand that, but there have been even prior to the consolidation era areas that were undeserved in terms of access to veterans and there have been, for example, in some areas DOD facilities that veterans wanted to use or could use, but were prohibited from using, stopped from using as a result of case load or DOD regulations, or what have you.

So what I would like to know is whether or not it's going to be a two-way street? Can veterans who would normally be eligible under the VA system, not necessarily under the DOD as in retired military personnel, would they be able to go to DOD facilities, for example, Martin Army Community Hospital at Fort Benning, rather than having to travel to Tuskegee or to go to Atlanta or to go to Dublin to some VA facility?

Dr. Kizer. My understanding of the issue, and this really is DOD's issue, is that Veterans would not be eligible for care at active duty military treatment facilities.

General Anderson. Veterans are, in general, not beneficiaries of the DOD system. That's a matter of law. However, we do have the joint ventures and a number of these sharing arrangements where there is a possibility for mutual arrangements.

In terms of a system-wide beneficiary issue though, the veteran is simply not a legal beneficiary of the DOD system.

Mr. Bishop. I guess I'm following up on Mr. Ney's suggestion where he was talking about the possibility of blending the two together. It seems to me that if we're talking about efficiencies and we're talking about the more effective delivery of service, if you have a DOD facility that's accessible to veterans, they ought to be able to use that subject, of course, to their own limitations, without having to travel hundreds of miles to some VA facility in the same way that you're going to allow DOD personnel to utilize VA facilities.

Dr. Kizer. I understand the issue, sir. We do not have, to my knowledge, any pending direction to change things in this area. I would point out----

Mr. Bishop. That would require a change in the law? Would that be subject to again a memorandum of understanding or some contractual agreement between DOD and VA?

Dr. Kizer. If I understand your thrust here, sir, that veterans, in general, would be beneficiaries of the DOD system, this would require changing the law. We have worked out a number of individual location sharing agreements based on work load. Where we can make the sharing concept mutually beneficial, that has worked. For example, Tripler Medical Center in Hawaii has for years treated veterans in that facility, and they are pressing on as one of our eight locations for continuation along that line.

Mr. Bishop. I guess could VA contract with DOD, for example, to provide those services for veterans in an affected area where there is a DOD facility and there are veterans in need of utilization of the facility?

Do you have authority to do that now if you wanted, if VA were to offer to suggest, to convince you to enter into a contract, would you have the authority?

Dr. Kizer. I believe we could work out a department level arrangement to do something like that. I don't see an individual location where that would really apply right now, because of the lack of excess DOD capacity in the current downsizing environment. We've already closed 42 percent of our beds in DOD.

Mr. Bishop. The final question then has to do with additional construction. Is there any way that budgetarily VA and DOD can have joint constructions in a DOD facility, for example, to add additional capacity so that there will be access for veterans who are in a particular area to ease the availability of services for them, for their convenience?

General Anderson. Yes sir. That's exactly what we're doing in Elmendorf. In the Elmendorf case, for example, and what we did at Nellis, in fact, was to plan from the beginning to build the hospital that would serve both needs.

Mr. Hutchinson. Thank you, Mr. Bishop. Mr. Clements is occupied. Before I dismiss the panel I just want to say I think there's been some interesting issues raised, but I know that there are lots of folks and I get contacted by them frequently who are CHAMPUS beneficiaries who live near a VA hospital. The hospital there who would love to have access to be able to utilize that VA hospital rather than traveling sometimes many hours or hundreds of miles to the nearest DOD facility. So I hope that there's a great promise in what we'll see in future years in the TRICARE model. I get contacted a lot by other Members who have VA hospitals in their districts and who are curious about what they can do to develop these sharing agreements, these joint ventures or to get into TRICARE. Does the Panel, Dr. Kizer, General Anderson, have any advice on what direction we can point them?

Dr. Kizer. Well, sir, I would, since you asked, make a pitch for some of the provisions that are in the reconciliation bill that would expand our sharing authority. Certainly, as we look to the future and the new operational and managerial paradigm that we hope to operate under in the future, we need to have essentially unlimited ability to contract with other entities and to enter into sharing arrangements or joint ventures with private providers, with our university affiliates, with DOD, and with other Government agencies. We would very much like to have, and we feel that we need, indeed desperately need that, if we're going to provide the service we want to provide to our veterans and to really make it work and be rational. Of course, if we could address some of those eligibility rules and statutes that are so much in need of change, that would provide us a system and the vehicle to provide the service that our veterans deserve.

Mr. Hutchinson. Good. Could you help educate CBO as to the benefits of eligibility reform?

Dr. Kizer. Actually, if it would be helpful I have a formula here for CBO. If the Congressional Budget Office would just plug in the numbers, they would see that our eligibility reform proposal is budget neutral. Going back to the comment that was made here, we are absolutely convinced that we can substantially increase our accessibility, improve our accessibility, site dozens and dozens of access points in community-based clinics; if we could amend those silly eligibility rules, we could make the system work a whole hell of a lot better.

Mr. Hutchinson. All right. And all of this eligibility reform as well as the joint ventures sharing agreements, TRICARE, all of that is not primarily budgetary-driven, but better service and accessibility to veterans.

General Anderson. Yes, Mr. Chairman, we, of course, in the Department of Defense do focus primarily on readiness, medical readiness is our theme. We do operate, though, as you know, a comprehensive system of health care for our beneficiary population. Many of them are also veterans, by the way.

We hear a lot from CHAMPUS-eligible beneficiaries and others as well. I assure you, Dr. Joseph and his staff are well aware of the things that you hear. Of course, one of our biggest problems in standing up TRICARE is our difficulty to deal with the older than 65 Medicare-eligible population who are otherwise potential beneficiaries to TRICARE. We would like to, of course, enroll everyone in TRICARE for life, essentially, so I would also ask that you address your attention to Medicare issues. That's a really big one for us and does overlap with other concerns of people that you worry about. So again, I appreciate very much the opportunity to come and talk with you today about these joint ventures. We are really enthusiastic about TRICARE and about the opportunities that that will offer the Department of Defense and the Department of Veterans Affairs as we expand our horizons in providing quality heath care.

Mr. Hutchinson. Mr. Clement, did you have any questions for the Panel?

Chet, anybody else on the Committee? I thank you for your testimony and we'll dismiss you.

Dr. Kizer. Thank you.

Mr. Hutchinson. Panel 3, if they would please come to the table. It consists of Mr. Al Poteet, Director of the Anchorage, AK VA Outpatient Clinic and Regional Office; Mr. James A Christian, the Director of the Asheville VAMC; Mr. Alan Harper, the Director of the Dallas VA Medical Center; and Mr. Michael Harwell, the Director of the Central Texas Medical Centers, headquartered at Temple, TX. We welcome you. Thank you for being here today. Mr. Poteet, we will recognize you, if you would like to begin.

STATEMENTS OF AL POTEET, DIRECTOR, VA MEDICAL AND REGIONAL OFFICE CENTER, ANCHORAGE, AK; ALAN G. HARPER, DIRECTOR, VAMC DALLAS, TX; JAMES A. CHRISTIAN, FACHE, DIRECTOR, VAMC ASHEVILLE, NC; AND R. MICHAEL HARWELL, DIRECTOR, CENTRAL TEXAS MEDICAL CENTERS, TEMPLE, TX

STATEMENT OF AL POTEET

Mr. Poteet. Thank you, Mr. Chairman. I'd like to summarize my statement very quickly with the understanding that the full text will be included in the record.

Mr. Hutchinson. Without objection.

Mr. Poteet. I have and will continue to be a big supporter of the concept of the VA/DOD sharing and joint venturing. Specifically, in Alaska, we will continue as federal partners to aggressively put together these win-win relationships between VA and DOD. It's imperative that we do this because of the extremely high cost of providing quality health care which often exceeds 200 percent the costs in the lower 48. Sharing agreements, by the way, havebeen a way of life in Alaska. Our first sharing agreement to provide Air Force health care to veterans precedes Alaska becoming a State.

VA Medical Center in Anchorage is the only VA health care provider in the State and currently we have sharing agreements with Bassett Army Hospital in Fairbanks, Third Medical Group in Elmendorf and we're also signatories to the Alaska Federal Health Care Partnership which was signed by the Indian Health Service, Coast Guard, Army Medical activity in Alaska and the Air Force.

This partnership is a blueprint for the joint cooperative and sharing throughout the State and has already saved substantial amounts of money. In fiscal year 1995 the VA spent $1 million with the Third Medical Group. The same medical care in the private sector would have exceed $1.8 million. Sharing of this excess capacity will continue to be a successful part of our future in Alaska.

Just as a way of an example, in Fairbanks, when we have an orthoscopic surgery performed on a knee, it can cost up to $8,500 in the private sector. When we pay for the veteran to come down Elmendorf, have the surgery, and return at the taxpayers' expense, VA pays about $900, and thereby we get to take care of nine additional veterans. These are the kinds of relationships we want to continue building on because they're extremely cost effective and we provide quality care.

As far as joint ventures are concerned, the VA and the Air Force in Alaska clearly have different missions and cultures. Basically, the Air Force is involved in readiness and we, of course, are there to provide health care through 365 days a year to our entitled veterans. Obviously, these differences can have a serious impact on joint venturing.

The Third Medical Group in Elmendorf is not a full service, tertiary care medical center, nor will it be upon the completion of the Air Force replacement hospital in late 1998. I think this is a factor that may diminishour potential for success. We understand, up front, that the Air Force mission of readiness is to be prepared and take care of shooters in a time of war. This by its very nature does not presume an on-going relationship between VA and the Air Force at Elmendorf during a movement from a peacetime to wartime scenario. The Air Force as the host at Elmendorf also poses a bit of a dilemma for the VA. In my opinion, the host facility must provide as its primary on-going mission, health care geared to the highest acuity of patients and 365 days a year during wartime or peacetime. Since the Third Medical Group will be our host, establishing a true joint venture, one that is workable and realistic, will be difficult. This is especially true in the arena of uncertain budgets when neither the VA nor the Air Force may have the resources to plan on in the future.

Having said that, I'd like to also note that we in the VA and my counterparts in the Air Force have a very close working relationship. We do propose to work very diligently and as much as practicable to have a joint venture that will take care of the needs of the Air Force and the VA in Alaska.

That concludes my comments.

[The prepared statement of Mr. Poteet appears on p. 85.]

STATEMENT OF JAMES A. CHRISTIAN

Mr. Christian. Thank you, Mr. Chairman. I appreciate the opportunity to appear before you and the other members of the subcommittee and discuss the issues of VA and DOD sharing. I currently serve as Director of a 275-bed VA Medical Center with 120-bed nursing home. Last year, we treated about 6,000 patients, inpatients; and about 90,000 outpatients. Our hospital is affiliated with Duke University and we provide all levels of care, including heart surgery. Our veterans come to us from western North Carolina, Tennessee, Virginia and upstate South Carolina and our service area includes over 100,000 veterans. It's particularly important for you to know that a large number of military retirees are located in this region and yet there is no direct military health care facility nearby.

Many of these military retirees had expressed frustration in their ability to obtain health care at our VA Medical Center in Asheville. Many of them are non-service connected and are above the means test eligibility. In 1992, I appeared before this committee expressing our desire to serve these veterans in a sharing agreement with the Department of Defense. In the fall of 1992, you authorized the VA to establish some pilots to allow CHAMPUS eligibles to be served by VA medical centers on a space available basis. Our hospital was selected for such a pilot and it began in March of 1994.

We have now one year's experience with that pilot and I would like to tell you about our experiences. First, and most important, no veteran has been restricted from access to care because of this pilot. We set up a primary care clinic for CHAMPUS patients and currently have 780 beneficiaries enrolled in this clinic. The staffing is supported from revenue received from DOD, other insurance sources and patient payments. Where we have specialty clinics that are filled, we refer the CHAMPUS patients to our local private sector providers, however, the primary care clinic provides the full range of services to CHAMPUS beneficiaries including diagnosis evaluations, screening tests such as Pap smears, care for short-term illnesses, as well as maintenance for the therapy for chronic diseases. The clinic is staffed by a physician, a physician's assistant and a registered nurse who sees patients 2 full days and 3 half days per week. The clinical team is able to treat 18 new patients and 49 established patients each week. We have found there are numerous opportunities to provide services to this population of patients. We currently have over 1,630 CHAMPUS beneficiaries who are registered in our CHAMPUS program, with an average number of 66 new registrants each month. Many of these beneficiaries continue to receive their care from private sector providers, but choose to have their prescriptions filled and obtain diagnostic studies such as x-ray and laboratory tests at the VA medical center.

inpatient treatment is also available to CHAMPUS beneficiaries. Since the program's implementation we have admitted 55 patients for a variety of problems including cancer care, acute pulmonary disease and gynecological disorders.

Under this pilot we have agreed to accept a discounted CHAMPUS reimbursement rate which affords cost savings to DOD. CHAMPUS beneficiaries also benefit by the agreement because their cost shares are based on a percentage, lower percentage at the discounted rate. We have received in excess of $482,000 in revenue from insurance payments and beneficiary cost shares and co-payments. Although we experienced administrative and clinical growing pains, which are inherent in any new endeavor, we have reached a point in this program where the efficiency of our operations has increased and we are realizing a return on our investment in the form of revenues in the excess of our costs. The ways in which this revenue can be used to benefit our veteran population is currently being evaluated.

Because of this pilot, Asheville has been invited to meet bi-monthly with Region 2 DOD Hospital Commanders. At that network level, we have developed a memorandum of understanding that promotes sharing within our hospitals and sets forth guidance for expanded relationships. We see a real opportunity to continue to work together to better serve both of our beneficiaries. For example, we have a proposed clinic to be established in Charlotte where there are no VA facilities. DOD and VA have no facilities in Charlotte, and they have no managed care contract at this time. Why not jointly establish a solicitation to local providers to provide care for VA and DOD beneficiaries in that area?

The VA's primary mission is health care. We recognize DOD's primary mission is providing for the defense of the country, not health care. Health care for retirees and dependents is but a very small part of DOD's operational activities. Although we both have the same objective to provide care to those for whom we are responsible, we seem to be working at cross purposes in this endeavor.

In consideration of this, we would like to note some of the major barriers to expand and share between VA and DOD facilities. First, FTE restrictions limit our expansion of internal VA resources, even though funds come from DOD. The various uniformed services control DOD CHAMPUS funds, but there is no uniformity for VA to be reimbursed by a DOD medical facility, for instance, Army, Navy, Air Force. They all kind of have their different controls and rules. Many barriers to VA sharing at the field level are caused by the apparent problems of the DOD services and health affairs and transferring CHAMPUS dollars to the VA. DOD insists billing for services must go through fiscal intermediaries, much like our Asheville pilot. DOD health affairs is reluctant to move to large scale implementation of pilots similar to our Asheville model. If the region lead agents could control the CHAMPUS funds for all of the services in the entire region, sharing would be greatly facilitated.

Finally, there appears to be at the DOD level a reluctance to expand sharing programs. This may be due to the institution of the contractor-oriented TRICARE program, but the 172 VA hospitals in their strategic locations throughout the country should not be discounted. Most commanders and VA Medical Center Directors are ready to share sites and facilities, but the programs will never happen effectively, unless there is an efficient way to transfer resources, particularly in the CHAMPUS area.

I appreciate the opportunity to provide remarks and we'd be happy to answer your questions, Mr. Chairman.

[The prepared statement of Mr. Christian appears on p. 94.]

Mr. Hutchinson. Thank you, Mr. Christian. Mr. Harper.

STATEMENT OF ALAN G. HARPER

Mr. Harper. Thank you, Mr. Chairman, members of the subcommittee. I am pleased to have the opportunity to discuss the Dallas Department of Veterans Affairs Medical Centers' participation in TRICARE. This joint venture represents a significant opportunity to build upon and complement our existing sharing initiatives with DOD. Currently, we are working in close cooperation with Foundation Health Corporation as the DOD managed care contractor. In this process, we have enjoyed the support of VA Headquarters, DOD Health Affairs and Foundation Health as we prepare for network participation in November 1995.

As an alternative choice, DOD's TRICARE beneficiaries, the Dallas VA Medical Center and our Fort Worth satellite outpatient clinic will provide accessible high quality and cost-effective care, consistent with DOD criteria and community standards. Our participation as a TRICARE provider highlights the natural relationship between VA and DOD beneficiaries which share the common bond of military service. It is also on this basis that we have received the unwavering support of both the Greater Dallas Veterans Council and the Terrant County Veterans Council as we enter into this initiative.

Significant benefits are associated with our participation as a TRICARE provider. Of first and foremost importance is the opportunity for revenue generation. In these times of scarce resources, it is imperative that we have the ability to generate supplemental funding in support of enhancing veterans access to care. The revenue generated from our participation will be reinvested to expand health prevention and screening initiatives, community access to primary care and the overall scope and level of services available to veteran beneficiaries.

These advantages to our VA beneficiaries and improved access in cost effectiveness of care, to DOD provides a win-win situation for our two Federal agencies.

Secondarily, the more diverse array of medical conditions associated with TRICARE beneficiaries will expand the training experiences available through our graduate medical education, nursing and allied health training programs. The increasing incidence of high risk, multi-system disease in our veteran beneficiaries can be offset by a younger and healthier TRICARE population of relatively lower risk. Balancing patient risk is particularly important in managing outcomes in cardiac surgery, organ transplantation and other procedure based programs.

Job satisfaction and the recruitment and retention of highly qualified health care professionals will also be enhanced by the enriched clinical practice supported by this diverse case mix.

While our Medical Center currently treats women veterans and CHAMPVA VA beneficiaries, the anticipated influx of women beneficiaries under TRICARE would generate new economies in support of the development of additional in-house services on the basis of cost effectiveness.

As an overview to our participation as a TRICARE provider, we recognize the divergent health care missions of DOD and VA. To maximize DOD's primary role of defense and VA's basic mission of health care, efforts should be undertaken to capitalize on our respective strengths by classifying VA health care facilities as secondary priority providers, solely for the purposes of TRICARE participation.

Classification as a secondary priority provider is based upon cost incentives to DOD and would permit VA facilities to assume a more front line position and expanded role within the managed care contractors provider network. Under this concept, the contractor would be required to establish referral mechanisms to insure optimal utilization of VA as well as DOD MTF facilities and resources.

The DOD MTF would be contacted as first line providers followed by VA facilities as second line providers to determine capacity before referring TRICARE beneficiaries to civilian providers. Clearly, the issues and details associated with the concept of classifying VA health care facilities as secondary priority providers for the purposes of TRICARE participation require joint discussions between VA and DOD. However, the implications of this concept based on cost effectiveness, quality patient outcomes and advantages to VA and DOD's respective beneficiary population must be appreciated and underscored.

The Dallas VA Medical Center in our Fort Worth Outpatient clinic would welcome the opportunity to participate with the lead agent's office in DOD Region 6 in piloting this concept as a joint demonstration project.

That concludes my statement, Mr. Chairman, and I'd be pleased to answer any questions.

[The prepared statement of Mr. Harper appears on p. 92.]

Mr. Hutchinson. Thank you, Mr. Harper. Mr. Harwell.

STATEMENT OF R. MICHAEL HARWELL

Mr. Harwell. Mr. Chairman and other subcommittee members and guests, I'm pleased to have this opportunity to discuss issues related to joint ventures and VA participation in TRICARE.

I sincerely appreciate your interest in and the support of the Central Texas Medical Centers with facilities at Temple, Waco, Marlin and Austin, TX. As the former Director of the Albuquerque Medical Center, I was in charge of an affiliated tertiary care center with a wide variety of programs and services. Due to our joint venture with the Kirtland Air Force Base Hospital, I was able to enter into numerous sharing agreements that benefitted both veterans and the Department of Defense beneficiaries. In fiscal year 1995 the Albuquerque Medical Center was reimbursed by DOD for approximately 400 inpatient stays and approximately 7,000 specially outpatient care visits. Revenues generated from these patients were used to enhance a number of different programs for the VA such as the Women's Health Program and expand our cardiology program at Albuquerque.

Since my arrival at the Central Texas Medical Center, I met with the Commander or Command Structure of Darnall Army Community Hospital at Fort Hood, TX, to discuss the possible DOD-VA sharing. We recently initiated a sharing agreement that allows for Army soldiers to receive a compensation and pension exams just prior to their discharge from the Army, with VA providers at Darnall Army Hospital.

We are also exploring the use of shared surgical space at the Temple facility whereby Army medical staff would perform surgical procedures for their beneficiaries in that space. The Commander of Darnall Community Hospital and I expect to enter into other areas of sharing in the future.

Earlier this week members of my staff met with Foundation Health Care staff to discuss the Central Texas Medical Center's participation in TRICARE. The Central Texas Medical Center was earlier reviewed by Foundation Health and received 100 percent compliance with the full delegation of credentially and privilege review and I fully expect to be in an active participatory role with TRICARE by the end of the, by the beginning of the calendar year.

I have provided a much more extensive summary of my written testimony and my written testimony and I would be pleased to answer any of your questions at this time.

Thank you.

[The prepared statement of Mr. Harwell appears on p. 97.]

Mr. Hutchinson. Thank you, Mr. Harwell. I thank the Panel. Mr. Harwell, you've been described as the most experienced VA Director within the system on joint ventures and sharing arrangements, so if you had to kind of sum up what is the key to the success and the secret to these kinds of arrangements, what would it be?

Mr. Harwell. I think, I listened to Mr. Baine and what he said and one of the things I agree with very much, it takes a lot of time to make it run smoothly and he indicated that in the Albuquerque experience. I was there from 1990 through 1995, until February of 1995.

I think what you have to do is there has to be a need on both sides and there has to be a provision to meet that need on both sides. In other words, we have to understand their readiness mission. That's what they do. And we have to accommodate that. At Albuquerque, we made use of that by when they had their readiness exercises, we participated to meet our joint commission accreditation standards for our emergency exercises. On the other hand, when they had to leave for certain things, we took over some of their patient care responsibilities, so I think you have to accommodate each other on your strengths, not pick at the weaknesses. You have to recognize those and go into it as a partner. Why else would you need a partnership unless you could meet their needs in some way.

Mr. Hutchinson. Mr. Harper, it's my understanding that DOD has recently awarded a contract which covers Texas, Oklahoma, Arkansas and Louisiana. I'd like to know the status of that contract and who is the awardee and what role, if any, the VA will play under this arrangement, and particularly I'm interested in the impact upon smaller rural VA facilities like my district in Fayetteville, AR.

Mr. Harper. Mr. Chairman, the contract was awarded to Foundation Health Corporation and they are in the process of putting together a health care network., They're supposed to come out in November with this plan that would cover all the CHAMPUS beneficiaries in those States that you identified.

VA has gotten involved in that we want to become a TRICARE providers. We have received excellent cooperation from Foundation Health. They too have visited our facility. They have reviewed our credentialing and privileging program, found it to be 100 percent in compliance with their requirements and granted us delegated credentialling and privileging authority. Foundation Health has a desire, and appropriately so, to develop a prototype contract that would be used by all VA medical centers. We've had excellent cooperation from our headquarters. Our sharing office and our General Counsel Office have reviewed the proposed prototype contract submitted by Foundation Health and have communicated changes on two occasions. The prototype contract is back at Foundation Health now for their final approval. Once that's done, then we will sit down and get into more detailed discussions with Foundation Health about the services that we would provide.

We have agreed in our proposal that we would offer them a 25 percent discount on CHAMPUS maximum allowable charges and we haven't worked out all the details of billing and those kinds of things.

Where do the other VAs fit into this? As Mr. Harwell indicated, he has had discussions with Foundation Health as well and we as the pilot in Dallas are keeping them informed. I would see the Central Texas network facilities coming on-line about the same time as Dallas. It's up to each individual medical center to determine what role that they have with Foundation Health and the TRICARE program. It's something that I think that if they don't do, they're missing the boat. The thing that I alluded to in my opening remarks that I think is very important is the concept of a secondary priority provider. DOD has first shot at these people. I think the VA ought to have the second opportunity and not stand in line with the private sector facilities. Again, I reflect back to the scarce resources, the need for Federal agencies to work together and I just think that that makes a whole lot of sense from a taxpayers' perspective. We do have tremendous support from our veteran community to get involved in this program, so I think they would welcome as active a role as Congress would allow us to have as a TRICARE provider.

Mr. Hutchinson. So if the agreements are reached and your negotiations with--is it Foundation Health Corporation?

Mr. Harper. Foundation Health Corporation.

Mr. Hutchinson. If that is consummated, then each VA medical center would have certain criteria that they would have to meet in order to participate. Is that correct?

Mr. Harper. Yes. They would have to negotiate with Foundation Health and Foundation Health would want to look at their credentialling privileging program to make sure that it meets their standards. They would have to agree to certain costs agreements.

Mr. Hutchinson. So your negotiations with Foundation Health would only make possible the individual hospitals' agreements?

Mr. Harper. We're basically going to be a prototype example that would be used in the future.

Mr. Hutchinson. Okay, so the impact on a CHAMPUS beneficiary that's in the region of a VA Hospital that wants to utilize that, what impact would they, if that hospital decided to participate and if Foundation Health agreed that they could be one of the providers, they then would?

Mr. Harper. The CHAMPUS beneficiary would have the option to come to the VA or elect to go somewhere else for their health care. VA would be an option for them. Right now we're not an option for them.

Mr. Hutchinson. Would the costs be comparable if they went to----

Mr. Harper. Well, the way it's set up now they would have to pay the same co-payments that they pay the private providers for their care. We'd like to see some incentive there for the beneficiary to come to VA and again that's where we get into that secondary priority provider.

Mr. Hutchinson. Good, thank you. Mr. Edwards.

Mr. Edwards. Thank you, Mr. Chairman, first my thanks to all of you for being here and especially my appreciation to all of you for the service you're providing veterans and seeing that they receive quality health care. It's a terribly important responsibility.

On a personal note I want to say hello to Al who used to be in Central Texas and did a great job at the VA Regional Office there and Mike Harwell, one of my present constituents who's done a great job at trying to bring about efficiencies and coordinating efforts between several VA medical centers in Texas and welcome personally to both of you.

Mr. Christian, we had some witnesses earlier that suggested perhaps there's really no need for legislation in this area. There's cultural barriers that needed to be broken down, not legal ones, but I think some of your comments might be well taken. It seemed to me you were suggesting there really is a need for some legislation with possibly FTE restrictions being a problem. You talked about the efficient transfer of CHAMPUS resources. Could you talk a little bit more about two or three or four areas where you think it would be important to have legislation to encourage these cultural changes, what those areas would be?

Mr. Christian. I appreciate both those issues and questions, Mr. Edwards, particularly in the FTE issues. In my local CHAMPUS clinic right now I would like to expand. As I mentioned, we're seeing about 66 new beneficiaries coming to us each month. We haven't even advertised this program. We're afraid to advertise it to all the 36,000 beneficiaries in our area for fear of being swamped. What we can't do is add staff to support that function because we have a FTE employment control level at our hospital, and that's true of all sharing programs, whether you're sharing laundry facilities or whatever. The FTE issue for VA medical centers is an issue.

In some areas where we have affiliated medical schools that are right across the street, we may be able to use some contract providers and so forth and develop that sort of relationship where it doesn't count against our Government-wide FTE head count. However, for total access and flexibility in this program and to mutually save money, we've set up some arbitrary controls on FTE controls Government-wide that really are dysfunctional and competes with the objective to save money.

In our CHAMPUS program alone and pharmacy, we're saving DOD 67 percent on each prescription from the retail price and we filled 19,000 scripts in the first year. That potentially can be a significant savings over the whole VA system as we work in such areas as pharmacy and other areas and yet, I can't add additional pharmacists because of my FTE controls.

The other area that particularly has been frustrating to me is how, and this is more an internal matter with DOD, but the CHAMPUS pot of money is controlled, at least from my perspective maybe I'm not fully educated, but I've been working on this since 1991, that the Army, Navy and Air Force basically have control over how they control those CHAMPUS funds within their uniformed services. And as General Anderson indicated the lead agent for each region now much like our VISN director, but different, the lead agent has been given sort of the coordinating responsibility of all this managed care responsibility, but in my view it's not clear to me that the lead agent has been charged with control of all those CHAMPUS funds. If the lead agent in the region had control of those funds, he could determine where and what VA medical center within that region we can work out the deals. Now, the Army is a little bit more flexible than the Navy, for instance, in terms of transferring CHAMPUS funds to a medical facility and using it for some sharing projects. The Navy, most of their money from what I understand is controlled right out of BuMed. I may be misinformed on some of this. I'm not sure this is legislative issues. It may be, but I think it may be more administrative within the Department of Defense and Health Affairs.

Mr. Edwards. Very good. I appreciate that. Very quickly, Mr. Harper, along the same lines of the question is legislation needed, would it require legislative action to change the co-payment arrangement on the VA and TRICARE or does DOD have that authority?

Mr. Harper. I do think that requires legislation, but I'm no expert in that area. I think it does.

Mr. Edwards. Very good. One last question, Mike, to you. You talked about some of the things you're trying to do with Darnall Hospital at Fort Hood and the VA Center in Temple. Are there some examples of things you'd like to do that you cannot do because of either DOD constraints or cultural problems or legal problems? Any specific examples of areas where you think it would be in the interest of our veterans and military families to work together, but we need to help break down some of those barriers?

Mr. Harwell. I haven't seen any yet, Congressman Edwards. We've only entered into negotiations. We've got two teams. One is from Darnall and one is from ours, right now in surgery sitting down making up a proposed plan. They're to have that to us within another couple of weeks. So they've been very cooperative and of course we have some excess capacity in the surgical arena. So we haven't seen that yet.

As you move through these, we very well might and I'll keep you informed if we do.

Mr. Edwards. Very good. Thank you.

Mr. Hutchinson. Mr. Bishop. Mr. Clement.

Mr. Clement. Thank you, Mr. Chairman. It's great to have the panel here today. I think some of the questions may have been already answered to some degree, but I wanted an idea about how many active service members have you seen and I think from what your testimony has said is that you'd be overrun if you really advertised it to any degree. But what has been your experience so far and I think some of you have already responded to that?

Mr. Christian. At Asheville, we're the only provider at this time, other than the joint venture at Albuquerque. In the CHAMPUS arena, about 47 percent of all of our beneficiaries that we have enrolled in our CHAMPUS are retired military veterans. The rest of it is mainly they're dependent, they're spouses and in a few cases some of their children. You know, we have about 1,620 already enrolled in the program, but many of them are just getting their pharmacy prescriptions filled at the VA. There's only about 780 that are in our CHAMPUS clinic, but again, without evening advertising, we're seeing 66 new applicants for the program every month and why are they coming to us? They feel like they're not having to pay us much for their pharmacy prescriptions under our model and that's a big issue for retired folks and the other issue is their co-payments and deductibles are less than the private sector because we have a discounted rate.

Mr. Clement. That's one thing I was going to ask is about the quality of service, so most people are coming to you for the pharmacy more than anything else?

Mr. Christian. Mr. Clement, those that are coming into the clinic though are extremely well satisfied. We did a survey and on a scale of five points the average was about 4.6 on all questions. The beneficiaries are very pleased with their status, their access, their timely access to our primary care clinic. To get a new clinic appointment, it takes about 6 weeks for them to get into this clinic.

Mr. Clement. Well, you know we've had a number of our veterans complain about delays, but you don't feel like with this shared agreement, joint agreement that that's brought about more delay?

Mr. Christian. Not for veterans because we basically set up this clinic separate and apart with DOD money, running really almost a self-contained program that doesn't deal with delays. Now where I have a delay of a referral to a specialty clinic, say like orthopedics where we have a three month backlog, the CHAMPUS beneficiary is sent to the private sector for that type of referral because the last thing I want to do is have a CHAMPUS beneficiary, nonveteran going ahead of a veteran who feels like he should be there first. That's our primary mission.

Some clinics and particularly in a specialty clinic, these CHAMPUS beneficiaries are being asked to go to the private sector. However, if I had the FTE restrictions lifted, I could hire an extra orthopedic surgeon and reduce my waiting time in orthopedics and at the same time improve care to our veterans and reduce their waiting time.

Mr. Clement. Well I know we've had this authority for a while, but it seems like most places are moving very, very slowly in these shared or joint agreements. Is the region budgetary? Is that the primary reason more places are not moving towards these agreements or is it they don't have the knowledge of the agreements and how to put it together and they're not asking some of you that have already done it?

Mr. Harper. I'd like to comment about that.

Mr. Clement. Yes.

Mr. Harper. I think we've got to be careful in making sure you understand which we're talking about. When we're talking about sharing agreements, there are a number of sharing agreements that we have with DOD doing lab tests and emergency treatments and all those kinds of things. There's an awful lot of those, but there's very limited involvement in the CHAMPUS and some of the joint venture things, more elaborate, I guess, kinds of agreements. But we have an awful lot of sharing agreements with DOD for a lot of little things, but there's a lot of sharing going on between VA and DOD.

Mr. Clement. Okay. I know you've already mentioned one recommendation for us to consider for the future. Any other recommendations the rest of you might have?

Mr. Poteet. There might be something to the notion and the efficacy of having some sort of a jointly staffed entity between DOD and VA where some of these problems as far as joint ventures can be resolved because to do the long range planning, for example, at Elmendorf in a parochial way that the VA and the Air Force has to do, it's very difficult to do that when your methodology of determining resources is at best a wet finger in the air and we don't have any assurances that we're going to have resources to do the kinds of things that we ought to be doing in order to take care of the DOD and the VA beneficiaries, so there might be some efficacy in having that kind of arrangement where the emphasis would be put on what is happening not to micromanagers in the field, hopefully, but to assist us in bringing these issues to the attention of both departments.

Mr. Clement. Mr. Harper, Mr. Harwell.

Mr. Harwell. I'd like to just amplify a little bit and back up what Alan said in his formal testimony. The situation at Albuquerque, you asked for numbers and they did not have a CHAMPUS arrangement, but they had what they called an alternative method of care which means that the MTF at Kirtland had the money and they could use the VA as he said as a preferred provider in lieu of CHAMPUS, but it worked the same way, except the MTF could control the money and we took care of about 11,000 active duty and dependents through that system, mainly in specialty clinics and inpatient stays for subspecialty care. It worked very well. It wasn't classified as a CHAMPUS initiative in those days, but it worked the same way in that they gave the MTF money and they purchased that from the VA or the preferred provider rather than what they call releasing them to CHAMPUS. So I'd like to say that that's a good idea, I think, in my opinion, me personally. I think that's a good idea to look at.

Mr. Clement. Thank you very much.

Mr. Hutchinson. Thank you, Bob. We have a vote so I'm going to excuse this panel and thank you for your participation and we'll stand in recess for about 15 minutes and reconvene for the fourth and final panel of the day. Thank you very much.

(Off the record.)

Mr. Smith of New Jersey (presiding). The subcommittee will come to order. Chairman Hutchinson was called away and will not return, but I'd like to ask the fourth panel if they could present their testimony and this panel consists of Larry Rhea, the Deputy Director of Legislative Affairs for the Non Commissioned Officers Association; John Vitikacs, Assistant Director of National Veterans Affairs and Rehabilitation Commission at the American Legion; Robert Carbonneau, National Director of the AMVETS; and, Bob Manhan, Assistant Director of the National Legislative Service of the Veterans of Foreign Wars. Who would like to go first, Mr. Rhea.

STATEMENTS OF LARRY D. RHEA, DEPUTY DIRECTOR OF LEGISLATIVE AFFAIRS, NON COMMISSIONED OFFICERS ASSOCIATION; JOHN VITIKACS, ASSISTANT DIRECTOR, NATIONAL VETERANS AFFAIRS AND REHABILITATION COMMISSION, THE AMERICAN LEGION; ROBERT P. CARBONNEAU, NATIONAL LEGISLATIVE DIRECTOR, AMVETS; AND, BOB MANHAN, ASSISTANT DIRECTOR, NATIONAL LEGISLATIVE SERVICE, VETERANS OF FOREIGN WARS

STATEMENT OF LARRY D. RHEA

Mr. Rhea. Thank you, Mr. Chairman. The Non Commissioned Officers Association is very appreciative of the invitation to testify this morning and although Mr. Hutchinson is not here at the moment, we certainly would like to commend him for the very hard work that he has done on Veteran Health Care issues during this session of Congress, whether it's eligibility reform or some other difficult issue.

Mr. Hutchinson, the chairman of the subcommittee, has not hesitated to take on some rather tough issues. And he has been more than forthcoming and generous in the time that he has devoted to veteran organizations and I'd be remiss if I didn't start my oral comments by expressing my appreciation to the chairman of the subcommittee. So we thank him for that and we thank you for including our statement in the hearing record.

As we indicated in our prepared statement, Mr. Chairman, the NCOA fully supports and we have and we will continue to fully support the sharing agreements and the joint venturing between DOD and DVA, but for our testimony today, we chose to address only one aspect of this huge issue and that's in relation to the June 29, 1995 memorandum of understanding relating to TRICARE and VA. Although the issue covered by that memorandum of understanding relative to CHAMPUS beneficiaries and treatment at DVA facilities is also very large, we narrowed our testimony down. In my brief comments, I will narrow them down to one aspect and that is the veteran beneficiary who has eligibility under both the DOD and the DVA systems, yet for all intents and purposes, the door to health care in both of those systems are essentially closed for these individuals. I'm referring to the military retired veteran.

We are quite frankly and honestly disappointed with the DOD and DVA memorandum of understanding because of the cost sharing that is going to be imposed upon military retirees for care in a DVA facility. We find it very troubling that the agreement views DVA, which we consider a Federal facility, as a private sector entity. As a matter of general statement, the Non Commissioned Officers Association is opposed to any arrangement that requires co-payments for military retirees for medical care in any Federal facility. So it just kind of escapes logic that DVA was being viewed as a private sector, in our view.

In the real world, Mr. Chairman, space and resources to treat military retirees in the DOD system has just about evaporated. The situation is only going to get worse. In recent years, 42 percent of the hospital beds in DOD has been reduced and by 1987 when the current base closures that are planned and the realignment that is planned under the base closure, one third of the medical facilities of DOD will have been reduced in 2 more years over what we had in 1988.

So on the total picture of DOD and DVA, I think it's a matter of no small significance as to how military retirees are treated when they reach age 65. hey lose virtually all of their health care options at that age. They're denied health care in the military treatment facilities and since they will lose CHAMPUS eligibility at that age, the DVA option will no longer exist for them except for service-connected disabilities that they have.

It's that reality of health care for military retirees that the reason we find the terms of the June 29 MOU rather disturbing because we think where was an opportunity to honor an obligation or more precisely a promise to those people that DOD and DVA consider it entirely appropriate to impose deductibles and co-payments upon its category of longest serving veterans. Mr. Chairman, we could accept that arrangement if that same arrangement, in fact, existed for all other veterans who received VA care for non-service connected conditions, if they were subject to that same standard or some similar arrangement. We know that's not the case and we know that it's not the case in the majority of cases.

So I guess our point this morning here is this. We think there's room here for the subcommittee to serve a purpose. If a promise was made to any veteran for health care, we think that that promise was made to the military retiree, along with the obligation that we have to those with service-connected injuries. We find it troubling that military retirees are being subjected to this arrangement. We think there's room here for the committee to work. One of the problems in this and I think we've seen it demonstrated in the hearing this morning, we have a DOD system under title 10. We have a VA system undertitle 38. We have a Medicare system, which both DOD and DVA are seekingMedicare's funding on, which is operated under another section of law and we've got oversight committees in Congress, a multitude of them. And it seems like we can never get everybody on the same sheet of music. I think there's a grand opportunity here for the subcommittee to bring some of these parties together so that we can discuss this issue and try to fulfill legitimate obligations that were made and to try to fill those in a reasonable fashion. We would ask you to do that, Mr. Chairman. Thank you.

[The prepared statement of Mr. Rhea appears on p. 102.]

Mr. Smith of New Jersey. Thank you, Mr. Rhea.

I will convey your kind comments to Chairman Hutchinson, and we do appreciate that.

Mr. Rhea. Thank you.

STATEMENT OF JOHN VITIKACS

Mr. Vitikacs. Good morning, Mr. Chairman, members of the subcommittee. The American Legion appreciates the opportunity to comment on the Departments of Veterans Affairs and Defense Health Care Sharing Programs. The American Legion has followed the progress of VA/DOD medical resource sharing since 1982 when Congress enacted Public Law 97-174. This law authorized the VA and DOD toenter into medical sharing agreements with facilities of the other agency. Subsequently, more specific legislation encouraged VA/DOD to joint venture hospital construction and a pilot program to treat CHAMPUS eligible beneficiaries at the Asheville, NC VA Medical Center. More recently, in June of this year the Departments of Veterans Affairs and Defense signed a memorandum of understanding that allows VA to become part of the provider network under DOD's TRICARE program.

The American Legion has supported the sharing of services and resources between VA and DOD since the enactment of Public Law 971-74. The major caveatto this position is that the VA and the military medical facilities must maintain their separate identities for the purpose of carrying out their distinct missions. In the view of the American Legion, this has been accomplished.

Today, VA and DOD have negotiated 670 sharing agreements representing 4,170 shared services. The American Legion supports the recent memorandum of understanding that allows VA to become part of a provider network under TRICARE. With this new agreement, VA medical centers can participate in TRICARE under the same cost access and quality of care criteria required of TRICARE's private sector providers. This new effort will be phased in over the next several years.

A June 1995 American Legion field service visit to VA Medical Center Asheville, NC included the first year's experience of the VA/DOD CHAMPUS pilot program was beneficial to both VA and DOD. There were no apparent delays, curtailment of services to VA patients, nor the denial of treatment to eligible veterans.

The Asheville VA Medical Center learned valuable lessons in CHAMPUS billing procedures during the first year's experience which will be invaluable to other similar programs. Recently, VA Medical Centers in Syracuse, NY and Indianapolis, IN have been approved for sharing agreements under CHAMPUS.

Mr. Chairman, both the VA and DOD health care systems are undergoing tremendous change. VA has begun to reorganize under its Veterans integrated service networks and DOD is in the initial stages of its TRICARE program.

Both of these systems are designed to facilitate better service to patients and to maximize resources. As VA becomes more proficient as a CHAMPUS or TRICARE provider, they will be able to use reimbursement from these programs to improve services to veterans.

Due to select base closures and the realignment of health care treatment facilities, this phenomenon will have a significant impact on DOD in providing required levels of care to retired beneficiaries and their dependents. Where feasible, it makes sense to authorize VA to contract with DOD as a TRICARE provider for eligible beneficiaries.

The most problematic of all VA DOD sharing agreements today is the joint venture program. Currently, seven VA/DOD joint venture projects are in various stages of development and operation. The first joint venture program was between the Albuquerque VA Medical Center and the Kirtland Air Force Base Hospital. This joint venture has produced favorable results for both VA and DOD. Patient care has been expanded and enhanced and many economies of scale exist which saves money for both parties.

VA provides a majority of the medical support services required by the Air Force. In turn, the Air Force provides emergency medical services for VA. VA generates approximately $3 million in annual revenue from this joint venture which is reinvested in services to veterans.

A VA/DOD joint venture hospital project at Nellis Air Force Base, Las Vegas, Nevada opened its doors to patients in August 1994. To date, the facility hasnot met the expectations of its veteran clientele. In the opinion of the American Legion, both the VA and DOD have not committed sufficient resources to adequately accomplish the facility's mission. The facility is underutilized and veterans continue to be referred to VA hospitals in Southern California for routine and subspecialty care. That is not the way the hospital was intended to function. All possible efforts must be made to insure that sick veterans do not have to travel over 300 miles for medical services that are well within the capability of the Nellis facility.

Other VA/DOD joint venture projects in various stages of development or operation are in Anchorage, AK; the Fitzsimons Army Medical Center in Denver, Colorado and the David Grant Medical Center at Travis Air Force Base California. All of these sites are addressed in our prepared statement.

Mr. Chairman, a major opportunity to improve medical services for both VA and DOD beneficiaries will be missed by not providing construction funding for the proposed VA/DOD joint venture hospital at Travis Air Force base. Veterans are not being well served in the former Martinez VA Medical Center, Chatsman area for inpatient subspecialty care. The current 53-bed VA presence at the David Grant Medical Center represents only a partial solution to the on-going problems created by the closure of the Martinez VAMC. The American Legion sincerely hopes that Congress will find it within its means to provide funding for the VA/DOD joint venture hospital at the David Grant Medical Center.

Mr. Chairman, in closing, the American Legion believes the joint venture projects authorized by Public Law 99-576 require additional congressional attention to assure that appropriate staff resources, health information systems and management policies are fully coordinated and made consistent at the respective headquarters' levels. Too often VA must interact with three DOD bureaucracies instead of one centralized office. Public Law 99-576 does not define how to implement and operate joint ventures. The law authorized joint ventures in terms of construction funding, but not how the joint ventures should be administered, controlled nor managed. The establishment of a national joint VA/DOD working group is essential and must be empowered to identify and resolve policy problems incurred at current or planned joint venture sites. Specific legislation may be necessary to insure the coordination of VA/DOD policies in this area.

That concludes my statement.

[The prepared statement of Mr. Vitikacs appears on p. 108.]

Mr. Smith of New Jersey. Thank you very much. Mr. Carbonneau.

STATEMENT OF ROBERT P. CARBONNEAU

Mr. Carbonneau. Mr. Chairman, AMVETS would like to thank you and the members of the subcommittee for holding this hearing. We at AMVETS have a vested interest in the potential for improved access to health care for military retirees and their families. The delegates attending AMVETS 51st National Convention in August of this year adopted a resolution fully supporting the continuation and expansion of VA/DOD health care sharing agreements. I have included a copy of this resolution at the end of my statement.

Sharing agreements between VA and DOD are opportunities to provide better services. Depending on the particular location and resources, VA can provide services which are unavailable at military treatment facilities and the reverse is also true. Sharing resources eliminates duplication of services and provides a cost savings for VA, DOD and ultimately the taxpayer. The VA's integrated service network health care organization presents increased opportunities for VA and DOD to work together.

AMVETS is optimistic that cooperation between VISN directors and military medical facility directors will improve patient services at a reasonable cost. Furthermore, sharing will make possible a coordinated continuum of health care during an era of budget balancing.

We are encouraged by the results of the CHAMPUS pilot project conducted at the Asheville VA Medical Center. I'm pleased to inform you that AMVETS received no negative feedback from our membership on that project. AMVETS has had a long-standing concern for our aging veterans' population as well as an appreciation of the importance to address the special needs of women veterans. Of the 1,630 CHAMPUS beneficiaries who have registered, 32 percent are 60 years of age or older and 58 percent are women. With regard to the patient over 60 years old, AMVETS is disturbed by the mandatory transition that must be made when CHAMPUS benefits run out at age 65. This aspect of a continuum ofcare for non-service connected veterans is neither clear nor certain. We have no doubt that the VA philosophy would be to continue care to establish patients after their CHAMPUS eligibility runs out. We are concerned, however, that because of the way Medicare laws are written, the VA Secretary's hands are tied. With this situation in mind, AMVETS would ask this subcommittee to look closely at the feasibility of allowing VA to pursue with the Health Care Financing Administration some means of Medicare reimbursement. This would be in keeping with the provision of a full continuum of care to our aging veterans.

AMVETS does not have a clear understanding of how VA's involvement in TRICARE will affect military retirees and their families enrolled in HMOs or PPO managed care CHAMPUS provider plans. Will they be automatically rolled into the TRICARE scenario? Retired veterans in this situation will need to have facts so they can choose intelligently among the options available to them.

While AMVETS is confident that VA/DOD resource sharing is beneficial to all concerned, we feel strongly that three factors must be considered in the long term. Eligibility reform must take place to enable VA to take on the added responsibility of treating CHAMPUS eligible patients. VA and DOD need to take a closer look at community based resources as a method to reaching out to broader veterans population. DOD also needs to be reminded that it cannot wash its hands of its responsibility to provide quality health care to its beneficiaries.

Mr. Chairman, that concludes my statement.

[The prepared statement of Mr. Carbonneau, with attachment, appears on p. 119.]

Mr. Smith of New Jersey. Thank you very much.

STATEMENT OF BOB MANHAN

Mr. Manhan. Thank you very much, Mr. Chairman. Will you please pass on VFW's warmest regards to Chairman Hutchinson who handled this hearing for the first two and a half hours. Being the last one up at bat it is going to be very difficult to say anything new or exciting. However, we recognize that this health care problem really cuts across three different Federal departments; the Department of Veterans Affairs, the Department of Defense and the Department of Health and Human Services.

Chairman Hutchinson asked for some ideas from the previous panelists for legislation to improve on this issue of health care. From the VFW's point of view we ask this committee to consider a bold piece of new legislation that simply says all veterans are entitled to a full continuum of health care from the Department of Veterans Affairs. At $16 billion a year, that is about what VA health care is being funded for in 1996. There aren't very many of the 27million living veterans who are able to benefit from the present VA health system because they lack access.

Now from a Department of Defense viewpoint, they impact directly on only one category of veteran. He is called--he or she--a military retiree. The Department of Defense is the only corporate entity in the Federal Government that cuts eliminates their employee's health care at age 65. You get nothingfrom the Department of Defense after age 65. Upon retiring, militaryretirees are entitled to CHAMPUS which has deductibles and co-payments. Retirees may, if you're lucky, be treated in a military treatment facilities on a space available basis. However, with the draw down of military installations, to include hospitals, clinics and medical staff the military retiree is seldom able to receive help in a military facility. DOD has recognized these problems and come up with a system called TRICARE. TRICARE comes in three different flavors. The one that was discussed before you took over the gavel was TRICARE Prime. A lot of people are enrolling in it, for example, in Southern California. But DOD is only executing or implementing TRICARE Prime in Region 11 which includes the two States of Oregon and Washington. TRICARE Prime by Dr. Joseph's own prior statements is very expensive. It does superimpose another layer of health care administrators into the system. It must implement the VA/DOD agreements on cost sharing and facility sharing. The Veterans of Foreign Wars is very much interested in having veterans, particularly the military retiree, be eligible for another federal family of health care programs. The long title is Federal Employment Health Benefit Program. I think the acronym is "FEHBP." All Members of Congress participate in FEHBP as do their staff. All civil servants participate in this program even after they retire and beyond age 65. TheFederal Government pays between 72 and 75 percent of the annual fee. FEHBP has some unique features that would really help the military retiree in that it has no age limitation. Military retirees, as I said earlier, at age 65, are dropped from DOD and picked up by HHS. They must go to Medicare. However, FEHBP has the widest possible choice of plans. I think each January, Federal employees have the option of selecting one of 13 or 14 FEHBP that are available. FEHBP are available anywhere in the United States and overseas. There is no pre-existing illness or disability exclusions which is very nice when one reaches the age 65. All military retirees at that age, come offCHAMPUS and enter Medicare which does not provide for an annual open enrollment season. But best of all no supplemental health insurance is needed for a FEHBP. As you recall a CHAMPUS supplemental is needed.

Thank you very much, Mr. Chairman. I'm prepared to answer any questions.

[The prepared statement of Mr. Manhan appears on p. 126.]

Mr. Smith of New Jersey. Thank you very much for your statement. You know, it's interesting that we are talking about this DOD-VA sharing agreement. It was one of the first bills passed by the committee with Mr. Montgomery's leadership during my first term and in trying to implement, at least the spirit of it, I worked very closely with Walson Hospital at Fort Dix and the VA, Department of the Army and we actually, and I'll never forget it, I took a tour of Walson in my first term and I wanted to see what the hospital was providing and it was floor after floor of empty space and I said this is where we need to put an outpatient clinic for the veterans. I worked on it, we got all of the X's in the box and at the last minute the CO pulled the plug on it. We then moved to get a VA outpatient clinic for Brick which is now up and running, but coming full cycle we are again now working to try to get an outpatient clinic at Walson because there is excess capacity there and it's all because of this legislation. It's fulfilling its hope. There are still problems with it and I appreciate the testimony of you gentlemen, and I, like others, will have to look at the record to see what went on previous to your testimony. But to fulfill the hope of trying to maximize scarce assets, particularly now where we see cuts everywhere, including the Department of Defense bill.

I do have a couple of brief questions and then I'll yield to Mr. Bishop to see if he has any questions.

Mr. Rhea, I understand your position on co-payments to the VA under the memorandum of understanding. Could you estimate for the subcommittee how many retirees are affected and do you have a cost estimate on what this would mean to a VA facility in terms of lost revenue?

Mr. Rhea. I cannot give you a precise estimate, Mr. Chairman. I have asked those questions of both DOD and DVA. Of course, we can give you the number of retirees and their beneficiaries that have CHAMPUS eligibility. That would be fairly easy to obtain.

The response I got from VA was though that they didn't track that, but now that we have the June 29 MOU that they would make a more aggressive effort to track that. The response to me when I inquired of them though was that they didn't really care, whether the veteran had 30 seconds or 30 years, they just established the veteran eligibility and go from there.

Relative to the cost, though and I think one thing that might bear consideration in this, VA has made a lot of repeated assertions that they provide comparable quality health care at less cost than the private sector and I think those gentlemen from the regional offices that testified earlier as to their experiences of seeing CHAMPUS beneficiaries, you know, come to their facilities and enroll, that's probably one reason. They're still sharing in the cost in that, but because the care is provided at less cost, there's naturally a co-payment and that sort of thing, even though the overall deductible which still has to be met.

Let me be clear on the point I'm trying to make here this morning, Mr. Chairman. The CHAMPUS world is a big world and includes active duty people, retirees and their beneficiaries. The only point that I'm asking the committee to address this morning is for that individual who has eligibility under both systems, that military retired veteran and it seems like where this opportunity existed to do something for those people, DOD and VA missed it completely in our view.

Mr. Smith of New Jersey. Thank you very much. You were very clear in your testimony and I thank you for that additional amplification.

Mr. Rhea. Thank you.

Mr. Smith of New Jersey. Mr. Vitikacs, can you describe how you would envision the VA/DOD working in the group that you mentioned in your testimony, would you suggest it be housed in the VA or in the DOD?

Mr. Vitikacs. This comment was a recommendation in the Joint Task Force Report to the Nellis Air Force Base facility this summer. It was commented in the report that there currently is a lack of coordination of personnel policies, information systems between the two facilities, between the two entities. Management policies are inconsistent so I'm echoing this recommendation where a high level, an appointed task force, task group made up of VA and DOD and perhaps service organization representation should be delegated to look at problems that are current, anticipated, come up with some practical solutions to these issues and be empowered. Without that empowerment, if these recommendations on various problems are only passed to respective headquarters or to field units, there's a chance they'll fall on deaf ears, so what I'm suggesting is to establish a joint task force with service organization representation, identify problems, work through solutions to these problems and have these recommendations binding on the respective entities.

Mr. Smith of New Jersey. Now is the VFW at the local level working actively to encourage these hearing agreements? Are there certain suggestions that come forward at the state and local level that you try to get the VA and the DOD to act on?

Mr. Manhan. I'm not so sure I understand your question, Mr. Chairman.

Mr. Smith of New Jersey. Has the VFW at any point identified there is something that ought to be done. There's a capacity here that if it was shared, there's a synergy here that could be realized, not unlike my own personal experience with the outpatient clinic. When I was going around, I think Secretary John Marsh at the time, he thought it was an outstanding idea, that Walson be utilized, and it would have been one of the first to utilize this new legislation, then it was new. Was the VFW and your service officers and others identify prospects and bring them forward?

Mr. Manhan. Yes. The answer is yes. We have a team of five VFW persons that work right out of here, Washington, DC. They're called field representatives. We've broken up the United States geographically and the field representatives go to their respective physical areas, look at VA facilities to include the hospitals, the Regional Office, a cemetery, and outpatient clinics. They write up their report. They give a copy to the VA hospital director, the Regional Office VA director, the Member of Congress whose constituency the physical plants are located in and they provide a copy to the Secretary of Veterans Affairs. We do that.

Mr. Smith of New Jersey. That's true, but it seems to me that if everyone, especially at a time when we have less to go on, less money in the pot, in this parallel type situation that just occurred in my own district, we were able to fight and succeed in saving Lakehurst which was on the list for closure, I mean radical realignment, not full closure and what I found very troubling was that Fort Dix, Maguire and Lakehurst have done very little in terms of joint sharing and they have assets that could very easily maximize over here and over there and there's very little of that being done. Now, there is a commitment by each of the commanding officers to meet regularly to try to see what they can borrow, beg or steal from each other in order to make their own operations better. It just seems it's a mindset more than anything else. How can we plug in what you have and what we're doing? That's why I ask how the VFW and other veterans organizations, when you see something that could be used, whether or not you're coming forward with recommendations for sharing.

Mr. Rhea. We certainly through our national service officers do make those recommendations back to the VA. Our director for Veterans Services on the national level, he is continually in contact with VA and I know he takes those things back. So, yes, we do.

Mr. Vitikacs. And if I may, the American Legion, similar to the VFW, we have an active field service that makes visitations around the country to VA facilities, not DOD facilities for the most part, but in our site survey reports, we identify concerns, make various suggestions, recommendations to the facility and to the respective central office and we follow up on that. I would say at this point that our organization is quite satisfied with most of the VA/DOD sharing arrangements and programs that are in place. The major problem area right now is the joint venture program and that's in our view what needs the most attention at this time.

Mr. Smith of New Jersey. Thank you. Mr. Bishop.

Mr. Bishop. Thank you very much. Let me thank all of you for your excellent testimony and for the job that your respective organizations do in bringing these matters to our attention, but I want to especially thank you for highlighting the plight of military retirees. It pains me a great deal for military retirees who certainly, if any veterans have done their due and have fulfilled their contract of service for them in the sunset of their lives, after age 65, to have their benefits evaporate as you so eloquently state and I would certainly ask you to keep us on track in trying to correct that wrong because in my view it is a very definite wrong and it's almost immoral and unconscionable for us to allow that to happen.

They should have their continued benefits and it should be continued at no cost to them and to transfer them to another system when they become Medicare eligible, it seems to me, where they've got to pick up deductibles and co-payments and worry about assuming costs is totally inconsistent with the commitment, although not legal, as I understand it, there certainly is a moral commitment that was made at the time they entered into that career status. I just want to thank you for bringing that to our attention and I want to ask you to continually remind us of that on a constant basis and remind your membership to remind their Members of Congress of this particular problem because I think the heat needs to be turned up and it needs to be addressed.

Mr. Smith of New Jersey. Thank you, Mr. Bishop. I want to thank the representatives of the VSO for your fine testimony and your continued input which makes the job of the subcommittee and the full committee very worthwhile and without it, we could not do our jobs, so I thank you so much.

This hearing is adjourned.