[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]



 
    CIRCUMVENTION OF CONTRACTS IN THE PROVISION OF NON-VA HEALTHCARE

=======================================================================

                                HEARING

                               before the
              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 of the

                     COMMITTEE ON VETERANS' AFFAIRS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                          MONDAY, JUNE 1, 2015

                               __________

                           Serial No. 114-22

                               __________

       Printed for the use of the Committee on Veterans' Affairs
       
       
       
       
       
       
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                     COMMITTEE ON VETERANS' AFFAIRS

                     JEFF MILLER, Florida, Chairman

DOUG LAMBORN, Colorado               CORRINE BROWN, Florida, Ranking 
GUS M. BILIRAKIS, Florida, Vice-         Minority Member
    Chairman                         MARK TAKANO, California
DAVID P. ROE, Tennessee              JULIA BROWNLEY, California
DAN BENISHEK, Michigan               DINA TITUS, Nevada
TIM HUELSKAMP, Kansas                RAUL RUIZ, California
MIKE COFFMAN, Colorado               ANN M. KUSTER, New Hampshire
BRAD R. WENSTRUP, Ohio               BETO O'ROURKE, Texas
JACKIE WALORSKI, Indiana             KATHLEEN RICE, New York
RALPH ABRAHAM, Louisiana             TIMOTHY J. WALZ, Minnesota
LEE ZELDIN, New York                 JERRY McNERNEY, California
RYAN COSTELLO, Pennsylvania
AMATA COLEMAN RADEWAGEN, American 
    Samoa
MIKE BOST, Illinois
                       Jon Towers, Staff Director
                Don Phillips, Democratic Staff Director

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATION

                    MIKE COFFMAN, Colorado, Chairman

DOUG LAMBORN, Colorado               ANN M. KUSTER, New Hampshire, 
DAVID P. ROE, Tennessee                  Ranking Member
DAN BENISHEK, Michigan               BETO O'ROURKE, Texas
TIM HUELSKAMP, Kansas                KATHLEEN RICE, New York
JACKIE WALORSKI, Indiana             TIMOTHY J. WALZ, Minnesota





Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Veterans' Affairs are also 
published in electronic form. The printed hearing record remains the 
official version. Because electronic submissions are used to prepare 
both printed and electronic versions of the hearing record, the process 
of converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.





                            C O N T E N T S

                              ----------                              

                          Monday, June 1, 2015

                                                                   Page

Circumvention of Contracts in the Provision of Non-VA Healthcare.     1

                           OPENING STATEMENTS

Mike Coffman, Chairman...........................................     1
    Prepared Statement...........................................    29
Ann Kuster, Ranking Member.......................................     2

                               WITNESSES

Mr. Edward J. Murray, Acting Assistant Secretary for Management 
  and Interim Chief Financial Office, Office of Management, 
  Department of Veterans Affairs.................................     4
    Prepared Statement...........................................    30
    Accompanied by:

        Mr. Gregory Giddens, Principal Executive Director, Office 
            of Acquisition, Logistics and Construction, 
            Department of Veterans Affairs

        Mr. Norbert Boyle, Chief Procurement & Logistics Officer, 
            Veterans Health Administration, Department of 
            Veterans Affairs

    And

        Ms. Phillipa Anderson, Assistant General Counsel, 
            Government Contracts, Office of General Counsel, 
            Department of Veterans Affairs

Mr. Jan Frye, Deputy Assistant Secretary and Senior Procurement 
  Executive, Office of Acquisition and Logistics, Department of 
  Veterans Affairs...............................................     5
    Prepared Statement...........................................    32

Mr. Randall Williamson, Director, Healthcare, United States 
  Government Accountability Office and GAO Highlights............     7
    Prepared Statement...........................................    34

Mr. Christopher LaBonte, United States Army Veteran..............     9
    Prepared Statement...........................................    61

                             FOR THE RECORD

Questions From: Hon. Walorski and Responses From: VHA............    87





    CIRCUMVENTION OF CONTRACTS IN THE PROVISION OF NON-VA HEALTHCARE

                              ----------                              


                          Monday, June 1, 2015

             U.S. House of Representatives,
                    Committee on Veterans' Affairs,
              Subcommittee on Oversight and Investigations,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 4:02 p.m., in 
Room 334, Cannon House Office Building, Hon. Mike Coffman 
[chairman of the subcommittee] presiding.
    Present:  Representatives Coffman, Lamborn, Benishek, 
Walorski, Kuster, O'Rourke, Rice, and Walz.

               OPENING STATEMENT OF MIKE COFFMAN

    Mr. Coffman. Good afternoon. This hearing will come to 
order.
    I want to welcome everyone to today's hearing, titled 
``Circumvention of Contracts in the Provision of Non-VA 
Healthcare.'' This hearing is the second in a series of 
hearings examining illegal VA procurement practices resulting 
in massive waste of limited taxpayer resources and serious 
jeopardy to the quality of healthcare received by our Nation's 
veterans.
    In our previous hearings on procurement on May 14, 2015, we 
focused on the mismanagement and misuse of purchase cards and 
avoidance of contract requirements, spending limitations, and 
warrant authority. VA's Senior Procurement Executive, Mr. Jan 
Frye, testified that these unauthorized commitments were in the 
billions of dollars. Mr. Frye has indicated similar levels of 
mismanagement and abuse in the procurement of non-VA healthcare 
services by VHA.
    By far, the most prevalent method by which veterans receive 
non-VA care is through the individual authorization, so-called 
``fee-basis process.'' Under Title 38 of the Code of Federal 
Regulations, section 17.52, VA is authorized to obtain non-VA 
medical services when demand is infrequent and the needed 
healthcare is not available in-house or through an existing 
contract. Unfortunately, VA uses this process even when these 
requirements are not at issue.
    Moreover, VA admits that the execution of these 
authorizations does not comply with the contract requirements 
of the Federal Acquisition Regulation, or FAR, and Veterans 
Affairs Acquisition Regulation, VAAR, V-A-A-R.
    Mr. Frye will testify that, by the longstanding and massive 
circumvention of the FAR and VAAR in the fee-basis 
authorization process, VA has illegally obligated billions of 
dollars. He will explain that VA incurs billions in improper 
payments that represent material weaknesses in VA internal 
audit controls. Significantly, in 2009 and 2010, the OIG 
reported on serious problems with the accuracy and efficiency 
of claims paid through the fee-basis program. The OIG reported 
that VA medical centers made hundreds of millions of dollars in 
improper payments, including duplicate payments and incorrect 
amounts.
    Most troubling is that VHA had not established fraud 
prevention or detection controls because it didn't consider the 
program to be at significant risk. OIG estimated that VA could 
be paying as much as $380 million annually for fraudulent 
claims. And, in May 2014, contrary to VA's assertion that 
previous illegal purchases can be institutionally ratified, OIG 
reported that VA further violated the law by institutionally 
ratifying illegal purchases and avoiding important checks and 
balances.
    Today, GAO director of healthcare Randall Williamson will 
testify about the continuing limitations in oversight of 
healthcare service contracts and will focus particularly on the 
inadequate management of clinicians who provide services under 
contract with VA facilities.
    We will also hear from United States Army veteran 
Christopher LaBonte, whose horrific experience with VA 
represents a case study in the risk associated with 
noncompetitive contracts with affiliates and the importance of 
quality control and oversight of contract performance 
standards.
    As I said in the purchase card hearing, violations of 
procurement laws are not mere technicalities. It is not just a 
matter of paying a little more for needed supplies and 
services, as some apologists for VA have asserted. Among other 
things, without competition, businesses may be awarded based 
on--business may be awarded based on cronyism and the directing 
of business to favored vendors, including those who may be 
employees or former VA officials.
    Without contracts, patient safety provisions are not legal 
requirements. VA's mismanagement of the fee-basis program is 
not a justification to dispense with FAR or VAAR requirements. 
If the atom bomb can be built and wars conducted under the 
acquisition regulations, surely VA can deliver patient care 
under them, as well.
    With that, I now yield to Ranking Member Kuster for any 
opening remarks she may have.

    [The prepared statement of Chairman Mike Coffman appears in 
the Appendix]

         OPENING STATEMENT OF RANKING MEMBER ANN KUSTER

    Ms. Kuster. Thank you, Mr. Chairman.
    This afternoon's hearing is a followup to our hearing 2 
weeks ago, and today our focus will be on the legal basis 
underlying VA's purchase of non-VA healthcare and the practice 
of VA in obtaining this care.
    At the end of the day, we can all agree we want to see our 
veterans receive the healthcare they need at precisely the 
moment they need it. But I want to make clear that neither I 
nor my colleagues view this laudable intent as a blanket 
rationale for not following laws, regulations, or proper 
procedure.
    Federal and VA acquisition regulations exist for a reason. 
They exist to ensure that there is proper competition when 
appropriate and that the best practice and price possible is 
obtained when the government purchases goods and services. For 
the VA, these laws protect veterans, save taxpayer dollars, and 
ensure our veterans receive the highest possible quality of 
care.
    VA states in its testimony that it has had a 30-year 
practice of using individual authorizations without applying 
Federal acquisition processes and procedures. At the same time, 
it seems that the VA has taken the position that individual 
authorizations are indeed contracts and should be viewed as 
such, even when acknowledging that VA officials appear to have 
acted in a manner inconsistent with procurement law.
    Now VA is arguing that it needs new statutory authority, 
quote, to resolve what has emerged as serious legal questions 
to its purchased care authorities. This new authority would 
explicitly exempt VA from procurement regulations and 
requirements and allow the VA to continue with the same 
practices that it has been following for the past 30-years.
    I personally am not convinced that this is the best 
solution, given VA's significant lack of oversight in this 
area. In fact, I would argue that the problem is not that legal 
questions have arisen over VA's Purchase Care Program but that 
for too long VA has operated a program where the legal basis 
has been challenged and yet VA has never changed course or 
modified its procedures.
    VA's authority to purchase care without having a contract 
in place is predicated on individual authorizations being used, 
quote, ``when demand is only for infrequent use,'' period, 
close quote. I would be interested in finding out how much of 
the $7 billion expenditure for non-VA care in fiscal year 2014 
has been obligated under this authority as compared to 
situations where contracts are in place.
    As we examine the current legal authority for VA's Purchase 
Care Program and whether this authority must be modified, we 
must first get to the bottom of how this program has been 
operated over the last number of years. It is absolutely 
critical that we understand how VA's legal interpretations 
changed and were communicated and enforced. It is hard to 
expect accountability when there are no clear signs pointing 
out the way.
    The testimony of Mr. Frye and the various legal arguments 
made by the VA in litigation makes it seem unlikely that over 
the last number of years clear policies and procedures were in 
place. GAO's testimony points out, quote, significant 
weaknesses in VA monitoring and oversight of its non-VA medical 
care program.
    Perhaps it is now time to stop applying quick band-aids and 
resolve right now to fix what is wrong. It took years for VA to 
get into this problem, and it will take time to fix it. But the 
first step in addressing the problem is to acknowledge these 
problems and quickly and forthrightly come up with a concrete 
plan to fix them.
    Finally, I would like to thank Mr. LaBonte for appearing 
before us today to relate his story, which is absolutely 
horrendous. Mr. LaBonte reminds us that the bottom line is the 
quality of care for our veterans. This quality can certainly be 
impacted by lack of accountability and process when it comes to 
making sure that all relevant laws, regulations, and policies 
are followed.
    And, with that, Mr. Chair, I yield back the balance of my 
time.

    [The prepared statement of Ranking Member Ann Kuster 
appears in the Appendix]
    Mr. Coffman. Thank you, Ranking Member Kuster.
    I ask that all members waive their opening remarks, as per 
this committee's custom.
     With that, we have the first and only panel at the witness 
table.
    On the panel, we have Mr. Edward Murray, Acting Assistant 
Secretary for Management and Interim Chief Financial Officer of 
VA Office of Management; Mr. Greg Giddens, Principal Executive 
Director of VA's Office of Acquisition, Logistics, and 
Construction; Mr. Norbert Doyle, Chief Procurement and 
Logistics Officer of the Veterans Health Administration; Ms. 
Phillipa Anderson, Assistant General Counsel for Government 
Contracts of VA's Office of General Counsel; Mr. Jan Frye, VA's 
Senior Procurement Executive and Deputy Assistant Secretary for 
the Office of Acquisition and Logistics; Mr. Randall 
Williamson, director of GAO's healthcare team; and Mr. 
Christopher LaBonte, a United States Army veteran.
    I ask the witnesses to please stand and raise your right 
hand.
    [Witnesses sworn.]
    Mr. Coffman. Thank you. Please be seated.
    Mr. Murray, you are now recognized for 5 minutes.

 TESTIMONY OF EDWARD J. MURRAY, ACTING ASSISTANT SECRETARY FOR 
   MANAGEMENT AND INTERIM CHIEF FINANCIAL OFFICER, OFFICE OF 
 MANAGEMENT, DEPARTMENT OF VETERANS AFFAIRS; JAN FRYE, DEPUTY 
ASSISTANT SECRETARY AND SENIOR PROCUREMENT EXECUTIVE, OFFICE OF 
  ACQUISITION AND LOGISTICS, DEPARTMENT OF VETERANS AFFAIRS; 
   RANDALL WILLIAMSON, DIRECTOR, HEALTHCARE, U.S. GOVERNMENT 
 ACCOUNTABILITY OFFICE; AND CHRISTOPHER LABONTE, UNITED STATES 
                          ARMY VETERAN

                 TESTIMONY OF EDWARD J. MURRAY

    Mr. Murray. Good afternoon, Chairman Coffman, Ranking 
Member Kuster, and members of the committee. Thank you for the 
opportunity to discuss the Department of Veterans Affairs' care 
to veterans by contracting with community providers.
    Mr. Chairman, the subject of this hearing involves some 
complex territory related to procurement process, legal 
interpretations, and the processing of hundreds of thousands of 
purchased care transactions per year. I know we will be 
discussing these areas in detail and that the committee's 
oversight is important.
    VA will always depend on a mix of in-house and community 
care, with care in the community continuing to grow to ensure 
veterans get the care they need in a timely way as close to 
home as possible. So while the discussion here may be 
technical, we're discussing transactions that represent the 
purchase of healthcare for a veteran who needs it.
    When purchasing care in the community, VA depends on both 
Federal acquisition-based contracts and non-FAR-compliant 
agreements, also referred to as individual authorizations. 
These agreements are used in many situations because a provider 
may have a relatively small number of veterans referred by VA 
as a part of their total patient mix. For those providers, it 
may not make business sense for them to enter into a FAR-based 
contract to provide care. This is especially true in rural 
areas.
    Although these agreements are not FAR-compliant, VA 
utilizes internal controls to ensure that care is obtained from 
a qualified provider and the services billed are consistent 
with VA regulation before a claim is paid. These practices 
safeguard veterans and protect taxpayer dollars.
    The VA's use of community care has risen dramatically. In 
fiscal year 2006, it was roughly $2.7 billion. For fiscal year 
2015, we estimate $10.4 billion.
    Over those years, the different authorities for purchased 
care have not been applied consistently and have been marked by 
conflicting interpretations. With the determination by the 
Department of Justice that individual authorizations are 
contracts and therefore must be FAR-compliant, VA began 
reviewing its internal processes, working towards development 
of a plan to improve integration, transparency, and oversight 
of all purchased care.
    We have recognized these problems and proposed a solution. 
Last year, in informal discussions with committee staff, VA 
noted issues that would need to be addressed by statute. In 
February's budget submission, we noted the Department would be 
putting forward a legislative proposal.
    On May 1, we provided a formal proposal for comprehensive 
reform, including very specific requirements for non-FAR-based 
agreements. The legislation would authorize the Secretary to 
enter into veteran care agreements when FAR-based contracts are 
not practical, with payment rates tied to Medicare rates--
similar to community care purchased throughout the Veterans 
Choice Program.
    The legislation recognizes that FAR-based contracts should 
be used when they can but also allows the responsible use of 
non-FAR-based agreements. Every 2 years, VA would review all of 
its non-FAR-based agreements of a certain size and evaluate 
whether changing to FAR-based contracts is more appropriate.
    I believe you will find the legislation provides strong 
protections for veterans and taxpayers.
    Mr. Chairman, we look forward to answering the committee's 
questions.
    [The prepared statement of Edward J. Murray appears in the 
Appendix]
    Mr. Coffman. Thank you, Mr. Murray.
    Mr. Frye, you are now recognized for 5 minutes.

                     TESTIMONY OF JAN FRYE

    Mr. Frye. Chairman Coffman, Ranking Member Kuster, and 
members of the subcommittee, thank you for inviting me to 
testify today.
    You just heard Mr. Murray provide the Department's position 
on the illegal purchases of billions of dollars in non-VA care 
over multiple years. If you're not now confused, I am 
surprised. I would be completely confused if I were not 
familiar with the facts.
    We obviously do not intend to admit our collective failures 
in the leadership and stewardship of public funds. Mr. Murray 
stated there was and is confusion, inconsistent application, 
and conflicting interpretations. As VA's senior leaders, we 
have had many years to correct these deficiencies.
    Mr. Murray also stated there were conflicting 
interpretations of the law. Here are some facts that may help 
you decide if conflicting interpretations exist.
    In October 2012, a very senior VHA official informed me 
trouble was looming, as they had been violating the law on a 
wholesale basis with regards to the purchase of non-VA care. I 
asked him for details about legal documents he hinted of. He 
declined to reveal anything.
    On October 22, 2012, I began a personal inquiry into the 
matter. I sent this same VHA senior official and his 
subordinate a written statement addressing his plight, hoping I 
would receive additional information from him. He declined to 
respond.
    On December 3, 2012, I sent a note to a senior executive 
from the Office of General Counsel requesting a legal opinion 
as to whether individual authorizations for non-VA care were 
considered FAR-based contracts. I received no response. 
Receiving no response, I followed up again on December 31 and 
for a third time on January 15, 2013.
    On February 28, 2013, nearly 3 months after I requested the 
initial opinion, the Office of General Counsel provided me a 
legal opinion dated September 10, 2009. This opinion 
categorically declares procurements of non-VA fee-basis care to 
be FAR-based. There is absolutely no confusion in this legal 
opinion in spite of what you've just heard to the contrary. 
Neither my predecessors nor myself have ever granted authority 
for VHA to acquire non-VA healthcare except by FAR-based 
methods.
    You may wonder why, as VA's Senior Procurement Executive, I 
had never previously seen this legal opinion and why there was 
such obvious reluctance to provide it to me. That is an enigma.
    Mr. Murray and myself testified under oath to this 
subcommittee in 2010, stating fee-basis care was not FAR-based. 
If this legal opinion existed in 2009, why was it kept from us 
in preparation for the hearing?
    Given the apparent recalcitrance to engage by VHA and 
counsel, I submitted a hotline complaint to the Office of 
Inspector General in March 2013. The OIG initially refused my 
submission, questioning my motive for submitting the complaint. 
I stubbornly persevered, and they subsequently accepted it. I 
am unaware if OIG ever investigated.
    In April 2013, I requested senior leadership assistance 
from VHA and the Office of General Counsel in conducting 
ratification actions for these massive violations of Federal 
law. I received no offer of assistance from either office.
    In May 2013, Secretary Shinseki was briefed on non-VA care 
authority options. He was made aware of our illegal actions. I 
was not invited to the meeting.
    In June 2013, I wrote a letter to Representative Issa, then 
serving as chairman of the House Oversight and Government 
Reform Committee, outlining my concerns in these illegal 
matters and others. My letter was never--my letter never made 
it to him. Two senior officials, who were apparent friends, one 
from the House Oversight Committee and one from VHA, conspired 
to keep Chairman Issa and the American public from learning of 
these matters and other serious VA violations of Federal laws.
    In April 2014, the VA Senior Assessment Team voted to close 
ongoing discussions of the illegal purchases of non-VA medical 
care with mine as the lone opposing vote.
    In that same meeting, the VA Office of Management sponsored 
a motion, which passed, to raise the reporting level for VA 
material weaknesses from approximately $400 million to $1 
billion. I believe this was an effort to avoid reporting 
emerging illegal matters to the American public through the 
annual statement of assurance process.
    From July to November 2014, we collaboratively developed a 
legally sufficient method to acquire non-VA healthcare. VHA's 
senior leadership rejected the method in November 2014. The 
illegal activity continues unabated.
    This past Friday, Deputy Secretary Gibson elected to make 
my disclosure of these and other illegal acts a personal issue 
with me. His demeanor and actions in both an open and one-on-
one meeting were clearly meant to intimidate me and to cast a 
chill over me and others who might be tempted to report 
violations in the future.
    I will allow you and the court of public opinion to decide 
for yourselves if what I briefly described constitutes 
corruption, malfeasance, or dereliction. No investigation has 
been conducted. No ratifications of illegal procurements have 
been executed. Improper payments continue. Veterans receive 
healthcare without protection of mandatory terms and 
conditions. And no one is liable.
    I believe these are two relevant questions: How can we hold 
subordinate VA employees accountable if we, as senior leaders, 
selectively pick and choose the laws we want to observe for 
sake of convenience? When will the VA senior leaders be held 
accountable?
    There were more than a dozen of VA's most senior leaders in 
the July 11, 2014, meeting. The issue of illegality was 
positively affirmed. Not a single leader, save one, 
subsequently acted in any way to protect the government's 
interests or resources.
    We've lost our way. Senior leader is required to obey and 
enforce Federal laws. Our actions and inactions do not fit 
anything I have previously experienced in over 40 years as a 
military officer and civilian public servant.
    Mr. Chairman, this concludes my statement. I am prepared to 
answer all questions the subcommittee may have for me.

    [The prepared statement of Jan Frye appears in the 
Appendix]

    Mr. Coffman. Thank you, Mr. Frye.
    Mr. Williamson, you are now recognized for 5 minutes.

                TESTIMONY OF RANDALL WILLIAMSON

    Mr. Williamson. Thank you, Chairman Coffman, Ranking Member 
Kuster, and members of the subcommittee. I am pleased to be 
here today to discuss our work on VA's programs for delivering 
care through non-VA providers.
    Non-VA providers treat Americans in community hospitals or 
doctors' offices using either a fee-for-service arrangement or 
a prearranged provider network. Non-VA providers also render 
care in VA facilities under a contracting arrangement or 
affiliation agreements with university medical schools.
    In fiscal year 2013, VA spent almost $5 billion for non-VA 
provider medical care for more than 1 million veterans. As more 
veterans seek care outside the VA system, it is important to 
ensure that non-VA care is of the highest quality and it is 
reliable, accessible, and efficient.
    Three recent GAO reports identified numerous weaknesses in 
VA's management of its non-VA medical care program, and today I 
will focus on issues VA needs to resolve in this area.
    In May 2013, GAO reported that VA does not collect data on 
wait time for veterans referred to non-VA providers. Therefore, 
VA cannot assure that veterans are receiving access to medical 
care that is comparable to veterans receiving care at VAMCs.
    Also, VAMCs do not have automated systems capable of 
collecting data for all services and charges tied to a specific 
episode of care during a veteran's office visit or in-patient 
stay. As a result, VA does not know how much it is paying for 
episodes of care from non-VA providers and cannot ensure that 
non-VA providers are appropriately billing VA for veterans' 
care.
    In October 2013, we reported on weaknesses in VA's process 
for contracting with non-VA providers to provide care at VA 
facilities in specialties that are difficult to recruit, that 
supplement VA clinicians in high-volume areas, or fill critical 
staffing vacancies.
    Specifically, we found that contracting officer 
representatives at VAMCs who monitor contract performance on a 
variety of contracts for goods and services, including clinical 
contracts, had heavy workloads and lacked training on how to 
gauge in post-award monitoring of clinical contractors, which 
compromised diligent oversight of non-VA providers. Robust VA 
oversight is essential to ensure that non-VA providers deliver 
high-quality care and fulfill the responsibilities of their 
contracts.
    Finally, in March 2014, we reported serious weaknesses in 
the way VA was administering and overseeing its program for 
reimbursing non-VA providers for emergency services for non-
service-connected veterans.
    In processing and reimbursing claims for non-VA providers, 
we found patterns of VA noncompliance with its own processing 
requirements, attributed largely to poor oversight at both the 
local and national levels. Therefore, some veterans were likely 
billed for care that VA should have paid for, and many were not 
informed that VA had rejected their claims for reimbursement 
for care from non-VA providers. As a result, many may have been 
denied their appeal rights.
    While VA has made progress in addressing recommendations we 
made on these three reports, only about one-third of them have 
been fully implemented.
    Moving forward, as new components are added to VA's non-VA 
medical care program, such as patient-centered community care, 
referred to as PC3, and provisions of the Choice Act, it is 
anticipated the number of veterans seeking medical care through 
non-VA providers will continue to grow. It is vital that VA 
establish robust oversight and accountability in its non-VA 
medical care program such that relevant VA staff at every level 
understand the importance of and are held accountable for 
ensuring that veterans receive high-quality, accessible, and 
cost-effective care from non-VA providers.
    This concludes my opening remarks.

    [The prepared statement of Randall Williamson appears in 
the Appendix]

    Mr. Coffman. Thank you, Mr. Williamson.
    Mr. LaBonte, first of all, thank you so much for your 
service to the United States Army. And you are now recognized 
for 5 minutes.

                TESTIMONY OF CHRISTOPHER LABONTE

    Mr. LaBonte. Thank you for giving me the opportunity to 
speak to this committee today.
    I, Christopher Kevin LaBonte, had upper and lower 
orthognathic jaw surgery on August 16, 2013, at the Atlanta VA 
Medical Center. In my specific case, there have been numerous 
unethical and negligent issues I've had to face. I've provided 
a written statement which explains in detail these events and 
issues.
    I was coerced into a highly invasive surgery, which was 
performed by a student with no qualifications or educational 
background to even be present in the room, let alone the Emory 
OMFS Residency program. I have submitted evidence to prove this 
statement in the index of evidence in my written statement.
    The Atlanta VA Medical Center has also been negligent in my 
healthcare. They have been complicit in allowing unqualified 
personnel to gain entry into the VA Medical Center and also 
provided some of the worst healthcare I've ever experienced.
    I have also submitted an index of medical evidence along 
with my written statement with imaging proving the willful 
negligence from not only the VA medical doctors but the 
administration and their corruption.
    On the day of my surgery, the Atlanta VA Medical Center 
changed the consent-for-surgery paperwork to allow Ibrahim 
Mohamed Haron, a student from Kuwait, to be the primary surgeon 
performing my surgery. I have no recollection of signing this 
document, as medication was already administered for anxiety 
presurgery by the doctors.
    In surgery, not only were bone shards left in my mouth, 
which caused further infection and bone loss months down the 
line, Ibrahim Mohamed Haron cut my inferior alveolar nerve. As 
a result of this surgery, I now have a medical condition called 
trigeminal neuralgia from damage to multiple branches of my 
trigeminal cranial nerve. Trigeminal neuralgia, also known as 
suicide disease, is described as one of the most painful 
medical conditions known to man. The VA surgical report admits 
to damaging a portion of this nerve, cutting it during the 
surgery on August 16, 2013, by Ibrahim Mohamed Haron.
    According to Ibrahim Mohamed Haron's social media pages, he 
has devout Islamic views. I am an Army combat veteran that 
deployed to both Kuwait and Iraq. I was deployed to Kuwait at 
the same time that Ibrahim Mohamed Haron was attending the 
University of Kuwait.
    It is no secret that many people from this region and 
religion want to harm U.S. soldiers. My question to the VA is, 
why was Ibrahim Mohamed Haron allowed to operate on combat 
vets, whom he very likely would have had difficulty treating 
objectively or even had ill intentions towards?
    The Veterans' Affairs medical centers should be sensitive 
to the need for veterans to feel comfortable and safe with 
their doctors. The VA medical centers, in fact, should be even 
more sensitive to this issue than any other facility in the 
country. As a combat veteran, I should have been given the 
choice to have Ibrahim Mohamed Haron involved with my care on 
any level, especially performing a highly dangerous surgical 
procedure that required me to be unconscious for an extended 
period of time.
    I wake up every day in chronic pain due to the failed 
system and procedure. If you can imagine the worst tooth pain 
you have ever felt, that is how all the teeth on the right side 
of my mandible feel constantly. I have to take muscle relaxers 
three times a day for the facial pain--for the facial pain and 
muscle spasms. I take narcotic pain medications four times a 
day for the chronic pain, musculoskeletal pain, and nerve pain. 
I have to take anxiety medication to keep my facial muscles 
from tensing and compressing my nerves, which not only cause 
sharp facial pain but also cause severe migraines. These 
migraines feel like someone is kicking me in the skull.
    I struggle with facial deformity due to the extreme cant of 
my lower jaw. My diet is limited to soft foods that do not 
require much chewing. According to my current team of non-VA 
doctors, I will not only need continual medical care for my 
mouth and jaw, but I will have to wear oral prosthetics in my 
mouth the rest of my life due to the surgery and also have 
chronic pain and require pain management for the rest of my 
life.
    I am extremely disappointed in the VA healthcare system. 
The VA's priorities seem to be in the following order: one, 
profit; two, hospital reputation; three, protecting high-level 
bureaucrats; four, protecting negligent doctors; five, cutting 
costs at the expense of veteran healthcare; and, finally, six, 
veteran healthcare.
    I refer to it as ``death care,'' as health is barely taken 
into account. From my experience, the Atlanta VA Medical 
Center's motto should read, ``Delay, deny, and hope you die.''

    [The prepared statement of Christopher LaBonte appears in 
the Appendix]

    Mr. Coffman. Thank you, Mr. LaBonte.
    The written statements of those who have just provided oral 
testimony will be entered into the hearing record. We will now 
proceed to questioning.
    Mr. LaBonte, how long have you been waiting for VA and/or 
Emory to address the situation created by the surgery?
    Mr. LaBonte. Since August 16 of 2013.
    Mr. Coffman. Okay. So nearly 2 years.
    Mr. LaBonte. Nearly 2 years. It will be 2 years this 
August.
    Mr. Coffman. Okay.
    Mr. Murray, in the September 2011 FHA Fee Care Program 
white paper, it was recommended VA conduct a cost-benefit 
analysis of contracting out the processing of claims, as with 
other payer models like TRICARE, Medicare, Medicaid, Blue Cross 
Blue Shield, et cetera, and their applicability for VA.
    What was the result of the cost-benefit analysis?
    Mr. Murray. Thank you for your question.
    I'm not aware of that being conducted, but I believe I'll 
ask my VHA head of contracting activity if he's aware of that 
analysis.
    Mr. Doyle. Sir, I'm not aware of that analysis.
    Mr. Coffman. Mr. Frye, any comment?
    Mr. Frye. I'm not--I'm not aware--I can't give you an 
answer on that.
    Mr. Coffman. Okay.
    Mr. Frye, VA Secretary McDonald was publicly critical of 
you after the last hearing conducted by this subcommittee on 
May 14, 2014. The Secretary--is this 2015?
    Voice. Yes, sir.
    Mr. Coffman. I'm sorry. May 14, 2015. The Secretary stated 
that he was aware of the problems and characterized your memo 
as, quote, ``just showing what he,'' meaning Mr. Frye, ``needs 
to improve,'' unquote. He further stated it is your, quote, 
``responsibility to fix it,'' unquote.
    What is your response to Secretary McDonald's statement?
    Mr. Frye. Well, I think all of us make comments sometimes 
and then wish we could retract them. I'm not sure that Mr. 
McDonald had read my 35-page statement to him at that point. 
Since that time, Mr. McDonald--Secretary McDonald came to see 
me last week, and he expressed appreciation for me raising 
these issues.
    In answer to your question specifically, I don't run 
contracting. I'm responsible for overall policy in the VA, and 
I have one of six heads of contracting activity who does report 
to me. But I do not run contracting for VA.
    I think anyone who reads the document that I provided to 
the Secretary will see that I have struggled in trying to right 
the ship. And I certainly was asking for assistance from he and 
the Deputy Secretary, given that I have been unable to, on my 
own, to fix what was wrong.
    So, you know, again, I make comments sometimes that I wish 
I could withdraw, and perhaps he does, as well. But I sincerely 
believe at this point that the Secretary appreciates and 
probably is more angry than I am at seeing this waste, given 
that he is trying to move us forward, and every time we move 
forward one step and this malfeasance is uncovered, we move 
backward 12.
    Mr. Coffman. Sure. I hope you are right that he is upset.
    Mr. Williamson, your testimony states VA didn't collect 
data on wait times from non-VA providers, leaving the 
Department unable to analyze such critical data, and did not 
provide critical oversight and monitoring of related claims or 
even the performance of the services provided.
    GAO made 22 recommendations to address VA's shortfalls, but 
how is the Department--how is the Department addressing them at 
this time?
    Mr. Williamson. On all 22? I could provide that for the 
record, but I will say that they have made progress.
    Mr. Coffman. Okay.
    Mr. Williamson. It's not like they're ignoring us. They are 
meeting with us. They're making progress.
    But to consider a recommendation closed, from our 
perspective, requires some rigorous documentation, and VA 
hasn't provided that documentation as of now on many of those.
    Mr. Coffman. Okay. Thank you, Mr. Williamson.
    Ranking Member Kuster.
    Ms. Kuster. Thank you, Mr. Chairman.
    I have a question at the top just to get to the bottom of 
the issue as to what legal authorities provide the basis for 
the purchase of non-VA care. And so I am asking our 
representatives from the VA to provide the following documents: 
the 2008 guidance from the Chief Acquisition Officer and Office 
of General Counsel that non-VA care was not governed by FAR--I 
think that was the original, 2008; and then the May 2013 white 
paper provided to Secretary Shinseki on non-VA care authority 
options; and then, finally--and I don't have a date for this, 
but I think from the testimony it is 2014--the Department of 
Justice ruling that referenced that VA must consider all fee-
based care actions as being FAR-based.
    So I want to--I am interested in going back, but I also 
want to try to go forward, where we go from here. I think 
whenever we are talking about healthcare, we are talking about 
sort of a triangle of access, quality, and cost. And it seems 
to me part of the problem that we have in terms of public 
policy going forward is the sheer scope of this problem. 
Because part of what the Choice Act entails is to bring in 
private-sector network coordination through TriWest and Health 
Net.
    Essentially, that is what we are talking about here. I 
mean, it is massive in scope to have individual contracts. And 
my district is a rural district in New Hampshire. I know about 
these contracts. I know about these authorizations.
    Could you comment--and we will start with Mr. Murray, but I 
would be interested, Mr. Williamson, with your knowledge of 
reviewing this, if you have--even if it is an opinion at this 
point--do you think we can get out of this morass by simply 
changing the rules of contracting? Or do you think that we 
should try to bring in the authorizations and even the FAR-
based contracts into these private-sector networks?
    And I will just put it--set it up to Mr. Murray, if you 
would.
    Mr. Murray. So the Choice Act does have TriWest and Health 
Net as the two what we call third-party administrators. And, as 
you know, we have not got off to the start--as quick a start 
with those programs as we would like. Rest assured that all 
leadership--the Deputy, the Secretary--are doing our utmost to 
exercise those programs to the maximum ability, extent, to get 
care to those veterans that urgently need it, that have earned 
it, that deserve it.
    The model looks like it--I go to the access meetings every 
morning. Many of the members of this committee have been 
invited to the morning access meetings. We believe it will be a 
very effective model for providing care in the community to our 
veterans.
    Ms. Kuster. Can you envision a time in the future where 
those networks would be sufficiently extensive where you would 
have dealt with the cost issue, whether it is Medicare 
reimbursement rates, whether you would have the quality issue 
addressed via the oversight by these third-party 
administrators? Can you envision a time where we wouldn't need 
to have these one-off individual contracts?
    Mr. Murray. I will defer that question in a moment to 
acquisition folks and the VHA gentleman here, Norb Doyle. But, 
you know, it's about signing up--building the network, having 
those providers in the network, the right type of providers in 
the network in certain geographical areas of the country. We 
see this in the morning through our meetings with the Dep Sec 
and senior leadership in the Health Administration, that it is 
all about ensuring you have the right clinical care, right 
physicians, in the right parts----
    Ms. Kuster. Is there an attempt to get the physicians that 
you are already dealing with through these individual 
authorizations--is there an attempt to get those physicians 
into these networks?
    Mr. Murray. Absolutely. Absolutely. So if the Health 
Administration leadership, if Dr. Tuchschmidt was here, he 
could tell you all about the options they're exercising, 
reaching out to their current provider network and getting them 
signed up or encouraging them to get signed up for Choice 
through TriWest or Health Net. So, you know, it's all hands on 
deck, everybody moving full bore to do that.
    Ms. Kuster. We will have to come back to Mr. Williamson on 
another round. My time is up, but thank you.
    Mr. Coffman. Dr. Benishek, you are recognized for 5 
minutes.
    Mr. Benishek. Thank you, Mr. Coffman.
    Thank you all for being here this afternoon.
    I think, to me, what I have learned from this is that it is 
not as easy to get healthcare in the private sector for the VA 
as one might think. I think the TRICARE model is interesting, 
but, you know, they pay TRICARE the Medicare rate, and then 
TRICARE pays the actual providers less than the Medicare rate. 
In my district, nobody really wants to sign up for any of this 
stuff because it doesn't pay very well. And it has been, you 
know, problematic. Some of the Choice people offer Choice, but 
there's no providers that will do Choice because they are 
actually getting paid less than Medicare rates, because they 
pay TriWest Medicare rates, but TriWest doesn't pay the actual 
people that are providing that care of those rates. And to get 
those numbers, it has been tough for me to figure that out.
    But my concern more is about this--for today, a little bit, 
is about this apparently illegal activity that has been 
happening. And I am just wondering--let me ask Mr. Doyle.
    Are you aware that some of these things were illegal, Mr. 
Doyle? I mean, that is what Mr. Frye seems to--is telling us, 
that a lot of these purchases are illegal. And then you got a 
legal opinion that this is not the way it should be done, from 
a long time ago, which he didn't know that was the case.
    You're sort of in charge of procurement of outside care, 
right?
    Mr. Doyle. Yes, sir. As the Chief Procurement and Logistics 
Officer for VHA, I do do--we do contracts for non-VA care----
    Mr. Benishek. So is your opinion different than that of Mr. 
Frye, that this is not illegal? Is that what is going on?
    Mr. Doyle. No, sir. I'm not a lawyer, so I'm not a judge, 
but I refer to my legal counsel, and I don't believe they would 
say it's illegal what we're doing. (I don't recall using the 
word delinquent).
    Mr. Benishek. So there's a difference between what you 
believe and what Mr. Frye believes.
    Is that right, Mr. Frye? Is there a basic difference here, 
or am I talking about two different things? It is a little bit 
confusing to me.
    Mr. Frye. Yes. I think what counsel will tell you is these 
aren't illegal; they're improper. Now, it's illegal to go 
through a stop sign in my neighborhood, but it's improper to 
spend billions of dollars outside the law in the VA. It makes 
no sense.
    This is the same argument that counsel--the same specious 
argument that counsel used several years ago when there was an 
argument in these chambers about the buying of pharmaceuticals 
without contracts. And, at that time, the Deputy Secretary was 
here at the table, and he in his oral statement was about to 
make the statement that it was improper and not illegal, and 
this body absolutely confirmed that it was illegal.
    If we are going to a court of law, the Supreme Court, I'd 
love to have the argument made that these are improper not 
illegal. But this is the court of public opinion--the court of 
public opinion, not a court of law. These are----
    Mr. Benishek. Let me--isn't fee for service providing--
different than contract? I mean, I am a private physician, and 
I worked at the VA for 20 years. And I was a fee-for-service 
physician, so I didn't have a contract. I agreed to a fee.
    And, frankly, I wanted to do a contract, but it was so 
difficult to get the contract, it would take months or more 
than a year to get the contract negotiated and completed, so 
that they couldn't get it done. So they actually preferred to 
do it fee-for-service because they could get that done right 
away. And, you know, I don't know what exactly the details 
were, but----
    Mr. Frye. I'm sorry to hear that you weren't on contract. 
It sounds like an unauthorized commitment. I'm not familiar 
with the--with the methodology that they used to bring you on, 
but if we're required to have a contract, we're required to 
have a contract.
    Mr. Benishek. All right.
    Well, let me go to a different thing. Mr. LaBonte, let me 
ask you a question about your care. You say that you don't 
think you signed a consent form before you had narcotics or 
some sedative----
    Mr. LaBonte. Oh, I signed a consent form after I was 
administered an anesthetic to calm me down before the surgery. 
I had to sign a digital pad. I wouldn't really call it a 
consent form, considering I never saw any paperwork. I don't 
recall signing it, but apparently I scribbled on a digital pad, 
under the anesthesia, to give the resident, Ibrahim Haron, the 
primary surgeon slot during my surgery instead of Martin B. 
Steed, the surgeon that was supposed to be conducting the 
surgery. To me, that sounds illegal, but I'm not a lawyer.
    Mr. Benishek. Well, it's highly unusual, in my experience, 
that anyone--I mean, nobody--where I come from, nobody's 
allowed to sign a consent after they had any drugs. So I'm 
just--you know, that's usually witnessed by somebody.
    I imagine you have all these documents. Is there--are you 
doing a lawsuit in reference to all this stuff?
    Mr. LaBonte. There's a court claim pending.
    What's also unusual is that Ibrahim Haron is the only--is 
the only resident in the entire OMFS program that has a 
bachelor's degree instead of a doctorate. So I find that 
unusual too. There's lots of things that are unusual about the 
Atlanta VA Medical Center. So----
    Mr. Benishek. Well, I think maybe that needs a little more 
work than we've seen here today, Mr. Chairman.
    I'm out of time. Thank you.
    Mr. Coffman. Thank you, Dr. Benishek.
    Mr. O'Rourke, you are now recognized for 5 minutes.
    Mr. O'Rourke. Thank you. Thank you, Mr. Chairman.
    Ms. Anderson, I will ask you--because Mr. Frye earlier 
summarized what he thought your response would be to the 
question--was this or was this not legal?
    Ms. Anderson. And not to put too fine a point, this--these 
were not illegal actions or illegal activities. Yes, they were 
not FAR-compliant. An illegal contract--and I'm speaking as a 
lawyer--an illegal action or an illegal activity, it's not 
enforceable. These commitments are enforceable.
    In fact, the Federal Acquisition Regulations acknowledge, 
understand that there are times when officials not authorized 
to commit the government, they do commit the government. And 
there is a formal ratification process.
    The courts and the boards have recognized that when the 
government makes a commitment, pays, receives the services, 
that the government can't hide behind the fact that you didn't 
follow the FAR. The government received the benefit. And there 
is a legal theory for recovery on that.
    So I respectfully disagree with Mr. Frye's position that 
these are illegal contracts.
    Mr. O'Rourke. It sounds like--I may or may not be following 
the distinction. It sounds like this is a obligation by which 
the VA is legally bound to fulfill.
    Did someone at the VA do anything illegal in committing the 
VA to this obligation?
    Ms. Anderson. If we're addressing merely the fact that a 
person not committing--not authorized to perform--enter into a 
contract, the answer is there was no illegal activity.
    Mr. O'Rourke. Okay.
    And then, so, for Mr. Murray, then, to follow up, if this 
was not illegal, was this improper?
    Mr. Murray. Thank you for your question.
    ``Proper'' is an interesting question, because if you 
establish the obligation, the provider provided the service, 
the provider billed correctly, and the provider was paid, one 
would argue that it was proper but not FAR-compliant.
    Mr. O'Rourke. Should the obligation have been entered into 
in the first place? Was that proper?
    Mr. Murray. It--so thank you again for your question.
    So was it proper? If it was--so, ``proper.'' I'm struggling 
with the word ``proper.''
    Ms. Anderson. May I----
    Mr. Murray. Yes.
    Ms. Anderson. I'd like to address that. And this is going 
afield on the appropriations--the appropriation area.
    So that just--if funds are available, one, we have the 
authority to contract. Done improperly, but we do have the 
authority to contract for these services. If funds are 
available, then they're proper. The payments are proper, from 
an appropriations and authorities----
    Mr. O'Rourke. So let me ask this followup question, Mr. 
Murray. Have these actions, these obligations been ratified? In 
other words, has this been blessed by the VA?
    I am just trying--so I think we are all concerned about 
what has happened here, and I think we just want to know the 
basic question of whether you are concerned and you think this 
was appropriate or not.
    Mr. Murray. So, as we know, the Office of Inspector General 
recently reviewed unauthorized commitments in the purchase card 
program. For those that were identified by the OIG, we did 100 
percent of review of that entire sample, and we referred those 
to the head of contracting activity for a ratification review 
and ratification if appropriate. So that's where those are.
    Now, those were with respect to purchase card transactions 
above the micro purchase threshold. So if they were identified 
as being--we didn't have the authority under the VA acquisition 
regulations--which said you can go to 10K, right? Mr. Frye will 
tell you about that. If they were above the $10,000 
authorization for fee care and they were non-FAR-based, one 
could logically say that they probably require ratification. 
And if they require ratification, one could make an argument 
that they perhaps were not proper.
    Mr. O'Rourke. Okay. I will allow a colleague to pursue this 
because I--if they choose, because I am out of time.
    And, for the record, I will ask Mr. Williamson what is 
knowable about the cost of purchasing this care without 
contract. Seven billion dollars, do we know it, or is it 
knowable. But I realize I don't have time now, so we will ask 
this question for the record.
    And I yield back to the chair.
    Mr. Coffman. Thank you Mr. O'Rourke.
    Mrs. Walorski, now 5 minutes.
    Mrs. Walorski. Thank you, Mr. Chairman.
    I am aiming this in the direction of Mr. Murray and Mr. 
Doyle, I am not sure which. But there is a business in my 
district that supplies specialized shoes, diabetic shoes, and 
custom inserts to vets through the VA. However, this business 
didn't have a contract.
    In November of 2014, VISN 11 notified them that the custom 
orthotic appliance and related service released a request for 
proposals. The business filled out all the paperwork. They were 
denied for not meeting the minimum technical requirement of 
having a certified, not podiatrist, but pedorthist on staff.
    My question is, who sets the technical requirements for 
these contracts, the VISN or the main VA office?
    And then my second question is, since this business did not 
have a contract, how do you think the VA was paying them for 
the services they provided?
    It doesn't matter----
    Mr. Doyle. I'll take that.
    Mrs. Walorski. Okay.
    Mr. Doyle. One, I'll need to explore more the specifics in 
this case. But the requirements, if it was done by VISN 11, it 
was probably done by the local contracting office that supports 
VISN 11, and they work for me in my organization. They probably 
worked very closely with the prosthetic folks in that VISN or 
at that medical center to develop the requirements. It is not 
set by the central office, I don't believe, in this particular 
case.
    Now, I don't know about the contract situation or not, but 
it is possible that they were being bought under the micro 
purchase threshold of $3,000 by the local prosthetics folks 
with the government purchase card.
    Mrs. Walorski. Well, and I guess, you know, my followup 
question to that is the owner did say they would receive a 
purchase order that would have a credit card number on it and 
an expiration date. They could purchase--they couldn't purchase 
more than one set of shoes, though, or inserts per time.
    And my question is, when you're talking about--this 
particular organization serviced about 200 veterans in my 
district, and now they can no longer do that. There really is 
no competitor. And, you know, when businesses that are highly 
specialized that service veterans get stuck in this cycle in 
the VA between--they don't know--they are not setting the 
rules. They are responding to an organization saying, you know, 
yes, we will join with you in partnership to provide some kind 
of specialized care.
    Mr. Doyle. Yes.
    Mrs. Walorski. And so, you know, it is harmful to the folks 
on the other end of this trying to comply, getting an RFP in 
the mail saying, you know, now you have to sign up for this. 
They had been providing this for a couple years already, and 
then they get thrown out because they didn't have a minimum 
certification. But it was okay and it was fine as long as they 
were being paid through the credit card number and the purchase 
order.
    It just--don't you see an inequity in that, when you are 
trying to keep service providers even available? They have no 
idea what you guys are doing and what is complicit and not 
complicit.
    Mr. Doyle. Right. I understand. I would say this sounds 
like, if they were doing repetitive orders with a government 
purchase card, one could make a logical argument that that is a 
split requirement. If it's a split requirement that goes above 
the micro purchase threshold of $3,000 in this case, there 
should be a FAR-based contract in place.
    Mrs. Walorski. And you can check this out for me if I give 
you the info, the personal info on it----
    Mr. Doyle. Yes, I'm happy to do so.
    Mrs. Walorski. Okay. I appreciate it.
    I yield back, Mr. Chairman. Thanks.
    Mr. Coffman. Thank you, Mrs. Walorski.
    Ms Rice. you are recognized for 5 minutes.
    Ms Rice. Thank you, Mr. Chairman.
    I feel like I missed something here. I'm just trying to 
figure out why--and maybe, Mr. Murray, you can answer this 
question. Why is there such a reluctance to apply FAR 
regulations when you are talking about non-VA care? If you can 
give that answer succinctly, because I have a lot of other 
questions.
    Mr. Murray. I don't sense there's a reluctance at, you 
know, the leadership levels. In fact, all the leadership levels 
I see, you know, PC3, Choice, provider agreements, seem to be 
the preferred approach for providing care in the community. And 
if you want to delve into this, I think that Chief Acquisition 
Officer, the head of contracting activity for the Health 
Administration, might have some sense for why this is true or 
could be true in the field.
    Mr. Giddens. Ma'am, one of the things that we tried to 
address--and we tried to do it with the legislation request 
that came in--was to recognize that there are some vendors that 
may shy away from doing business with the government. We're not 
known as being the most streamlined and the most easiest to 
deal with. Vendors have to get Dun & Bradstreet numbers. They 
have to apply for Federal contract wage statutes. There's a lot 
of additional activity they do to do business with the 
government.
    And what we tried to recognize with the legislation is 
there's an order of precedence. We want to start and deliver 
and provide care in our VA medical centers. Next is with 
contracts; next with agreements. Our last preference would be 
what has been termed the individual authorizations.
    So we want to have that as really kind of the backstop 
that, as we go through this priority, this hierarchy of 
providing care, we see that as the least preferred option but 
one that we don't want to take away from approximately 400,000 
veterans that are being served by some of those small 
providers----
    Ms Rice. But it's become a $7 billion backstop, right?
    Mr. Giddens. I don't know all seven of that--all seven, I 
believe, is for overall fee, and some of that is happening 
through FAR and non-FAR. I don't have the breakout.
    Ms Rice. Well, the problem is that there is no 
comprehensive auditing that has been done.
    I guess, Mr. Williamson, if you could--I mean, what I see a 
pattern of is either GAO or the inspector general saying, 
here's a problem, here is how you fix it, and an intentional or 
negligent failure on the part of the VA to take recommendations 
and actually implement them.
    So can you just tell us what you recommended the VA do and 
where they are still lacking?
    Mr. Williamson. Well, of course, as you know, we put VA on 
our high-risk list very recently, and part of the justification 
for that was that they are not implementing many of the 
recommendations. In fact, there were over 100 recommendations 
we've made that VA has not implemented just in the healthcare 
area alone.
    So there are 22 recommendations from 3 reports on Non-VA 
provider care. I don't want to use all your time up, but let me 
give you a couple examples. One is that we recommended that VA 
keep track of wait times for veterans that went to non-VA 
providers. They have not yet done that. We have talked to them 
about it. They still haven't done that.
    Ms Rice. What is the reason for them not having done it?
    Mr. Williamson. We don't really know.
    Ms Rice. Well, when you ask them, you tell them how to do 
it----
    Mr. Williamson. I think what they're looking at--VA wants 
to close a case from the time the veteran starts the process of 
getting an appointment until the time the claim is paid. They 
want to do that in 90 days. And VA is tracking that, but for 
some reason they're reluctant to track the 30 days.
    Ms Rice. Why?
    Mr. Williamson. Good question. I don't know that they've 
given us a great answer on that.
    Ms Rice. What would be a good answer? Is there a good 
answer?
    Mr. Williamson. They probably don't have the systems to do 
it. It takes a lot of work. It requires having some good data. 
But that's not a good reason, necessarily, for not doing it.
    Ms Rice. Mr. Williamson, so you have laid out a blueprint 
for how the VA can improve, whether it is tracking wait times, 
doing better audits to see where these multi-billion-dollar 
expenditures are going. And I guess maybe there isn't an answer 
to this.
    But it seems to me that you have not been able to get any 
satisfactory answers as to why your recommendations have not 
been implemented. And maybe you are not the right person to 
answer this, but I don't know if anyone at the VA--I haven't 
heard Mr. Murray give any explanation as to why.
    Mr. Williamson. Well, I think part of it always comes back 
to the same issues, no matter what program you're reviewing in 
VA. The data is often insufficient. The automated systems they 
have, in many cases, cannot produce the kinds of things they 
need. And it comes down to a lack of oversight both at the 
local level and at the headquarters level. It happens time and 
time again; the claims-processing problems we found on the 
emergency care for non-service-connected veterans, is a good 
example.
    Ms Rice. The problem is that there will be no overall 
cultural shift at the VA unless there is meaningful oversight, 
whether you are talking about this issue or you are talking 
about how whistleblowers are treated or anything else.
    And that is really part of the problem, isn't it?
    Mr. Williamson. It comes down to accountability, and it's 
not there.
    Ms Rice. Thank you, Mr. Williamson.
    I yield back, Mr. Chair.
    Mr. Coffman. Thank you, Ms. Rice.
    Mr. Lamborn, you are recognized for 5 minutes.
    Mr. Lamborn. Thank you, Mr. Chairman.
    And I appreciate your leadership in pursuing yet another 
scandal, basically. Here it is June 1. It is another month, and 
we have got another scandal. And it seems like the whole year 
has been like this, and I, for one, am getting sick and tired 
of it.
    Mr. Williamson, I would like to ask you for some background 
in this whole issue. Whether we call the contracts illegal or 
just improper or noncompliant, what can go wrong when the VA 
doesn't follow the proper procedures as regards these 
contracts? Mr. Williamson.
    Mr. Williamson. You're talking to me?
    Mr. Lamborn. Yes.
    Mr. Williamson. Oh, okay. I thought you were saying Mr. 
Giddens.
    Mr. Lamborn. But from a GAO perspective.
    Mr. Williamson. You know, I'm not a lawyer or a procurement 
expert either. And in listening to what I've heard today from 
the VA witnesses, I'm a bit confused because, on one hand VA 
says there's no impetus or there's no reluctance to go to a 
FAR-based kind of process for purchased care for VA non-
providers, and I think there obviously is or, otherwise, Mr. 
Frye would not have had the difficulty he's had.
    I think I would want a FAR-based system would impact the 
access for veterans because the end game here is still 
providing high-quality, accessible, and cost-effective care for 
veterans.
    And so, if a remedy to solve the problem is a FAR-based--if 
it's determined that a FAR-based system should be used here I 
would want to know how long would it take in this process for a 
contract to be executed and what the process means. I would 
want to know how it would affect the accessibility to care for 
veterans.
    Also, one thing we haven't mentioned yet is the whole idea 
of what it would mean for VA's acquisition workforce. When we 
did our clinical contract care work, we found that the 
contracting officers and the contracting officer 
representatives who do most of the legwork for the contracting 
officers are already stressed in terms of workload.
    If you increase that workload, you double it, tenfold, 
whatever it would mean to get a FAR-based system implemented, 
then-- what would it mean in terms of VA's budget for hiring 
new people?
    I just don't know what a FAR-based system would mean in 
terms veterans' of accessibility to care and VA's acquisition 
workforce, and that's what we need to know.
    Mr. Lamborn. Well, it is interesting that GAO has 
identified six categories of problems that can arise when 
proper oversight is not provided by the VA: the type of 
provider care, credentialing and privileging, clinical practice 
standards, medical record documentation, business processes, 
and maybe the most important, to me, access to care.
    So let me turn now to Mr. Frye. Would you agree that those 
six areas are called into question when proper procedures are 
not followed?
    Mr. Frye. Well, yes. Absolutely.
    And, in addition to that, when Federal contracts are 
required and you don't use them, there are terms and conditions 
that are completely missing from the contract. By Federal 
statute, you're required to have terms and conditions.
    These include the termination for convenience, termination 
for default, the disputes clause, fair and reasonable price 
determination, just a whole host of issues not--and probably 
even more important in terms of healthcare, the safety and 
efficacy terms and conditions that are required to be followed 
by the specific contractors. Without a contract, without those 
terms and conditions, the contractor is free to do what he or 
she wants.
    Mr. Lamborn. Well, and that is my concern.
    And, Ms. Anderson, in regards to your statement earlier, I 
have to agree with you. The government is obligated to pay for 
services that are rendered, even if the proper foundation 
wasn't followed--you know, the procedures weren't followed in 
soliciting those services.
    Ms. Anderson. Thank you for the opportunity to respond to 
that.
    We were comparing a FAR-based contract and what it will 
take to become FAR-compliant and then, to Mr. Williamson's 
point, to what end. Will that result in immediate care to the 
veteran?
    And I chaired a work group in July of 2014, and that work 
group was responsible, tasked, with identifying measures in how 
do we become FAR-compliant.
    We realized after 3-hour weekly sessions over 4 months that 
there are lots of hurdles to overcome, not the least of which, 
labor issues, consultation with labor, hiring a contracting 
officer workforce, estimate 600. Then it's how immediate can we 
really give the care at that point. Still, we need to go 
through the hurdles.
    So we quickly realized that we need to really begin 
aggressively pursuing legislation. And in aggressively pursuing 
legislation, working with the Department of Labor, working with 
OMB, working with the Department of Justice, we've embedded in 
the legislation protections, credentialing, quality of care----
    Mr. Lamborn. Ma'am, maybe you are getting into another 
issue that is a very important issue, the proposed legislation. 
My time is way over. I just wanted to make the point.
    No one is arguing that the government should not pay these 
contracts. I am concerned about what GAO and Mr. Frye have 
identified as what can go wrong when the procedure is not 
followed.
    Mr. Chairman, thank you for your indulgence. I yield back.
    Mr. Coffman. Thank you, Mr. Lamborn.
    Mr. Walz, you are now recognized for 5 minutes.
    Mr. Walz. Thank you, Mr. Chairman.
    And, first of all, Mr. LaBonte, my deepest apologies for 
you. And what I understand and you understand much more clearly 
is that veterans' care is a zero-sum proposition. If one 
veteran doesn't receive the care that they are entitled to and 
the best quality, then it is a failure. So your situation is 
unacceptable.
    The thing I would encourage you on is--and I looked into 
this--the tort issue. That is your recourse on this. And they 
will always try and throw barriers up both in the private 
sector and in the public. But there are a lot of good folks out 
there that can help with that. So I would hope you would pursue 
that.
    Mr. LaBonte. Well, the efficacy of the tort program is that 
the VA essentially investigates themselves. I mean, their 
attorney acts as an investigator, which is----
    Mr. Walz. Well, trust me. People win these. And what I am 
saying is, if this was wrong, there are people out there to 
assist you. There are veteran attorneys that are veterans 
themselves that their job is to try and help make this right.
    Mr. LaBonte. Yes. But the VA has a 6-month head start to 
coach witnesses, ``Well, you're not allowed to file a Federal 
lawsuit.''
    Mr. Walz. Yes. And I agree. And it is never easy. I think, 
as you are sitting here listening to this, the issue for you is 
that all the rest of this is kind of irrelevant.
    Mr. LaBonte. Yes.
    Mr. Walz. The issue is what happened to you.
    Mr. LaBonte. Yes.
    Mr. Walz. And I would just say, from your perspective, 
there are two things happening here. We are kind of at the 
40,000-foot reform discussion here. My advice to you is that go 
down that road, pursue that hard, and that is where you can 
get--redress your----
    Mr. LaBonte. That's what I'm doing now. And I'm witnessing 
that that program is ineffective as far as VA investigating 
themselves.
    The VA attorney sends the information that I send the 
attorney/investigator to the actual hospital risk management 
coordinator, who then tells the privacy officer which records 
they need to keep or manipulate or lose and then tells the 
Department head how to coach their residents specifically to 
the legal matter.
    So I would say that that recourse is ineffective and it's 
designed to protect the hospital's reputation rather than 
actually help the veteran----
    Mr. Walz. I wouldn't disagree with you. There is folks out 
there to advocate for you--stick with it--veterans' service 
organizations, others. So stick with it.
    Mr. LaBonte. Thank you.
    Mr. Walz. I am going to move back to, again, our 40,000-
foot--and I appreciate you all being here.
    And my colleague from New York, Ms. Rice, was hitting on 
this, Mr. Williamson. I have seen this before. GAO puts out 22 
recommendations.
    What exactly is the weight of a GAO recommendation? Exactly 
what does that do?
    Mr. Williamson. We report to the Congress and the Congress 
provides the leverage we need, and it's forums like this that 
we use bring those things to light.
    Mr. Walz. Exactly.
    And this is why--and, again, Mr. Murray, I could go down 
here and ask why some of these, but I do think--and I don't 
think it was necessarily even a rhetorical question. I do think 
you are the wrong person to answer this because what we are in 
is--and this needs to be fixed and somebody needs to deal with 
this.
    But this is a much broader issue. This is the reform issue. 
This goes back to the VA being all things for all people. And 
not to antagonize my chairman, but this is the VA trying to 
build hospitals. This is the VA trying to do everything for 
everybody.
    And I have been saying we need to have that discussion to 
figure out how do we best leverage both the private sector, the 
public sector, our promises to our veterans, get quality care, 
and do it in the most cost-effective manner.
    So we are here, I would argue, dealing with a very 
important issue. And it is very granular, and we are discussing 
inappropriate versus illegal. And they do matter.
    The bigger issue here is that, if I would ask the 
questions--and, again, I don't think they are fair to you, Mr. 
Murray--what should be the VA be doing, how do we fix this 
contracting, what is the purpose of this, and we will get back 
into Mr. Frye pointing out where those holes are in there, this 
is probably not the forum for that.
    So I appreciate you all being here. I don't question that 
we are all trying to get to the same point. But you heard Mr. 
LaBonte. This is what happens when you break faith. He doesn't 
believe that anybody is going to get good care. And we can tell 
him countless stories of the highest quality healthcare 
delivered in the country by a VA hospital, and it would be 
irrelevant to him.
    And I think that is a noble goal for us to continue to 
strive for, but I don't think we are going to get there in the 
current system. I am quite confident your 22 recommendations 
will be recommended in 2 years from now and we will still be 
trying to implement them, and that is a horrible condemnation 
on the entire process.
    Mr. Williamson. They have implemented seven of them.
    Mr. Walz. Yeah. Well, and it is. And, again, it is not 
because the motive is to not provide quality care. I think it 
goes back to the institutional design and some of the issues on 
culture that we are trying to get to. And I think that level 
over the top of this is going to make answering many of these 
questions very difficult.
    So I thank you, Chairman, for your time.
    Mr. Coffman. Well, again, Mr. LaBonte, I certainly 
apologize for your situation, and I think you personalize the 
problems in this contracting process.
    I am stunned by the kind of bureaucratic incompetence, the 
corruption, the lack of leadership demonstrated here today 
where what I have heard is, ``Yeah. We have these rules, but 
they are really not important.'' The kind of lawlessness that 
exists in this Department is just extraordinary.
    Mr. Frye, what you heard here today was essentially, 
splitting hairs, ``Oh, it is really kind of not improper,'' 
``Oh, it is really not illegal, but we don't follow the law 
here because we are somehow above the law.''
    I mean, Mr. Frye, could you comment on what you have heard 
today.
    Mr. Frye. That's exactly right. Let's talk about those 
purchases above $10,000. They are using the same methodology 
that is used from $1 to $10,000 above $10,000. That authority 
has never existed.
    Every purchase, every acquisition in healthcare above 
$10,000, must have a FAR-based contract in place. It must be 
signed by a duly appointed contracting officer. And I will take 
issue with Ms. Anderson. We can't pay that unless it's been 
ratified by a contracting officer.
    A ratification is a requirement where a contracting officer 
must do an investigation. We can't liquidate that obligation 
willy-nilly, but we are. We're going ahead without doing 
ratifications and liquidating the obligation.
    Those are improper payments, by the way. Our own 
regulations in the GAO Red Book and other statutes state that 
we will not pay unauthorized commitments until they are 
ratified. We've done it wholesale.
    To my knowledge, not a single one of these requirements 
above $10,000 has ever been ratified, and we bought billions of 
dollars' worth of healthcare. If that isn't illegal, I don't 
know what is. But I guess we can--we can parse words here.
    Mr. Coffman. Mr. Frye, is there anybody else in senior 
leadership, besides yourself, that actually cares about getting 
this right?
    Mr. Frye. It doesn't appear that there's anyone outside my 
organization that cares. I come to work every day, and I watch 
this malfeasance. I watch this malpractice. You know, they've 
made a mockery of the Federal acquisition system.
    The FAR has the same force and effect as the law. We all 
know that, those of us who were trained in its use, and 
certainly the attorneys know that. And we're just ignoring it.
    This isn't done in any other government agency. If you were 
to bring other government agencies, senior procurement 
executives or chief acquisition officers, you wouldn't get this 
same story. This is just another example of us trying to blow 
smoke up your sleeve.
    Mr. Coffman. Is Secretary McDonald just a placeholder? I 
don't sense that he is working to make a difference here. Does 
he care?
    Mr. Frye. I hope Secretary McDonald cares. Again, I think 
Secretary McDonald dislikes these scandals, this malfeasance, 
more than anybody else because he's got a very short window 
here to move the VA forward. And, again, he moves us 2 steps 
forward and we move 12 steps backwards every time one of these 
scandals arises.
    Mr. Coffman. Thank you.
    Ranking Member Kuster, you are recognized for 5 minutes.
    Ms. Kuster. Thank you.
    Mr. Frye, let me just follow up on this. If every single 
one of these contracts was FAR-qualified or whatever the verb 
would be, what would the time commitment and cost to the VA be 
for that process?
    Mr. Frye. Thank you for asking that question.
    So from $1 to $10,000, we have a non-FAR-compliant--
however, it is FAR-based--system in place. It's like falling 
off a rock. It's non-FAR-compliant. The appropriate terms and 
conditions are in that contract.
    It is simply a process where authorized personnel, not 
contracting officers, sign this document, and they are on their 
way to the doctors. It's not hard at all. And it's been this 
way for years.
    Now, we all recognize, including counsel, that it is not 
compliant with the FAR. And so a year ago in July, we began a 
4-month effort to bring it in compliance.
    But in November, after all that effort, Veterans Health 
Administration summarily rejected it. It didn't go far enough 
for them, even though it was FAR-compliant. So----
    Ms. Kuster. But that is my concern, is that--we have heard 
from my colleague, Ms. Walorski, that a company that had been 
providing services was--obviously, somebody draw attention to 
that. They didn't have a contract. They tried to go through a 
contract. But, in fact, the process was so burdensome, what 
ended up happening was that the veterans didn't get the 
podiatry that they needed because that company was 
disqualified. There was no other company available.
    So I want to try to understand how do we get from here--I 
recognize the problem. I agree with you we have got a problem. 
How do we get from here to veterans all across the country 
getting timely care in a cost-efficient, high-quality manner?
    Mr. Frye. Sure. And I realize there are issues sometimes 
with veterans getting care no matter what system we have, 
whether it's in the VA hospital----
    Ms. Kuster. But would you agree that there is an added cost 
for all this administrative procedure on top? I mean, I am 
not--I am not condoning it.
    I am just asking you----
    Mr. Frye. I have no idea if there's an added cost. But I 
will tell you this.
    Ms. Kuster. Well, we talked about----
    Mr. Frye. There is a requirement.
    Ms. Kuster. We talked about 600 additional people.
    Mr. Frye. There is a requirement under the Federal 
acquisition regulation to do it. I don't make the laws, but I--
--
    Ms. Kuster. I understand the requirement.
    Mr. Frye. I comply with the laws.
    Ms. Kuster. I am not asking you about the requirement. That 
is up to us.
    Mr. Frye. Right.
    Ms. Kuster. What I am asking you is: What is the cost to 
the system for each one of these authorizations to be 
compliant?
    Mr. Frye. You're asking the wrong person. You'd have to ask 
the program officials.
    Ms. Kuster. Do you agree that there is----
    Mr. Frye. They're the ones that make the business decision.
    Ms. Kuster.--a cost, that there is potential delay, there 
is an administrative procedure that has to go on, there are 
individuals that have to be involved? Do you agree that there--
--
    Mr. Frye. I agree----
    Ms. Kuster [continuing]. Is a cost?
    Mr. Frye.--there is a cost of doing business using any 
system, whether it's the Federal acquisition regulation or any 
other system. By the way, I am ambivalent. If the Federal 
acquisition regulation wasn't used, that's fine.
    But we have to have a system. We can't just spend money 
like drunken sailors willy-nilly. If we're going to have a non-
FAR system, then let's put a non-FAR system in place. Let's go 
through the rulemaking process at OMB. Let's then promulgate 
those rules. And then let's comply with the rules. It's as 
simple as that.
    Ms. Kuster. What do you think is the correct dollar amount 
that we would have the balance of being able to supervise 
contracts, but not have every last paper clip be covered by 
this contractual obligation?
    Mr. Frye. Again, I have no idea. I'm not the program 
official. But I can tell you this. We have FAR-based contracts 
in place.
    PC3, which you may be familiar with, is a FAR-based 
contract. It provides specialty care, and it goes up into the 
hundreds of thousands of dollars. And veterans are getting care 
every day using PC3.
    Ms. Kuster. And do all the providers in the PC3 network 
have a FAR-based contract?
    Mr. Frye. Have a what contract?
    Ms. Kuster. A FAR-approved contract----
    Mr. Frye. If they're in the----
    Ms. Kuster [continuing]. Even in a rural area like I am in, 
individual provider?
    Mr. Frye. No. There are some rural areas--for instance, 
there's another FAR-based contract, which you're familiar with, 
called ARCH. I am not that familiar with it because I am not a 
program official, but I know it exists because of care that's 
required out in rural areas.
    Ms. Kuster. Well, my time is nearly up.
    But I think what I am interested in, going forward, is 
let's separate out the ones that are possible. I would like to 
hear more about the PC3 FAR-based contracts and then not chase 
every last one down a rabbit hole with 600 new employees. But 
let's try to use a public-private arrangement.
    Because I know it is expensive. I have been in healthcare 
for the past 25 years. It is expensive to supervise these 
contracts, and we are going to have to get to the bottom of it. 
So thank you.
    Mr. Coffman. Mr. Lamborn, you are now recognized for 5 
minutes.
    Mr. Lamborn. Thank you, Mr. Chairman.
    Mr. Murray, I have got a question or two for you. I want to 
ask you about the proposed legislation that the VA has come up 
with--and I think Ms. Anderson made reference to it--basically, 
to let VA off the hook and say, ``You don't have to follow FAR 
anymore for these kinds of contracts.''
    And that really bothers me because one of the potential 
abuses that can happen when FAR or something the equivalent of 
FAR is not followed is that there is the potential for cronyism 
or higher prices. It is sort of like sole-sourcing of contracts 
and the taxpayer isn't given the benefit of competing bids and 
that kind of thing.
    So would you agree with me that the legislation--or I won't 
put it that way. Are you concerned that the legislation VA is 
proposing could allow for those problems to arise?
    Mr. Murray. I am. And I'm concerned about that sort of 
thing, fraud, cronyism, paying more than you should across 
programs, whether it's travel or conference spending or whether 
it's payroll, get a major initiative to make sure, you know, 
payroll is where it needs to be in terms of controls.
    So, absolutely, which is why it's so important that 
controls that we suggested--and perhaps more are required in 
these--in this legislation--be implemented. You know, reviews.
    The control that I am intrigued with is that we review 
these individual authorizations to see if they pass the 
threshold, a million dollars annually, and, if so, we start 
thinking right away maybe this needs to be FAR-based. We're 
doing a lot of this, for instance.
    Mr. Lamborn. Well, but the specific language that concerns 
me in the proposed bill says, quote, ``that healthcare can be 
awarded,'' quote, ``without regard to any law that would 
otherwise require the use of competitive procedures for 
furnishing of care and services,'' unquote. So, to me, that 
opens the door for potential cronyism.
    Mr. Frye, would you like to comment on that same question?
    Mr. Frye. Well, that piece disturbs me as well. But I 
think, in the background, there may be some additional 
information. Counsel, down at the end of the table, was 
involved in putting that together.
    But, certainly, again, if you give us legislation that 
allows us to do something besides the FAR, I am ambivalent, but 
we have got to develop those rules, go through the rulemaking 
process, put those rules in place, and then we have to enforce 
the rules and hold people accountable.
    We don't hold people accountable for anything right now. 
Yet, you know, we come down here. I read the newspapers every 
day. Chairman Miller says, you know, why aren't things working, 
why don't we follow the rules?
    It's because no one is held accountable. No one. No one has 
been held accountable at all for these violations of Federal 
regulations in law in the course of events with these 
obligations for fee basis care, and I suspect no one will ever 
be held accountable.
    There are hundreds of thousands of these transactions that 
should have been ratified. There are billions of dollars that 
have been spent, and we'll just sweep it under the carpet.
    Mr. Lamborn. Well, I am truly concerned about that.
    Mr. Chairman, I appreciate your leadership on this issue. 
And I yield back.
    Mr. Coffman. Thank you, Mr. Lamborn.
    Mr. O'Rourke, you are recognized for 5 minutes.
    Mr. O'Rourke. Passes.
    Ms Rice. you are recognized for 5 minutes.
    Ms Rice. Thank you, Mr. Chairman.
    Mr. Williamson, I just want to follow up on Ms. Kuster's 
line of questioning in terms of the VA's position that was 
stated previously, that following FAR would impact a large 
number of veterans by compromising immediate access to care in 
our community providers.
    Now, forgive me if this was already spoken about. But do 
you share that?
    Mr. Williamson. I share your view; it's very much of a 
concern. Again, unless I know more about how a FAR-based system 
would work for purchased care for non-VA providers and I know 
how long it would take to execute these contracts, I can't give 
you an answer.
    If I had that, I would. But my concern is that it's going 
to take a longer period of time for the process. In the 
meantime, the access to care that veterans have to non-VA 
providers may be degraded.
    Ms Rice. So we have to figure out a way to either not have 
FAR apply, right, and implement your recommendations?
    Mr. Williamson. But what is our recommendation on that 
particular aspect? I am listening to all of the dialogue here, 
and I think that whatever is decided upon we have to know some 
facts first about how such a system would work.
    Ms Rice. Where can you get those facts from?
    Mr. Williamson. Please repeat.
    Ms Rice. Where can you get those facts from?
    Mr. Williamson. Well, first of all, for the care that's 
given--and, by the way, if 80 percent of the veterans used the 
PC3 network of providers, it would solve a lot of the FAR-based 
issues. But they don't. A very minute number of veterans 
currently use PC3 providers for a lot of reasons.
    In any case----
    Ms Rice. You think that is the answer--that could be one of 
the answers here?
    Mr. Williamson. Well, it's one of the answers. Certainly it 
is. But for every other form of non-VA provider care there is, 
this issue of what's FAR-based and whether it's being done 
illegally or not.
    Questions need to be answered such that there is clarity 
not only on the accessible care issue, but also on the cost, 
because I think that the impact on the acquisition workforce in 
VA would be potentially quite a bit in terms of having to hire 
more people. But you have got to get those answers first, and I 
haven't heard it here.
    Ms Rice. Well, that is the problem at these hearings. A lot 
of questions are asked and very few answers actually are 
received. Thank you.
    I yield back, Mr. Chairman.
    Mr. Giddens. Ma'am, could I follow on to your question, 
please?
    Ms Rice. Mr. Chairman.
    Mr. Coffman. Go ahead.
    Ms Rice. Sure.
    Mr. Giddens. So I find myself in complete agreement with 
Mr. Williamson, that we have to balance this need for access 
and provide the right structure that represents the interest of 
the taxpayers so it's balancing what's good for veterans and 
what's good for taxpayers.
    And the answer to his question about how we look at that 
and how we balance that is I own that for the Department. I am 
going to work to put that together. I would love to meet with 
the committee and/or the staff as we do this and get your 
input.
    But I have to find a way that allows us to balance this, to 
meet the needs of the veterans, to manage their access, while 
at the same time representing the interests of the taxpayer and 
recognizing the Federal acquisition regulations and all the 
appropriate laws. I own that for the Department.
    Ms Rice. Well, thank you for that offer.
    Mr. Coffman. Well, I would like to thank the witnesses. You 
are now excused.
    And let me just say it really doesn't matter how the 
system's changed because, if you are not going to follow 
whatever system is there, because if you don't have the 
discipline, you don't have the leadership, it really just 
doesn't matter.
    I mean, at the end of the day, there has got to be a rule 
of law. And this is just--I think some of the witnesses today 
just, you know, really demonstrated how lawless this 
organization is. You are now excused.
    Today we have had a chance to hear about problems that 
exist within the Department of Veterans Affairs with regard to 
oversight of its non-VA healthcare programs.
    This hearing was necessary to accomplish a number of items: 
number one, to identify the continuing widespread problems with 
procurement of non-VA healthcare; two, to allow VA to provide 
answers as to why these problems still exist and have been 
allowed to continue for so long; and, three, to assess next 
steps that must be taken by the Department in order to stem the 
continued waste of taxpayer dollars and jeopardized services 
provided to veterans.
    I ask unanimous consent that all members have 5 legislative 
days to revise and extend their remarks and include extraneous 
materials. Without objection, so ordered.
    I would like to once again thank all of our witnesses and 
audience members for joining us at today's conversation.
    With that, this hearing is now adjourned.
    [Whereupon, at 5:30 p.m., the subcommittee was adjourned.]

                                APPENDIX

                                 

              Prepared Statement of Chairman Mike Coffman

    Good afternoon. This hearing will come to order.
    I want to welcome everyone to today's hearing titled, 
``Circumvention of Contracts in the Provision of Non-VA Healthcare.'' 
This hearing is the second in a series of hearings examining illegal VA 
procurement practices resulting in massive waste of limited taxpayer 
resources and serious jeopardy to the quality of healthcare received by 
our Nation's veterans.
    In our previous hearing on procurement, on May 14, 2015, we focused 
on the mismanagement and misuse of purchase cards in avoidance of 
contract requirements, spending limitations, and warrant authority. 
VA's Senior Procurement Executive, Mr. Jan Frye, testified that these 
unauthorized commitments were in the billions of dollars. Mr. Frye has 
indicated similar levels of mismanagement and abuse in the procurement 
of non-VA healthcare services by VHA.
    By far, the most prevalent method by which veterans receive non-VA 
care is through the individual authorization, so-called fee basis, 
process. Under title 38 of the Code of Federal Regulations, section 
17.52, VA is authorized to obtain non-VA medical services when demand 
is infrequent and the needed healthcare is not available in-house or 
through an existing contract. Unfortunately, VA uses this process even 
when these requirements are not at issue. Moreover, VA admits that the 
execution of these authorizations does not comply with the contract 
requirements of the Federal Acquisition Regulation (FAR) and Veterans 
Affairs Acquisition Regulation (VAAR).
    Mr. Frye will testify that by longstanding and massive 
circumvention of the FAR and VAAR in the fee basis authorization 
process, VA has illegally obligated billions of dollars. He will 
explain that, VA incurs billions in improper payments that represent 
material weaknesses in VA internal audit controls. Significantly, in 
2009 and 2010, the OIG reported on serious problems with the accuracy 
and efficiency of claims paid though the fee basis program. The OIG 
reported that VA medical centers made hundreds of millions of dollars 
in improper payments--including duplicate payments and incorrect 
amounts. Most troubling is that VA had not established fraud prevention 
or detection controls because it didn't consider the program to be at 
significant risk. OIG estimated that VA could be paying as much as $380 
million annually for fraudulent claims and in May 2014--contrary to 
VA's assertion that previous illegal purchases can be institutionally 
ratified--OIG reported that VA further violated the law by 
institutionally ratifying illegal purchases and avoiding important 
checks and balances.
    Today, GAO's Director of Healthcare, Randall Williamson, will 
testify about the continuing limitations in oversight of healthcare 
service contracts and will focus particularly on the inadequate 
management of clinicians who provide services under contract within VA 
facilities. We will also hear from United States Army veteran, 
Christopher Labonte, whose horrific experience with VA represents a 
case study in the risk associated with non-competitive contracts with 
affiliates and the importance of quality control and oversight of 
contract performance standards.
    As I said in the purchase card hearing, violations of procurement 
laws are not mere technicalities. It is not just a matter of paying a 
little more for needed supplies and services as some apologists for VA 
have asserted. Among other things, without competition, business may be 
awarded based on cronyism and the directing of business to favored 
vendors, including those who may employ former VA officials. Without 
contracts, patient safety provisions are not legal requirements. VA's 
mismanagement of the fee basis program is not a justification to 
dispense with FAR and VAAR requirements. If the atom bomb can be built 
and wars conducted under the acquisition regulations, surely VA can 
deliver patient care under them as well.
    With that, I now yield to Ranking Member Kuster for any opening 
remarks she may have.

                  Prepared Statement of Edward Murray

    Good morning, Chairman Coffman, Ranking Member Kuster, and Members 
of the Committee. Thank you for the opportunity to discuss the 
Department of Veterans Affairs' (VA) provision of care to Veterans by 
contracting with community providers. I am accompanied today by Mr. 
Gregory Giddens, Principal Executive Director, Office of Acquisitions, 
Logistics and Construction (OALC), Mr. Jan Frye, Deputy Assistant 
Secretary for Acquisition and Logistics, Mr. Norbert Doyle, Chief 
Procurement and Logistics Officer for the Veterans Health 
Administration (VHA), and Ms. Phillipa Anderson, Assistant General 
Counsel.

Introduction

    VA is a provider of healthcare services for Veterans. By statute, 
38 United States Code (U.S.C.) Sec.  1710, VA is authorized to provide 
``necessary'' care to Veterans. With respect to hospital and outpatient 
care, VA has defined what is ``necessary'' by regulation, 38 Code of 
Federal Regulations (CFR) Sec.  17.38, the medical benefits package. VA 
has been given authority, pursuant to 38 U.S.C. Sec.  1703, to contract 
for that care. These contracts are governed by Federal acquisition 
statutes and the Federal Acquisition Regulations (FAR). This mix of in-
house and community care provides Veterans the full continuum of 
health-care services covered under our available medical benefit 
offerings.
    Last year VA in informal discussions with House and Senate Veterans 
Committee staff noted possible confusion regarding its purchased care 
authorities that would need to be addressed by statute. VA in its 
February budget noted the Department was putting forward a legislative 
proposal that would update its purchased care authorities to address 
confusion and uncertainty surrounding its current authorities. After a 
period of interagency discussions, VA on May 1, 2015, provided the 
House and Senate Veterans Affairs Committees with a formal proposal for 
comprehensive reform of its purchased care authorities, including very 
specific requirements for non-FAR based agreements.

VA Procurement: Care in the Community

    Care in the community is used to augment VA provided healthcare in 
order to meet clinical demand as well as address wait times for 
providing medical services, while also considering patient convenience. 
When VA facilities are not capable of furnishing economical care 
because of geographic inaccessibility or otherwise are not capable of 
providing the care or services required, they may contract for hospital 
care or medical services in accordance with 38 U.S.C. Sec.  1703. When 
the demand is for infrequent or limited use, VA, through the use of 
individual authorizations, as described in VA Acquisition Regulation 
801.670-3, may purchase hospital care or medical services from the 
community. VA has had a 30 year practice of using individual 
authorizations without applying Federal acquisition processes and 
procedures. This practice allows Veterans to get the best care they can 
get in the most efficient way possible. VA's legal basis to use non-FAR 
based contracts to purchase care in the community for Veterans has been 
challenged. Because of possible confusion regarding the authority for 
this practice, VA sought to clarify the authority through proposed 
legislation, because VA believes this practice is critical to ensuring 
that veterans receive healthcare in a timely fashion, and from 
locations that are close to where they reside.
    In FY 2006, we spent roughly $2.7 billion for care in the 
community. Since 2006, there has been a steady increase in individual 
authorizations for care in the community. In FY 2014, we spent over 
$7.0 billion, which represents an increase of 160 percent. This 
includes care purchased using individual authorizations, emergency 
care, and care purchased via FAR-based contracts, the majority of which 
was for services priced at or below comparable Medicare rates. However, 
VA often finds it difficult to purchase care at Medicare rates for 
specialty and primary care services in underserved areas. Currently, 
the FY 2015 estimate is approximately $10.4 billion, which represents 
an increase of 55 percent over the last year.
    When VA issues an individual authorization for care in the 
community, regulations 38 CFR 17.55 and 38 CFR 17.56 are the relied 
upon payment authorities. Both regulations align VA with Federal 
government payments under the Medicare program for preauthorized 
outpatient and inpatient care to eligible Veterans. VA has a 
comprehensive internal audit program to review claims submitted by 
community providers. VHA's Chief Business Office conducts multiple 
audits to ensure proper eligibility determinations and accurate payment 
of claims for care in the community. VA's Office of Business Oversight, 
an audit office external to VHA, conducts enterprise-wide payment 
accuracy and internal control reviews of non-VA care claim payments.
    Finally, VA acknowledges that our long-standing procurement 
processes for care in the community need improvement. We will continue 
to work to improve our procurement practices by identifying items that 
should be transitioned into national contracts, maximizing the use of 
current national contracts, adopting a standard nomenclature, and 
looking for best practices to be applied across the enterprise.

Purchased Healthcare Streamlining and Modernization Act

    On May 1, 2015, VA submitted proposed legislation that would 
authorize the Secretary to enter into Veterans Care Agreements with 
providers, physicians and suppliers that have enrolled with Medicare 
and entered a provider agreement or participation agreement with 
Medicare; providers participating in Medicaid; and other providers the 
Secretary determines to be qualified. These agreements would provide 
relief from certain Federal contracting requirements, including 
competitive acquisitions procedures, but similar to VA's existing 
authority, payment rates for these agreements will be tied to 
comparable Medicare rates. Veterans Care Agreements will allow VA to 
provide care in a way that is similar to the operation of the Medicare 
and Medicaid programs as well as community care purchased for those 
eligible for care through the Veterans Choice program. The legislation 
is designed to provide a clear legal foundation for VA's continuing use 
of individual authorizations and provider agreements. At the same time, 
the legislation includes explicit protections for procurement 
integrity, provider qualifications, and price reasonableness. We note 
that Congress enacted a similar authority that is restricted to use in 
the Veterans Choice Program in Public Law (P.L.) 113-146, as amended by 
P.L. 113-175.
    Many Veterans receive care under individual authorizations. If we 
were to stop providing these authorizations, it would impact a large 
number of Veterans by compromising immediate access to care and our 
community providers that we rely on to care for Veterans. Because small 
practices and individual providers of health services would not be 
willing to enter into complex procurement contracts just to treat one 
veteran, it is likely that veterans will be deprived of care that is 
best for them.
    Enactment of this legislation will resolve what has emerged as 
serious legal questions in our purchased care authorities. Without this 
change, Veterans will lose access to many community providers across 
the board in primary care, specialty care, mental healthcare, and 
extended care.

Conclusion

    In conclusion, VA strongly values its relationship with community 
providers. We realize the important role they play in assisting us in 
providing timely and high quality care to Veterans. Our priority always 
has been to put Veterans' health and well-being first. Without the use 
of individual authorizations, Veterans would not receive the care they 
need. We look forward to working with Congress toward enactment of the 
proposed legislation and the critical aspect of ensuring Veterans' 
timely access to healthcare.
    Mr. Chairman, I appreciate the opportunity to appear before you 
today. My colleagues and I look forward to answering any questions you 
or other Members of the Committee may have.

                                 

                   Prepared Statement of Jan R. Frye

    Chairman Coffman, Ranking Member Kuster, and Members of the 
Subcommittee, thank you for inviting me to testify today.
    You have just heard Mr. Murray provide the Department's position on 
the illegal purchases of billions of dollars in non-VA care over 
multiple years. If you are not now confused, I am surprised. I would be 
completely confused if I were not familiar with the facts. We obviously 
do not intend to admit our collective failures in leadership and 
stewardship of public funds. Mr. Murray stated there was and is 
confusion, inconsistent application, and conflicting interpretations. 
As VA senior leaders, we have had many years to correct these 
deficiencies.
    Mr. Murray also stated there were conflicting interpretations of 
the law. Here are some facts that may help you decide if conflicting 
interpretations exist. In October 2012, a very senior VHA official 
informed me trouble was looming, as they had been violating the law on 
a wholesale basis with regards to purchase of non-VA care. I asked him 
for details about legal documents he hinted of; he declined to reveal 
anything.
    On October 22, 2012 I began a personal inquiry into the matter. I 
sent this same VHA senior official and his subordinate a written 
statement, addressing his plight, hoping I would receive additional 
information from him. He declined to respond.
    On December 3, 2012, I sent a note to a senior executive from 
Office of General Counsel, requesting a legal opinion as to whether 
individual authorizations for non-VA care were considered FAR-based 
contracts. I received no response.
    Receiving no response, I followed up again on Dec. 31, and for a 
third time on January 15, 2013.
    On February 28, 2013, nearly three months after I requested the 
initial opinion, the Office of General Counsel provided me a legal 
opinion dated September 10, 2009. This opinion categorically declares 
procurements of non-VA, Fee Basis Care to be FAR-based. There is 
absolutely no confusion in this legal opinion, in spite of what you 
just heard to the contrary. Neither my predecessors nor myself have 
ever granted authority for VHA to acquire non-VA healthcare except by 
FAR-based methods.
    You may wonder why, as VA's Senior Procurement Executive, I had 
never previously seen this legal opinion, and why there was such 
obvious reluctance to provide it to me. That is an enigma. Mr. Murray 
and myself testified under oath to this subcommittee in 2010, stating 
fee-basis care was not FAR based. If this legal opinion existed in 
2009, why was it kept from us in preparation for the hearing?
    Given the apparent recalcitrance to engage by VHA and Counsel, I 
submitted a Hotline Complaint to the Office of Inspector General in 
March 2013. The OIG initially refused my submission, questioning my 
motive for submitting the complaint. I stubbornly persevered, and they 
subsequently accepted it. I am unaware OIG ever investigated.
    In April 2013, I requested senior leadership assistance from VHA 
and the Office of General Counsel, in conducting ratification actions 
for these massive violations of Federal law. I received no offer of 
assistance from either office.
    In May 2013, Secretary Shinseki was briefed on non-VA care 
authority options. He was made aware of our illegal actions. I was not 
invited to the meeting.
    In June 2013, I wrote a letter to Representative Issa, then serving 
as Chairman of the House Oversight and Government Reform Committee, 
outlining my concerns in these illegal matters and others. My letter 
never made it to him. Two senior officials who are apparent friends, 
one from the House Oversight Committee, and one from VHA, conspired to 
keep Chairman Issa and the American public from learning of these 
matters and other serious VA violations of Federal laws.
    In April 2014, the VA Senior Assessment Team voted to close ongoing 
discussions of illegal purchases of non-VA medical care, with mine as 
the lone opposing vote. In that same meeting, the VA Office of 
Management sponsored a motion, which passed, to raise the reporting 
level for VA material weaknesses from approximately $400M to $1B. I 
believe this was an effort to avoid reporting emerging illegal matters 
to the American public through the annual statement of assurance 
process.
    In July 2014 I was threatened and coerced on multiple occasions in 
a two-hour meeting headed by the VA Chief of Staff, in an effort to 
force me to authorize illegal actions on a major scale concerning fee-
basis care.
    From July to November 2014, we collaboratively developed a legally 
sufficient method to acquire non-VA healthcare. VHA's senior leadership 
rejected the method in November 2014. The illegal activity continues 
unabated.
    This past Friday, Deputy Secretary Gibson elected to make my 
disclosure of these and other illegal acts a personal issue with me. 
His demeanor and actions in both an open and one-on-one meeting were 
clearly meant to intimidate me, and to cast a chill over me and others 
who might be tempted to report violations in the future.
    I will allow you and the court of public opinion to decide for 
yourselves if what I have briefly described constitutes corruption, 
malfeasance or dereliction. No investigation has been conducted. No 
ratifications of illegal procurements have been executed. Improper 
payments continue. Veterans receive healthcare without protection of 
mandatory terms and conditions. No one is liable.
    I believe these are two relevant questions: How can we hold 
subordinate VA employees accountable, if we as senior leaders 
selectively pick and choose the laws we want to observe for sake of 
convenience? When will VA senior leaders be held accountable? There 
were more than a dozen of VA's most senior leaders in the July 11, 2014 
meeting. The issue of illegality was positively affirmed. Not a single 
leader present, save one, subsequently acted in any way to protect the 
Government's interests or resources.
    We have lost our way. Senior leaders are required to obey and 
enforce Federal laws. Our actions and inactions do not fit anything I 
have previously experienced in over 40 years as a Military Officer and 
civilian public servant.
    Mr. Chairman, this concludes my statement. I am prepared to answer 
all questions this Subcommittee may have for me.



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]  




Deliverable HVAC O&I Hearing titled ``Circumvention of Contracts in the 
                    Provision of Non-VA Healthcare''

    Congresswoman Walorski's asked a question regarding a constituent 
vendor who is no longer eligible for a VA contract for orthotics.

VHA Response:

    The VISN 11 Prosthetics Integrated Service Line has been working 
for some time to move vendors to firm contracts that require a standard 
level of quality from approved vendors. VISN 11's effort is part of a 
VHA-wide initiative. The goal of the initiative is to:

         Ensure quality patient care to provide a satisfactory 
        Veteran experience;
         Improve timely Veteran care;
         Assure compliance with Medicare prices.

    The VISN's seven (7) medical centers and their CBOC's have been 
relying on purchase card micro-purchases to fill Veteran prosthetics 
needs for many years. The Prosthetics Integrated Service Line has used 
firm contracts to ensure quality, timeliness and price for many years 
on artificial limbs procurements. This initiative closely aligns the 
Orthotic procurements with the standards already set for Prosthetics 
artificial limb purchases via historical contracts and Medicare patient 
guidelines. It also follows the national accrediting bodies' scope of 
practice for Orthotic-Prosthetics-Pedorthic patient care.
    Leather Banana, the vendor mentioned (unnamed) at the hearing, has 
provided satisfactory Orthotic goods and services in the past to VISN 
11. However, Leather Banana is a retail store that sells handbags, 
wallets, belts, etc. They do not have a certified pedorthist on-site to 
ensure orthotics are properly fitted and perform in the intended 
function. Other vendors have been unscrupulous, and provided non-
therapeutic shoes in place of diabetic shoes, as one example. This 
causes a delay in the Veteran's treatment when a new order must be 
made. Furthermore, the wrong shoe or ill-fitting shoe can lead to an 
amputation for an at risk Veteran patient.
    To be qualified for the advertised contracts, Leather Banana was 
informed they needed to have a certified Pedorthist on staff. They were 
unable to meet this requirement even though VHA extended the response 
date by an additional 30 days at the request of Leather Banana.
    The VISN 11 Prosthetics Integrated Service Line decided to create 
firm contracts with qualified vendors across their region. To be deemed 
qualified, VISN 11 follows Medicare guidelines for clinical practice, 
coding and billing. Also, VISN 11 Prosthetics used the national 
accrediting bodies in Orthotic-Prosthetics-Pedorthic scope of practice 
for certified clinicians.
    VISN 11 Prosthetics decided it was important to allow as many 
vendors as possible, and manageable, to be eligible to ensure 
sufficient regional coverage. They selected a minimum quality standard 
of having a certified Pedorthist on staff. The terms and conditions of 
the contracts allow VHA to inspect vendor facilities, review patient 
records, and billing practices to ensure the vendors stay within the 
scope of practice established under the contract. VISN 11 Prosthetics 
has a certified Contracting Officer Representative to monitor each 
contract. Each Veteran patient order will be paid using the purchase 
card to minimize the time from VHA consult to vendor order. Some 
responding vendors have offered prices lower than Medicare rates 
resulting in savings for VHA.