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




                                 
 
                         [H.A.S.C. No. 114-97]

             DEFENSE HEALTH AGENCY: BUDGETING AND STRUCTURE

                               __________

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON MILITARY PERSONNEL

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD

                           FEBRUARY 24, 2016
                           


                                     
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                   SUBCOMMITTEE ON MILITARY PERSONNEL

                    JOSEPH J. HECK, Nevada, Chairman
WALTER B. JONES, North Carolina      SUSAN A. DAVIS, California
JOHN KLINE, Minnesota                ROBERT A. BRADY, Pennsylvania
MIKE COFFMAN, Colorado               NIKI TSONGAS, Massachusetts
THOMAS MacARTHUR, New Jersey, Vice   JACKIE SPEIER, California
    Chair                            TIMOTHY J. WALZ, Minnesota
ELISE M. STEFANIK, New York          BETO O'ROURKE, Texas
PAUL COOK, California
STEPHEN KNIGHT, California
               Jeanette James, Professional Staff Member
                Craig Greene, Professional Staff Member
                           Colin Bosse, Clerk
                           
                            C O N T E N T S

                              ----------                              
                                                                   Page

              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Davis, Hon. Susan A., a Representative from California, Ranking 
  Member, Subcommittee on Military Personnel.....................     2
Heck, Hon. Joseph J., a Representative from Nevada, Chairman, 
  Subcommittee on Military Personnel.............................     1

                               WITNESSES

Bono, VADM Raquel C., Medical Corps, USN, Director, Defense 
  Health Agency..................................................     4
Woodson, Jonathan, M.D., Assistant Secretary of Defense for 
  Health Affairs, Department of Defense..........................     3

                                APPENDIX

Prepared Statements:

    Heck, Hon. Joseph J..........................................    25
    Woodson, Jonathan, M.D., joint with VADM Raquel C. Bono......    26

Documents Submitted for the Record:

    Statement of The Fleet Reserve Association...................    53
    Statement of The Military Coalition..........................    59

Witness Responses to Questions Asked During the Hearing:

    Mr. O'Rourke.................................................    73
    Ms. Stefanik.................................................    74

Questions Submitted by Members Post Hearing:

    Mr. O'Rourke.................................................    77
    
             DEFENSE HEALTH AGENCY: BUDGETING AND STRUCTURE

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
                        Subcommittee on Military Personnel,
                      Washington, DC, Wednesday, February 24, 2016.
    The subcommittee met, pursuant to call, at 5:01 p.m., in 
room 2212, Rayburn House Office Building, Hon. Joseph J. Heck 
(chairman of the subcommittee) presiding.

OPENING STATEMENT OF HON. JOSEPH J. HECK, A REPRESENTATIVE FROM 
      NEVADA, CHAIRMAN, SUBCOMMITTEE ON MILITARY PERSONNEL

    Dr. Heck. Let me go ahead and call the subcommittee meeting 
to order. Today the subcommittee meets to continue our 
discussions on the military healthcare system, to help inform 
our efforts to reform military health care. I know the timing 
of our hearing is a little unusual for the Military Personnel 
Subcommittee. I appreciate everyone's participation even at 
this late hour. Just too much to get done and not enough time 
to get it done in.
    The Defense Health Agency [DHA] was established in October 
2013 to manage the activities of the Military Health System 
[MHS], which includes integrating clinical and business 
processes across DOD [Department of Defense] and the military 
services. A key element was establishing shared services to 
eliminate the need for each of the military medical services to 
manage functions that are common across the MHS.
    At the time the DHA stood up, DOD estimated that the shared 
services would generate significant savings by eliminating 
redundancy and variability. I am interested in hearing how much 
the DHA has saved DOD since 2013. I am also interested in 
hearing about the DHA's role in medical readiness, and in 
particular, how the DHA assists the Army, Navy, and Air Force 
medical services to provide a medically ready force and ready 
medical personnel to combatant commands.
    In the fiscal year 2017 budget the Department of Defense 
has proposed several measures aimed at reducing the cost of the 
defense health program by reforming TRICARE. While I appreciate 
the Department's efforts to simplify the health benefit, the 
proposal still shifts the cost burden through TRICARE fee and 
cost share increases to our Active Duty family members and our 
retirees.
    What is not clear from the Department's proposals is how 
this reform addresses the concerns we have heard from our 
beneficiaries. Does it improve access to care and reduce the 
hassles of the referral process? Will the anticipated savings 
generated by the reforms be used to improve the beneficiary's 
experience?
    Lastly, I am interested to hear your views on the MHS 
structure and function especially as it compares and contrasts 
with civilian hospital systems. I hope that our witnesses will 
address these important issues as directly as possible in their 
oral statements, and in response to member questions.
    Before I introduce our panel, I would like to offer our 
ranking member, Mrs. Davis from California, an opportunity to 
make her opening remarks.
    [The prepared statement of Dr. Heck can be found in the 
Appendix on page 25.]

    STATEMENT OF HON. SUSAN A. DAVIS, A REPRESENTATIVE FROM 
 CALIFORNIA, RANKING MEMBER, SUBCOMMITTEE ON MILITARY PERSONNEL

    Mrs. Davis. Thank you, Mr. Chairman. I also want to welcome 
our witnesses, especially Admiral Bono. I believe that this is 
your first hearing before our subcommittee in this capacity.
    And Dr. Woodson, I hope that this will certainly not be the 
last time we are able to hear from you this year. And I look 
forward to working with you on these reform efforts. And I know 
that you have worked very hard on this for quite some time.
    The committee has held several roundtables and hearings 
over the past several months to try and better understand the 
Military Health System. And our goal is to find the most 
appropriate way to reform the military healthcare benefit in 
order to provide the best, the most cost-effective benefit, 
while maintaining, of course, the appropriate level of medical 
readiness for the force.
    Your written statement details the initiatives that you 
have taken on your own as well as the legislative reform 
proposals that you have submitted once again for our review.
    And I look forward to discussing how we can move forward 
together to continue to provide access to quality health care 
for your beneficiaries as well as ready and capable providers 
to care for our force.
    Thank you very much, Mr. Chairman, and I know we have a 
number of objectives with this hearing today, and I hope that 
we are able to work through those. Thank you.
    Dr. Heck. Thank you, Mrs. Davis. I would respectfully 
remind the witnesses that we desire that you just summarize, to 
the greatest extent possible, the high points of your written 
testimony in 5 minutes. As a reminder, you see the lighting 
system in front of you. At 4 minutes gone it will turn yellow 
and when your time is up, it will turn red.
    At this time without objection, I ask unanimous consent 
that additional statements from The Fleet Reserve Association 
and The Military Coalition be included in the record of this 
hearing. Without objection, so ordered.
    [The information referred to can be found in the Appendix 
beginning on page 53.]
    Dr. Heck. Let me welcome the panel. I am pleased again to 
welcome back the Honorable Dr. Jonathan Woodson, Assistant 
Secretary of Defense for Health Affairs, and for the first time 
welcoming Vice Admiral Raquel Bono, Medical Corps, United 
States Navy, Director of the Defense Health Agency.
    With that, Dr. Woodson, you are recognized for 5 minutes.

  STATEMENT OF JONATHAN WOODSON, M.D., ASSISTANT SECRETARY OF 
       DEFENSE FOR HEALTH AFFAIRS, DEPARTMENT OF DEFENSE

    Secretary Woodson. Thank you very much. Chairman Heck, 
Ranking Member Davis, members of the committee, thank you for 
placing the issue of Military Health System reform high on your 
agenda for 2016.
    The Military Health System takes great pride in its 
performance in combat medicine over the last 14 years, with a 
greater than 95 percent survival rates for those wounded in 
battle. Our ability to prevent disease through exceptional 
primary care and preventive medicine services produced equally 
historic outcomes and reduction of disease and non-battle 
injuries. The challenges we face in medicine and national 
security, however, continue to evolve and require new 
approaches so that we are prepared for the future.
    We have undertaken a number of initiatives to strengthen 
the Military Health System in all facets of its 
responsibilities, and they have been organized around six 
principal lines of effort which we have spoken about in 
previous testimony. I was, therefore, encouraged that last 
year's Military Compensation and Retirement Modernization 
Commission reviewed and supported many of the initiatives that 
we had already set in motion in the Department.
    Let me briefly describe those efforts. First, we have 
modernized our management system with an enterprise focus. We 
established the Defense Health Agency that Vice Admiral Bono 
leads. The Agency is entrusted with providing common business 
processes and standards in support of the military departments 
and the combatant commanders, an approach that provides greater 
operational efficiency and ensures joint solutions to our 
customers. We identified multiservice markets and developed 5-
year business plans to promote common solutions and optimize 
the use of the military treatment facilities, while providing 
required care to beneficiaries in the purchased care sector.
    In addition, we have acquired and are now preparing to 
deploy a new electronic health record using commercial off-the-
self products. Together with the Surgeons General and Vice 
Admiral Bono we have established an enterprise-wide dashboard 
to actively manage our performance in readiness, access to 
care, quality, safety, patient satisfaction, and cost. The 
Defense Health Agency achieved a milestone of full operating 
capability on 1 October 2015 and in its first 2 years saved 
over $700 million.
    Second, we are defining and delivering the medical 
capabilities and manpower needed in the 21st century. With the 
services the Department has embarked upon a thorough process to 
define essential medical capabilities and metrics to monitor 
readiness.
    Third, as a result of the modernization study, we have 
analyzed infrastructure needs and rightsized several military 
treatment facilities, as well as made adjustments to move 
skilled medical personnel to markets where the MTFs can 
recapture care, they can maintain their skills, and reduce 
overall costs.
    The fourth line of effort is perhaps the main focus of 
today's discussion. That is our plan for reforming TRICARE. We 
are appreciative of the input from the beneficiaries and the 
service organizations that in recent testimony have expressed 
their support for TRICARE. The TRICARE benefit was named the 
number one health plan in the country for customer experience 
by Temkin in 2015, owing in no small part to the comprehensive 
coverage and low costs to the beneficiaries. But we also heard 
loud and clear from our beneficiaries that access to both 
primary and specialty care needs attention, particularly in the 
MTFs.
    In response, we have implemented a number of access 
improvements last year to open up appointments and resolve 
appointment issues on the first call. We are improving access 
to after-hours care, particularly childcare, whether that is 
through evening clinics, weekend clinics, the ability to email 
providers with questions through secure messaging, the 
availability of a 24/7 nurse advice line that is integrated 
into our appointment system, streamlining the referral process, 
and implementing urgent care demonstration programs that 
Congress requested in last year's Defense Authorization Act. 
Our T2017 contract which will be awarded in 2016 includes 
provisions that further improve upon the experience of care for 
our beneficiaries. The PB17 [President's budget for 2017] 
proposal provides choice and incorporates the feedback of our 
stakeholder groups.
    The fifth line of effort has been to expand the strategic 
partnerships with the civilian health organizations to enhance 
our ability to meet and exceed our responsibilities in 
readiness, quality, safety, and satisfaction. Partnerships with 
the organizations such as the American College of Surgeons and 
the Institute for Healthcare Improvement are providing tangible 
benefits that offer us ways to sustain our trauma system, 
improve clinical quality, and become a high reliability 
organization.
    Finally, the sixth line of effort is about the global 
health engagement where DOD is deeply engaged with other 
partners in reducing threats posed by emerging infectious 
diseases and building bridges through health care around the 
world. We have contributed to surveillance, prevention, 
diagnosis, and treatment strategies to combat well-known 
outbreaks of Ebola and now Zika, as well as ongoing efforts to 
prevent outbreaks in other areas.
    We enter 2016 confident that the reforms in the MHS and 
health benefits can be further strengthened through a 
combination of legislative and operational reforms.
    I am grateful for this opportunity to be here today, and 
look forward to your questions.
    [The joint prepared statement of Secretary Woodson and 
Admiral Bono can be found in the Appendix on page 26.]
    Dr. Heck. Thank you. Admiral Bono.

STATEMENT OF VADM RAQUEL C. BONO, MEDICAL CORPS, USN, DIRECTOR, 
                     DEFENSE HEALTH AGENCY

    Admiral Bono. Chairman Heck, Ranking Member Davis, and 
members of the subcommittee, thank you for the opportunity to 
appear here today. I am pleased to represent the Defense Health 
Agency and explain how the DHA is contributing to the 
modernization of the Military Health System. In November, I was 
honored to become the Defense Health Agency's second director. 
Only a month earlier the Agency had reached full operating 
capability. After 2 years of collaborative work with Army, 
Navy, Air Force, medical leaders, and the Joint Chiefs of 
Staff, it established the concept of operations for many of the 
functions of the Agency.
    Our responsibilities center on supporting the military 
departments and the combatant commanders in the execution of 
their missions. The Defense Health Agency was created in the 
recognition that most healthcare delivery is common across the 
Army, Navy, and Air Force; what we need, what we buy, and what 
a best practice entails in both the clinical and administrative 
environment. The Defense Health Agency helps bring together 
common support functions into a new enterprise-focused 
organizational structure.
    We are able to help Dr. Woodson and the Surgeons General 
see and manage across the MHS in a more unified way. One of the 
principal ways in which we deliver the support is through this 
operation of shared services. Critical enterprise support 
activities include TRICARE, pharmacy operations, health 
information technology, medical logistics, public health, 
medical R&D [research and development], education and training, 
health facilities, contracting, and budget resource management.
    In addition to the 10 shared services that have been 
implemented, the DHA has also brought in joint activities that 
had previously been distributed to the services that acted as 
executive agencies. These include the Armed Forces Health 
Surveillance Center, the Armed Forces Medical Examiner System, 
the DOD Medical Examination Review Board, the Defense Center of 
Excellence for Psychological Health and Traumatic Brain Injury, 
and the National Museum of Health and Medicine.
    The DHA offers value, however, to more than our COCOMs 
[combatant commanders] and services. We serve as a single point 
of contact for many intra-agency, interagency, and external 
industry matters, simplifying the process for our partners and 
outside colleagues to work with the Department of Defense in 
support of a number of our imperatives: research, global health 
engagement, adoption of emerging technologies, healthcare 
interoperability, and more.
    The existence of the DHA has streamlined engagement with 
the Defense Logistics Agency, Defense Information Systems 
Agency, and other field agencies. External to the Department, 
the DHA provides a single point of contact for operational 
matters with the VA [Department of Veterans Affairs], a number 
of agencies within HHS [Department of Health and Human 
Services], to include the Centers for Medicare and Medicaid 
Services, the Food and Drug Administration, the Centers for 
Disease Control and Prevention, the Public Health Service, and 
more. We have successfully collaborated with the Justice 
Department on the prosecution of healthcare fraud cases, most 
recently with highly suspect activities around compound 
medications.
    We work with Treasury, State, and the GSA [General Services 
Administration] on a number of critical functions that directly 
support our healthcare mission. I would like to focus on one 
shared service in particular, the operation of TRICARE, the 
military's health plan. TRICARE modernization is part of the 
MHS modernization plan that Dr. Woodson just outlined. We have 
a number of TRICARE initiatives already underway in 2016. Later 
this year, we will award the next round of TRICARE contracts 
known as T2017, which is when health care will become 
operational under the new contracts.
    We are simplifying the contracts, reducing management 
overhead in both government and contractor headquarters by 
moving from three regions to two regions. We are expanding the 
means by which we manage the quality of our networks to ensure 
that they meet the expectations for quality and safety that we 
expect for our beneficiaries whether in the direct care system 
or in private sector networks.
    We also will introduce innovative models for value-based 
purchasing in the coming year. My staff, in close collaboration 
with the services, is also crafting the contract amendments to 
permit TRICARE enrollees to use urgent care centers without 
preauthorization. And our analytics team provides the 
Department's civilian, military, and medical leadership at the 
headquarters and field level with the ability to assess 
enterprise-wide performance of the Military Health System using 
agreed upon joint measures for readiness, health, quality, 
safety, satisfaction, and cost.
    The DHA is now an integral and integrated part of the 
Military Health System. We are proud to contribute to the 
modernization of this system through a joint collaborative 
solution and responsible management approach.
    I am honored to represent the men and women of the Defense 
Health Agency and I look forward to answering any questions you 
may have.
    [The joint prepared statement of Admiral Bono and Secretary 
Woodson can be found in the Appendix on page 26.]
    Dr. Heck. I thank you both for your testimony. So, my first 
question is how does DHA relate to, and interact with, the 
service Surgeons Generals in carrying out shared services and 
in the relationship of facility management, staffing of 
facilities, and things along those lines?
    Secretary Woodson. Thanks for that question. And there are 
two parts, of course, to the revised enterprise management 
scheme, if you will, that we have outlined and carried out over 
the last few years.
    So first is the Defense Health Agency that has the 10 
shared services. And so in regards to your question about 
facilities, the Defense Health Agency provides the common 
business processes for managing those facilities. As it relates 
to governance and how the DHA interacts with the services, 
there is a governance system that is made up of medical 
operations group, and most importantly, the medical deputies 
advisory group, which looks at the enterprise priorities and 
helps set those priorities with Admiral Bono.
    Dr. Heck. So then can you provide some examples of how DHA 
has achieved integration of clinical and business processes at 
the MTFs, across the services, and what are the additional 
opportunities for expanding common activities and functions 
across the MTFs?
    Secretary Woodson. So maybe I will start and then certainly 
Admiral Bono will want to chime in. I think the biggest example 
is in health information technology. Prior to the DHA separate 
activities in the three services, a lot of money goes into 
health IT [information technology], whether it is in DOD or it 
is in any private health system. Bringing it into enterprise 
focus, you can reduce the redundancy. You can actually develop 
the enterprise tool. I don't think we could field a new 
electronic health record without an enterprise focus on health 
IT. It is allowing us to make changes in the network, at lower 
cost, that will save billions of dollars going into the future.
    Admiral Bono. A couple of additional areas, they would also 
be in pharmacy, where jointly working with the services we can 
create a uniform formulary that makes that available to all of 
our patients. We can also through this pharmacy shared services 
and working with the military services, have been able to move 
to almost 100 percent electronic ordering, order entry, not 
only within the MTFs, but from our providers, or from providers 
that are seen out in the network in the civilian world.
    One other area is in medical logistics, in ordering the 
equipment that we use in the MTFs, and what we use even down 
range. So being able to collaborate and consolidate some of 
those purchases has saved us money as well as created less 
variability, or more standardization in the acquisition of 
those products.
    Dr. Heck. So is all purchasing for durable equipment then 
purchased through DHA for the individual MTFs, or is there like 
a blanket purchase order that an MTF can buy off of at DHA-
negotiated rates?
    Admiral Bono. Yes, sir. We work very closely with the 
Defense Logistics Agency and so they have created an e-catalog 
which contains all that and all MTFs can order off of that 
catalog.
    Dr. Heck. My next question is probably going to take longer 
to answer then a minute-30, so I am going to yield back my time 
and wait for the second round and recognize the ranking member.
    Mrs. Davis. Thank you, Mr. Chairman, and I think we all 
recognize there are a lot of layers to this. And at the same 
time, I think you have made an attempt to simplify the 
proposals from what we had seen initially. And I am very 
pleased to see that. I think that is great.
    But I am also wondering as we boil it down a little bit, I 
think the chairman mentioned earlier about shifting the cost, 
and the perception at least, and the reality for some, that 
there is a shifting of cost from the DOD to the beneficiary.
    So I wanted to, you know, I guess to just echo, perhaps, 
what constituents might be asking. I am paying more for my 
health care, but what do I get in return?
    Secretary Woodson. Well, that is a great question, and so 
let me see if I can explain this from a number of perspectives. 
PB17 really offers a simpler system. We have boiled down a lot 
of different programs into basically a managed care variety 
which is the HMO [health maintenance organization] variety, and 
a self-manage which is preferred provider organization variety, 
or fee for service, which is the ability to go anywhere, any 
time to receive health care.
    The issue brings into sharp focus, then it gives choice, 
because if you want to use the PPO [preferred provider 
organization] product or the fee-for-service product, you have 
the ability to go and see physicians that you want, when you 
want to see them. And particularly with the PPO product, no 
longer are you paying a percentage of the fee, but you are 
paying a fixed amount so you can predict your costs better.
    We did the analysis, let's say, for a family of four. The 
actual rise in total out-of-pocket costs rises from about 8 
percent to about 10.4 percent. And this needs to be seen in the 
context of when TRICARE was originally put forth where the cost 
share was 27 percent. So it modestly increases that cost, but 
it gives greater freedom. And of course, with the PPO product, 
the referrals go away, which was a major dissatisfier for many 
of our constituents.
    There is no change for Active Duty. There is this 
participation fee, but again, because we have moved to a fixed 
copay, the actual increase in out-of-pocket expenses is only 
from about 8 percent to 10.4 percent. Notably also, is that our 
catastrophic caps are low. So your expenses will accrue against 
your catastrophic cap, and the issue really is that this is a 
major benefit of TRICARE versus other commercial products where 
the catastrophic cap is much, much higher.
    So although there is a slight rise in that catastrophic 
cap, remember, those caps were reduced back in 2001 and have 
not risen over a decade and nearly a half. There is also the 
second payer option that we have put forward which lowers the 
fees for those who have other health insurance. We have also 
set the fee structure so that it incentivizes for those who are 
around MTFs really to receive care at very low cost or no cost 
if they receive care in the MTFs.
    So I think there is great value there. There is a very 
modest increase in cost, again, to this average family of four, 
but it is in the context of having had a diminished cost share 
that has progressively gone down over the years.
    Mrs. Davis. I don't know, Admiral Bono, if you want to--I 
actually wanted to sort of throw something else in there about 
an FEHBP [Federal Employee Health Benefits Program] option that 
might be along a continuum in terms of what people could look 
at. I would suspect that that would only be for people who 
would choose to have increased costs that would, you know, have 
a higher share of that option, but it would be possibly part of 
a continuum. And I think that folks have thought about that a 
little bit. We will probably have a chance to get into that in 
terms of whether you think it would be a good idea or not.
    But it certainly would continue to do that. I think that my 
time is up. But I think what you had to say is very helpful. I 
think we also have to find ways of doing it in a quicker 
elevator speech, so that people have an understanding 
immediately of what it means to their family. And maybe that 
additional percentage is the best way to talk about that.
    But I know that there is a lot of concern out there that 
nevertheless, people are going to be paying a little bit more. 
And when you think in terms of the benefit, they want to know 
that they are really getting something for that. So thank you.
    Dr. Heck. Mr. Knight.
    Mr. Knight. Thank you, Mr. Chair. So I just have a couple 
of questions on kind of the timing of this. I know this was 
established in 2013. Can you give me an idea of what happened 
before that, why we have had these problems, why it has taken a 
little bit long to figure out these problems? And because we 
are doing this kind of this purchasing power of getting the 
three services together, are there any audits that are going on 
out there that we can figure out if this is actually everything 
that we can do, or if there are other issues that we can 
handle?
    Admiral Bono. So part of the evolution of the DHA was when 
we identified these shared services which were brought together 
and designed by the services. And the conditions for successful 
performance was identified there. What we realized was in 
bringing the services together, that in many times we each had 
different business processes to accomplish similar end goals. 
And so being able to standardize that, and understand what 
nuances or what specific service concerns were being addressed 
took some time to do that.
    In addition, as we brought people together, we also had to 
understand what our own infrastructure had available to support 
some of this. And so it has been an adjustment but we have been 
able to watch that and look at it.
    I think at FOC now, full operating capability, we now have 
the ability after 2 years of actually measuring what our 
baseline performance is, and now being able to measure our 
progress towards goals. So I think that was probably the 
primary issue in standing up the DHA, was bringing three 
services with different business processes.
    Mr. Knight. Do either of you believe that this might be a 
model to move forward with other services that the branches are 
doing, that maybe at some point they are going in three 
different directions, and they have to go in three different 
directions in certain aspects because they do certain missions. 
But in other missions they don't because, you know, a hurt 
soldier is the same as a hurt marine or sailor. So could we use 
this as a model to help in other situations in the military?
    Secretary Woodson. So the short answer is yes. If you look 
at medical as you have suggested in your statement, 85 percent 
of what the services do in regards to delivering care is alike. 
As a surgeon, I always say that the outcomes you want when you 
do a procedure, the resources you bring to having to do that 
procedure, the standards you want to apply are all the same no 
matter whether you are wearing an Army uniform, a Navy uniform, 
or an Air Force uniform. So 85 percent is alike. And that 
relates to the operational environment as well as the garrison 
environment.
    There is that 15 percent which is service unique. So what 
Navy brings to a float platform and undersea medicine, what Air 
Force brings to aerial platforms, needs to be respected because 
they made great advances, and what Army brings to land-based 
projection of force, but the majority is alike, and so that is 
the underlying concept.
    And I would remind the committee members that prior to the 
DHA establishment we had 19 studies that suggested that we 
needed to come together. And when we conducted the task force 
back in 2011, it was pretty clear that we could achieve 
economies of scale and efficiencies, and so I think the issue 
is that we really have delivered on that at this point.
    Mr. Knight. Thank you. Thank you, Mr. Chair. I yield back.
    Dr. Heck. Mr. O'Rourke.
    Mr. O'Rourke. Thank you, Mr. Chairman. Dr. Woodson, what do 
we know about available or excess capacity at military 
treatment facilities since this proposal would drive more 
customer use? Maybe I will just start there and I might have 
some other questions based on your answer.
    Secretary Woodson. A great question. So we need to look at 
it in two ways: outpatient capacity and inpatient capacity. 
Inpatient capacity we clearly have excess capacity particularly 
in many specialty areas. And we need to be able to utilize the 
MTFs more effectively.
    In the outpatient, as is true throughout the country, there 
is less of a capacity in primary care. However, having said 
that, we have done analysis through the modernization study and 
we do have a significant capacity there, particularly if we 
drive up productivity. If we increase panel size, if we create 
capacity by use of telehealth and other mechanisms to interface 
with patients who don't require a face-to-face appointment, and 
just better management strategy. So there is capacity there.
    Mr. O'Rourke. And have you measured that capacity and is 
that a number that you have at the top of your head or one that 
you could get to the committee?
    Secretary Woodson. So I can get that to you, and I would 
rather take that for the record in terms of numbers, but let me 
just tell you that we conducted this modernization study which 
looked at just that. So I think we do have substantial data.
    [The information referred to can be found in the Appendix 
on page 73.]
    Mr. O'Rourke. Okay. And then if I heard you correctly, part 
of the capacity will be developed by forcing efficiencies and 
modernization, or were you saying that that has already 
happened and it has created the capacity?
    Secretary Woodson. So that is in progress and as I 
mentioned in my opening statement, things like secure 
messaging, streamlining the referral process, increasing panel 
size, urgent care, things that increase our ability. You know, 
weekend and night clinics, pre-school clinics for children, all 
of these things increase your capacity. So we are carrying out 
those reforms as we speak.
    Mr. O'Rourke. Great. So when you provide those numbers for 
the committee, I would love to know what established capacity 
we have and then the capacity we project forward if we are able 
to follow through on these great initiatives that you talk 
about.
    So one of the concerns that I hope your numbers will answer 
is whether there is any threat to current, you know, service 
members, Active Duty service members receiving care at military 
treatment facilities in terms of compromising capacity for 
their priorities and their care. And then I have another 
question related to that.
    Secretary Woodson. So I don't believe there will be any 
compromise to the services.
    Mr. O'Rourke. Because that capacity exists, great. And then 
the other question, Admiral Bono brought up care for veterans. 
Does the capacity then also exist to complement care provided 
at the VA where you have unacceptable wait times, especially in 
specialties like behavioral health and mental health, and 
should we avail ourselves of that capacity within military 
treatment facilities for veterans who may not be TRICARE 
beneficiaries?
    Secretary Woodson. So the short answer to that is yes. The 
longer answer is that we already have a number of sharing 
agreements with the VA around the country. And the issue really 
needs to be analyzed on a local level because all of the 
markets are different. And the capacity to take care, of 
particularly, behavioral health individuals, will be somewhat 
market dependent.
    So the short answer is yes. But the more involved answer 
and we have got data to look at the distribution of the 
facilities and what is available in each market.
    Mr. O'Rourke. Great. I look forward to seeing that and to 
the degree that you can localize that capacity, I would love to 
know, for example, William Beaumont Army Medical Center in El 
Paso at Bliss, what we have and what we project going forward. 
Maybe other members would like to know that for their districts 
as well. Thank you very much. I yield back.
    Dr. Heck. Ms. Stefanik.
    Ms. Stefanik. Thank you, Mr. Chairman, and thank you to the 
panelists for testifying today and for your service. I wanted 
to direct my question to Admiral Bono. I want to discuss the 
General Temporary Military Contingency Adjustment Program 
which, as you know, exists to offset the lower reimbursement 
levels provided under the Medicare payment model to sole 
community hospitals that provide care to large volumes of 
service members and military families.
    In my district Fort Drum does not have a full MTF on post 
so soldiers and their families depend on community hospitals, 
one of which is the Carthage Area Hospital. Outpatient services 
to our military and their families represent anywhere from 30 
to 35 percent of this hospital's outpatient services and 
unfortunately, Carthage is still being reimbursed at the 
Medicare levels. And although they have applied, they have not 
received relief from the General Temporary Military Contingency 
Adjustment Program. And this appeals process has been going on 
for 2 years, since September of 2013.
    So my question is, what is DHA doing to alleviate these 
bureaucratic challenges facing facilities like Carthage Area 
Hospital?
    Admiral Bono. Thank you for the opportunity. I confess that 
something like that is something I am still getting a better 
understanding. But your broader question about what DHA is 
doing to address some of these bureaucratic or these 
administrative challenges is something that I am taking into 
real strong consideration as we are going forward in the 
modernization of our healthcare plan.
    In looking and in arriving at the DHA one of the first 
things that I realized is that many times we have policies or 
operations in place that need to be brought into a more modern 
approach, to be a little bit more agile, and to look at some of 
the processes we are doing. This was particularly evident with 
some of our referral management operations and our processes 
there.
    So I would like to take that for the record, and look at it 
a little bit more closely so that I can better understand where 
the opportunities are. But I share your concern on that that 
administratively, part of what I feel my responsibility to do 
is to make sure that the DHA is looking at our administrative 
processes and streamlining them to the best of our ability.
    [The information referred to can be found in the Appendix 
on page 74.]
    Ms. Stefanik. Great. I appreciate that and I look forward 
to working with you to alleviate those bureaucratic challenges. 
But I would also like you to take for the record the specific 
case of Carthage Area Hospital, the uncertainty for 2 years 
since September of 2013.
    [The information referred to can be found in the Appendix 
on page 74.]
    Ms. Stefanik. We are working with their office. We are 
trying to work with DHA, and we need to get more understanding 
of the decision, which brings me to my next point.
    What actions have been taken to ensure that these 
reimbursement levels are determined in a transparent manner, so 
bringing more transparency to the decisionmaking process? Have 
you put any thought into that from your position?
    Admiral Bono. I have, as a matter of fact, and I realize 
that being able to be more transparent is more helpful to 
everybody. So you will see that in many of our discussions. We 
are bringing that to the table, being more transparent about 
our conversations, being more transparent about our analysis as 
well.
    Ms. Stefanik. Okay, great. Bringing greater transparency 
would not only help this specific case of Carthage Area 
Hospital, but in terms of who qualifies for this program 
because there has been an independent audit of Carthage that 
basically says that they are beyond the 10 percent requirement; 
that outpatient services make up 30 to 35 percent, so they 
should qualify for this program. So we need transparency and 
clarification. And I am sure this isn't the only hospital that 
is facing this issue.
    And I yield back the rest of my time.
    Dr. Heck. Thank you. Mr. MacArthur.
    Mr. MacArthur. Thank you, Mr. Chairman. I applaud you for 
thinking through how to simplify the TRICARE plans and I think 
the intended move to an HMO and a PPO makes some sense.
    But the PPO, which is where I want to focus, still relies 
on your current networks. And as I read and I just read it 
again last week, the Military Compensation and Retirement 
Modernization Commission's overall assessment, they were pretty 
critical of the adequacy of the provider networks within the 
TRICARE system.
    So I want to get into the weeds on this a little bit, but 
for starters, I would like to ask if you agree with their 
assessment of your networks. And if not, where do you differ? 
And I will, maybe I will start with you, Mr. Secretary.
    Secretary Woodson. Thank you very much for that question. 
And I don't agree with the assessment that the Commission made 
about the adequacy of the network. There are several things I 
think that they considered in making that assessment.
    So first of all, let's start with some big numbers. We have 
424,000 physicians in the TRICARE network. And we have got 
virtually all of the 5,000 hospitals that are available to take 
care of our patients. But the issue is that, some of the 
assessments that were made relative to, let's say the Fort 
Bragg or the Fayetteville area, didn't take into account that 
when we considered the network development, we consider what is 
available in the MTF as well as what is required. So we have 
formulas that we use for trying to decide the adequacy of the 
network.
    And the issue is that you may not need as many orthopedic 
surgeons in your network if you have got a lot of orthopedic 
surgeons in the MTF, particularly in that 30-mile area around 
the MTFs. You know, there are some other formulas that every 
insurance company uses to determine adequacy. It turns out that 
the average insurance company will have a ratio of particularly 
primary care providers to population of about 1 to 528. 
TRICARE's is 1 to 24.
    Mr. MacArthur. If I can stop you there, though, because it 
is an interesting comparison. The difference is when you are 
talking about private insurers, if they are wrong, if their 
formula might be right overall, but in particular communities 
around the country there are gaps, their beneficiaries can 
walk. And they can go to a different insurer, a different plan, 
and remedy their own situation. The difficulty is under 
TRICARE, that remedy doesn't exist.
    So let me just finish, my question then because I have only 
got another moment to try to unpack this, if we made the 
networks in the FEHBP available to our military personnel, what 
would that do in your opinion? Pro and con, what would that do?
    Secretary Woodson. So first of all, probably many of those 
physicians that are in these other plans are in our network. I 
mean, because physicians are in multiple plans. But to the 
issue of if there is inadequate, let's say, specialty in one 
area, two things: one, if you have a private insurance program, 
you are going to have to travel to get that care because the 
providers are not there. TRICARE has to pay for you to travel 
to get that care because we have a requirement to provide the 
care.
    So one of the issues that you are addressing is very real, 
but it is a ubiquitous issue that in certain rural communities 
there aren't enough providers of a variety of specialties. But 
TRICARE must pay for that beneficiary to travel, which is not 
true in other plans.
    Mr. MacArthur. But is it possible that there might be a 
closer service provider in a different network other than yours 
that perhaps they wouldn't have to travel quite as far?
    Secretary Woodson. And so, conceivably that could be a 
case, and certainly for Active Duty and Active Duty family 
members, they can actually go and see those providers without 
the added costs. So for the retiree, they may have to get a 
waiver, basically, but we have a requirement to provide care, 
so either there, or have them travel.
    Mr. MacArthur. I thank you. I yield back.
    Dr. Heck. Mr. Coffman.
    Mr. Coffman. Thank you, Mr. Chairman. I am on health care 
on both sides of VA and DOD. Can you tell me, I know that the 
Veterans Administration would certainly like to do more DOD 
work. To what extent is that occurring?
    Secretary Woodson. Thanks again for that question. We, too, 
would like to do more business with Veterans Administration. 
And as I mentioned before we have a number of sharing 
agreements and we are looking more closely how we can craft 
more mutually beneficial sharing agreements across the country.
    One of the interesting things that has happened with the 
rollout of the VA Choice product, is that the way it was, I 
guess, outlined, it put in conflict our ability to, in fact, 
operate under the sharing agreements and we are actually trying 
to unpack that right now and resolve those conflicts so that we 
can be at liberty to do more work with the VA.
    Mr. Coffman. Well, let me just say, I have had, obviously, 
problems with the VA in my district in the building of a 
hospital that happened to be $1 billion over budget. And so 
during the process before I didn't know whether I could get 
funding for it, and obviously, we stripped the VA's ability to 
build another hospital again.
    But I remember going to the University of Colorado Health 
System and saying, would you take over this project and work 
with the VA and somehow purpose this for veterans? And I 
remember during those discussions that were occurring when I 
was concerned about not getting funding and what I was going to 
do with this half-built building, they said something very 
interesting. They said, you know what, we will not have VA 
employees in this hospital because we have got two separate 
cultures and it would result in a separate standard of care. 
And I believe that the military medicine and the VA, I believe 
is two separate cultures. And I am very concerned.
    We need to reform the VA. But until it is reformed, as a 
veteran of 21 military years of service, I don't want to see 
them taking care of our Active Duty. And I don't want to see 
them taking care of our Active Duty families. And I think that 
is absolutely important. And so I am going to push back the 
other way. And in fact, we had flag officers from other 
branches of the service that testified before us in an earlier 
hearing and essentially said the same thing: different 
standard, two different cultures, different standard of care, 
and they were not supportive. And so I would ask you to relook 
at that. And I think I am going to visit it for the National 
Defense Authorization Act coming up.
    It would be wrong for our military personnel to subject 
them to that system. I want to clean it up. We owe it to our 
veterans to do that. But until we do, it would be wrong. My 
father was in military medicine and I can remember during 
Vietnam how those soldiers that came home from Vietnam severely 
wounded, were stabilized in the military system and were 
transferred to the VA for their rehabilitation. Thank God we 
don't do that right now. We keep our military personnel in the 
military system throughout the rehabilitation; only if they opt 
for the VA do they go to the VA. And so I want to caution you 
on the direction that you are taking. Do you have a response to 
that?
    Secretary Woodson. No, I appreciate your concern, and I 
appreciate your service and certainly your commitment to 
ensuring quality care.
    And we will take that under advisement. I think the issue 
is that we will be absolutely certain. Some of these sharing 
agreements have been in place for a while, but we will relook 
at the quality of care in the organizations that we have the 
sharing agreements with.
    Mr. Coffman. Thank you, Mr. Chairman. I yield back.
    Dr. Heck. Thank you. We will continue with a second round 
of questioning. If you could, you know, compare and contrast 
the differences between the Military Health System and its MTFs 
with civilian hospital systems and the best practices that are 
perhaps on the civilian side. I think you have alluded to some 
of them and how you try to increase capacity by increasing 
operational hours, increasing panel size, increasing 
productivity.
    How is that going to go? I mean, having worked in an MTF, 
certainly during my time there we did not have a taxing 
schedule of patient flow. Whereas if you were in a civilian 
hospital, you were expected to see many more patients in the 
same period of time. And as we have heard, you know, one of the 
issues that we hear from beneficiaries is the difficulty in 
getting an appointment slot.
    So I understand, you know, you have alluded to implementing 
some of those things. How do you expect those to roll out and 
what is the role being pushed by DHA or does that have to be 
pushed by the Surgeons Generals? How does that actually get 
down to the MTF and implemented?
    Secretary Woodson. So the Surgeon Generals have a real role 
to play in this because under the current system they actually 
operate the hospitals. But I think the issue is that the 
leadership with Admiral Bono and the Surgeon Generals have made 
it clear that we need to pivot to a full patient-centric, 
customer-focus delivery system. So in answer to your question 
about compare and contrast, there are many things that are the 
same.
    So we have to do hospitalization, we have to ensure access, 
quality, patient safety. We have to provide trained 
specialists. We have to organize and equip the hospital to 
provide those services and pay attention to all of those 
metrics that are important.
    The contrast is, again, that the MTFs are medical force 
readiness platforms. They are soldier-focused readiness 
platforms, and the people who are in those MTFs tonight, or 
tomorrow, may be called to deploy somewhere in the world.
    And so there is going to be some difference in operations 
and maybe some cost to the efficiency. Now, you can rightly 
push back at me and say, well, what is that cost? And I 
wouldn't have an answer for you today, but I can tell you that 
that is what we are working on now to define what is the 
readiness cost so that we can produce the efficiency and the 
productivity to the highest level it can be at.
    Dr. Heck. And I appreciate it and I have said in just about 
every hearing that we have had on this issue that there is a 
cost to readiness and we have to be ready to assume that cost 
if we want to have a ready, deployable medical force and then a 
ready deployable combat force. So there is that intangible cost 
that the civilian sector does not have to deal with.
    So transitions to the readiness issue as you just alluded 
to, as well as in your written testimony about how TRICARE 
supports the readiness mission of the MHS with the military 
treatment facilities as a readiness training platform for 
medical forces. So how does DHA expand choice to the 
beneficiaries with their ability to choose either a military or 
civilian provider while making sure we recapture the right mix 
of patients to ensure that we do have that medically ready 
force as you mentioned, incredible strides in combat casualty 
care, but we have also got to be ready to do the humanitarian 
mission and take care of that elderly patient with CHF 
[congestive heart failure] in some far-off land? So how does 
DHA look at getting that patient mix.
    Secretary Woodson. Let me start the answer and then maybe 
Admiral Bono can chime in. So the issue, again, at a basic 
level is, we need to have a good flow of patients through the 
hospitals to ensure that we keep the skills current. And that 
is not only for the docs, but it is for the nurses, it is for 
the OR [operating room] teams, the medics, the x-ray techs, the 
pharmacy folks, you know, the respiratory therapist. We need to 
have flow.
    And as you have indicated that when we get into the fight 
and particularly the medical fight, it is more than just trauma 
care. We actually have to take care of disease and non-battle 
injuries. And one of, again, our great statistics is the 
reduction in disease and non-battle injuries. So we need full-
service platforms.
    Now, to answer your last question about the issue of the 
right flow. First of all, let me just pivot a little bit to 
PB17 because I think what we have done in PB17 is set a fee 
structure that encourages folks to use the MTF. We have got to 
deliver on the customer care, the experience of care, clearly, 
but we have set a fee structure that that is the lowest cost 
option, and incentivizes individuals to use the MTFs.
    But again, a lot of the detailed analysis relates to the 
geographic areas and what is available. So we can't put every 
subspecialist at every camp, post, and station, but we have got 
great centers and we have got great community hospitals that 
can be used more effectively. I don't know if the admiral wants 
to comment.
    Admiral Bono. I think just to piggyback on that, by making 
sure that the direct care system is the more attractive option, 
we incentivize patients to come in, but that also means that we 
need to be prepared to take them. And so working with the 
Surgeons General we realize that we have to be able to make 
sure that it is easier for our patients to get in.
    And some of the things that we have also put in place are 
single appointing centers, where the patient only has to call 
once, and also putting a first call resolution so with that 
first call the patient gets their appointment that they need.
    What we have also put in place is the nurse advice line and 
this is something that we have implemented across all of the 
MTFs with the services. And so patients can receive that advice 
from the nurses, and be able to get some counsel on whether or 
not they need to go in to see somebody, or whether they can 
take care of that.
    And then of course, Dr. Woodson mentioned asynchronous type 
of care through telehealth and secure messaging. All of that 
kind of combines to making sure that we have that capacity and 
that flow for our patients.
    Dr. Heck. Mrs. Davis.
    Mrs. Davis. Thank you, Mr. Chairman. I know, Dr. Woodson, 
you responded to Mr. MacArthur and trying to, what would, you 
know, is it even feasible to think about having an additional 
option for constituents? And I know that that was what the 
Commission brought to us, and they were interested and I think 
that you have done a good job of trying to lay out the piece as 
it relates to MTFs.
    I raise it just because I think that there might be a very 
small percentage of people that would have an interest in it. I 
can't imagine that there would be a great deal because it would 
be more costly.
    No other constituent should subsidize that interest on the 
part of someone who perhaps has some special needs for some 
reason or other within the family that they would choose to do 
that, just like people would choose more expensive options 
within, you know, their company plan.
    Does, does that play a role somewhere? And I think partly 
what we are dealing with, of course, there is all of these 
regions whether urban, rural, I mean, so that people don't 
always experience the same health care where they go because it 
is a more limited ability of the community to respond, at least 
within a very short time span.
    Secretary Woodson. So thanks again for that question. So 
within the realm of possibilities, it is possible. The question 
is whether or not it is feasible and makes sense to do.
    Because here is the issue: Number one, you would have to 
decide which benefits are going to be assigned to the health 
plan that they are going to get in the commercial market. So if 
you take the Commission's outline, they had OPM [Office of 
Personnel Management] setting up sort of a special exchange 
market where people could go and pick from 250 plans.
    But the Department of Defense was still responsible for 
dental, vision, pharmacy, and many other aspects of the 
program. And so there were going to be many more touchpoints 
that any beneficiary would have to coordinate on their own in 
order to get their full set of benefits.
    The biggest issue is, what would be the incentive? So 
TRICARE is a very robust comprehensive benefit. We have the 
best autism coverage, bar none, in the country. The question 
is, who would go and pay now a $6,000, $7,000 premium with 
maybe total out-of-pocket costs of $9,000 as opposed to the 
$1,700 that exists today? And then what would be our 
responsibilities if they are not happy with that insurance 
product about coordinating their care?
    So, in the realm of possibility? Yes. Feasibility for a 
small percentage, frankly, they have that right, right now. 
They can do that. Right? Because all you have to do is not use 
your TRICARE benefit, and you can buy a commercial product or 
if your husband or wife works for an employer and they offer 
other health insurance, you can take that. So that option is 
there right now.
    Mrs. Davis. I wondered about that. And part of the, I 
guess, transparency of this may be that it is helpful for 
people to see that. Even alongside the options that they have 
so that they know that, in fact, they really are getting great, 
great care at certainly a reduced cost.
    And people, you know, might know that. They might go on the 
Net [Internet] and see that. But there might be some reasons, 
and I guess it is just part of trying to say to people, we want 
you to be sure that you have all of the information. And part 
of the process that we will be going through is providing 
people with good information.
    So do you think that that would be information that would 
be important to people as in part of this education process? 
And I know my time is up. How are we going to go about making 
sure that people do get good information so they can make those 
decisions?
    Secretary Woodson. So that is an excellent point. We need 
to communicate effectively. We can certainly make people aware 
that as things stand today, they can exercise their option not 
to use TRICARE and buy commercial insurance and provide cost 
estimates so that they have a basis of comparison.
    Mrs. Davis. Yeah, that might be helpful to do. Okay. Thank 
you, Mr. Chair.
    Dr. Heck. Mr. MacArthur.
    Mr. MacArthur. Thank you. I am going to actually continue 
that for a moment. I think we have to be careful when we talk 
about this because in that discussion I think we were 
conflating the Commission's recommendation of a private 
healthcare model with 250 plans, with what I started with, and 
what Mrs. Davis started with which was FEHBP [Federal Employee 
Health Benefits Program], which was not a, you know, such an 
involved and dizzying, frankly, set of options.
    Personally, I don't think moving to a commercial system is 
advisable. I don't think it is necessary. And I was asking a 
much more directed question about a single option FEHBP which 
is currently run by the Federal Government and includes many 
networks which have been less criticized, frankly, than the 
Commission certainly was of yours. So I think we have to be 
careful.
    And I also think complex systems are difficult to manage. 
You have got 9.8 million lives in TRICARE. It is a $50 billion 
system. It is difficult to manage. And you have got the MTFs 
and the private contracts you have, but they are even more 
difficult to predict. And that is why I raise the question 
because I don't know whether people would opt for it. I have no 
idea.
    All I know is the Commission was critical of the current 
networks. And I heard you, Secretary, that you have a large 
number of physicians in the network, 424,000, 5,000 hospitals, 
but this may be a problem of geography more than volume.
    You may have plenty of providers. I am sure you do. The 
question is, do you have them where the beneficiaries have the 
need? And it is hard to predict that. And that is why I ask 
about whether another option allows people to make that 
judgment for themselves instead of all of us trying to make it 
for them, which is impossible to do.
    That is a comment. I am going to ask another question, 
though, and that is, Admiral, you mentioned the plan to go from 
three to two regions in TRICARE. So I am going to take a little 
different direction now. I am always concerned that when we 
talk about a change we don't confuse motion for progress. And I 
would like to ask you why is two better than three? These are 
still massive service providers, now each one gets even larger. 
How does that improve either service or cost?
    Admiral Bono. With going from three to two, I think this is 
a great question and something that bears fleshing out a little 
bit. What we realized is we needed to be able to offer a more 
standardized benefit across all of our MTFs and across our 
services. And in looking at our geography and our current 
configuration where we had three, we realized that we could 
already, geographically, work with two main contractors and be 
able then to kind of standardize and reduce some of the 
variability that we saw in having three plans.
    And so that was why we went ahead. We also looked at the 
overhead costs, not only within the contractors, but also 
within managing those from the DHA. And so we saw some great 
efficiencies by doing that by going to two.
    Mr. MacArthur. I need you to be a little more specific. 
Because economies of scale can be deceptive. You have already 
got massive scale on all three of your regions today. So what 
further economies do you expect to get out of just two?
    Specifically, I mean, you can't unpack all of that, but 
give me three, four very specific things that will be less 
costly in two regions than they are in three?
    Secretary Woodson. Administrative process, setting up the 
contracts, two versus three. You are going to have more 
standardized processes, easier flow as our beneficiaries move 
from one region to the other. We can standardize the automating 
process. We can standardize the communications to the 
beneficiaries and providers. We can leverage the use of their 
data systems without having to go to more data systems to do 
population management, quality management. So there are 
actually multiple benefits to moving to----
    Mr. MacArthur. Then if that is true from three to two, why 
not go to one?
    Secretary Woodson. Well, that is a good question. I think 
it is about the issue of risk if you put all of your eggs into 
one basket. But that is a good question. But I would also make 
this historical note. You know, we didn't arrive at this 
overnight. Remember, there was a time when we had 12 and then 
6, and then 4. And so we have been progressively getting here.
    The ability to coordinate when you have four, five, six 
contracts is just a nightmare. The updates in the manual when 
these contracts roll out, so they are always out of sequence, 
administratively it is just a lot easier.
    Mr. MacArthur. I would stay all night if I could, but my 
time has expired. Thank you.
    Dr. Heck. Thank you. I got one last question because I 
didn't see it addressed in PB17. The fate of TRICARE Reserve 
Select [TRS]. So what happens to Reserve members? Are they 
going to be moved into either a TRICARE Choice or TRICARE 
Select plan, or do we maintain TRS?
    Secretary Woodson. So as a product it will be TRICARE 
Choice. But I think the larger question you are asking has to 
do with what are the optimum products for the Reserve 
Components? And that is really under study because there are a 
couple of different, there are several different solutions that 
might be applied to the Reserve Component.
    The real issue with the Reserve Component is that when they 
are mobilized, how do you prevent turbulence in terms of 
families having to switch doctors and insurance plans. The 
answer for the Reserve Component might be one of several 
options. One would be if everybody took TRICARE Reserve Select 
or now TRICARE Choice, they would have that PPO product and 
then they could use, and of course the member comes on Active 
Duty and nobody has to change doctors.
    Another solution might be something similar to the 
Commission recommendation, which is to give BAHC [basic 
allowance for health care] when the reservist comes on Active 
Duty, and then they don't have to switch their insurance plan, 
but you just give them a basic allowance for health care.
    Another solution might be to offer TRICARE Choice into the 
employer insurance plans, which might work for the employer and 
might work for the reservist because it might be a lower-cost 
option and get greater acceptance of TRICARE Reserve Select.
    So there are many options, and we need to really poll and 
assess the Reserve community about what they are doing for 
insurance now and what the options are. Because we don't have 
the right answer. We don't have enough data to make the right 
answer now.
    Dr. Heck. I appreciate that. Three very great options, I 
believe. Do you believe that you will have data in time to make 
a suggestion through this NDAA [National Defense Authorization 
Act] process that is going to probably wind up before June?
    Secretary Woodson. We will not have enough data for this 
cycle. We certainly will have for the next.
    Dr. Heck. Okay. I appreciate that. Again, I thank both of 
you for being here so long at this late hour and answering the 
questions as effectively as you did.
    There being no further business, I will adjourn the 
subcommittee.
    [Whereupon, at 6:05 p.m., the subcommittee was adjourned.]



      
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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                           February 24, 2016

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             RESPONSE TO QUESTION SUBMITTED BY MR. O'ROURKE

    Secretary Woodson. Primary Care: Current MHS capacity targets for 
primary care are for enrollment of 1,100 per adjusted full time 
equivalent (FTE) primary care managers (PCMs). Services standardize 
adjustments per FTE PCM in order maximize clinic provider availability. 
Current average enrollment per adjusted FTE PCM is 1,053; therefore, 
Services are open to enrollment overall as long as the MTF is able to 
provide access to care within MHS standards. The Services are working 
to increase capacity as follows:
      Reducing the Utilization Rate/Demand: The major variable 
in increasing capacity size is utilization [(number of duty days per 
year x 21 encounters per day]/utilization rate). Current MHS 
utilization or demand is over 4.1 visits per year, which is 187% higher 
than the national average of 1.43 visits per year in an insured 
population, per the CDC. If utilization/demand can be reduced, capacity 
will increase; conversely, if demand increases, primary care capacity 
will decrease. Numerous utilization/demand reduction efforts are 
underway. The MHS' main strategy to reduce unnecessary utilization is 
through optimization of the Patient Centered Medical Home (PCMH) model 
of care. The primary utilization reduction initiative is PCM 
continuity; a patient's continuous relationship with his/her PCM 
reduces demand because the PCM is aware of and can proactively address 
patient demand for care without multiple unnecessary appointments. In 
addition, PCMH uses team-based workflow to maximize PCMH teams' ability 
to meet patients' needs; the Services are ensuring teams have 3.1 
support staff per PCM. The PCMH model also includes embedded behavioral 
health specialists, physical therapists and clinical pharmacists to 
provide high quality comprehensive care to enrollees. PCMH is also 
maximizing the use of virtual health opportunities, such as telephone 
visits, secure messaging and the nurse advice line to meet patients' 
demand for care beyond face-to-face appointments with the PCM. The 
direct care system's most mature PCMHs have reduced demand for face to 
face appointments by using the strategies identified above and have 
increased capacity above 1,100 enrollees per PCM.
      Increasing number of direct care appointments: Simplified 
Appointing guidance increased the number of appointments available per 
duty day by 24% (an additional 11K appointments per duty day.) In 
addition, the Services hold MTFs accountable to schedule the target 
number of appointments based on an analysis of demand.
      Expanding Operating hours: MTFs are analyzing demand by 
day of week and hour of day to determine whether a positive business 
case exists to expand or implement extended hours in PCMH and/or MTF 
urgent care. Many MTFs currently offer extended and weekend hours (see 
below). All Services are exploring extended hours, based on an analysis 
of patient demand.
      Telehealth: Additional efforts are underway to deploy 
telehealth initiatives to increase capacity. For example, a pilot is 
underway to allow virtual PCM appointments using telehealth technology. 
In addition, a pilot is underway to allow remote home monitoring for 
patients with chronic disease; remote home monitoring will provide 
quality are using telehealth technology and increases convenience to 
the patient who does not need a face-to-face appointment.
      Provider Distribution: The Services are moving primary 
care managers (PCMs) from areas where no additional enrollment demand 
exists or where there is excess primary care capacity to areas where 
there is insufficient capacity to meet appointment or enrollment 
demand.
      Community Based Medical Homes (CBMHs): The Army is 
expanding its successful CBMH program, which implements stand-alone 
primary care clinics in population centers where beneficiaries live. 
For example, Harker Heights CBMH is located in a town near Ft Hood, 
Texas, where many beneficiaries reside; referrals generated support the 
specialty care base at Darnall AMC. The Army has implemented 20 CBMHs 
and has plans to implement 3 more in FY16 as well as to expand eight 
existing CBMHs due to their popularity with beneficiaries in FY17. 
Staffing CBMHs after hours, with overtime GS or active duty rotations, 
has increased additional capacity, as well (see below).
    Specialty Care: The process to standardize specialty care to 
improve processes and increase capacity is underway through the new 
Tri-Service Specialty Care Advisory Board (TSSCAB). The TSSCAB is 
responsible for executing MHS Review Action Plan 2, which outlines MHS 
requirements to develop standard processes for specialty care in MTFs. 
Based on the MHS Modernization study, which compared specialty care 
productivity to 40% of the MGMA standards, there currently is capacity 
in MTF specialty care; however, making this capacity available will 
require standard processes and supporting guidance be developed, 
similar to what was previously done in the MTF primary care product 
line. Specialty care plans to further increase available capacity 
include: Deployment of enhanced access tools such as telehealth and 
secure messaging in specialty care clinics
      Development and implementation of Tri-Service manpower 
standards for support staff and support staff protocols to increase the 
product lines' ability to meet the needs of more patients through team-
based workflow
      Development and implementation of Simplified Appointing 
Guidance for specialty care product lines, which will identify the 
number and types of appointments expected per full time equivalent per 
day/year. Simplified Appointing Guidance in primary care has increased 
the number of available appointments per duty day by over 20%.
      Implementation of Specialty Appointing and Referral 
Guidance, in collaboration with primary care. The guidance is in final 
coordination with MHS governance; implementation is expected in CY2016. 
The goal of the guidance is to provide the patient with a confirmed 
specialty appointment date and time before the beneficiary departs the 
MTF after receiving a referral from a primary care manager. The 
guidance includes requiring the use of Tri-Service referral guidelines 
in primary care, to reduce unnecessary referrals, which will further 
increases specialty care capacity.   [See page 10.]
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            RESPONSES TO QUESTIONS SUBMITTED BY MS. STEFANIK
    Admiral Bono. By law, TRICARE is required to adopt Medicare's 
reimbursement system to the extent practicable. TRICARE adopted the 
Outpatient Prospective Payment System in order to comply with this 
statutory requirement to reimburse like Medicare. However, TRICARE did 
create a General Temporary Military Contingency Payment Adjustment 
(GTMCPA) for those hospitals that served a disproportionate share of 
Active Duty Service Members and Active Duty Family Members.
    The process to apply for a GTMCPA is transparent and available to 
the public through the TRICARE web site at http://
manuals.tricare.osd.mil/pages/Search.aspx, as well as, education from 
the facility's respective Manage Care Support Contractor (MCSC). There 
are no bureaucratic challenges preventing facilities like Carthage from 
navigating through the process.
    Per the TRICARE regulation, 32 CFR 199.14, a GTMCPA is ``available 
at the discretion of the Director. . . .'' Carthage submitted their 
initial GTMCPA request in September 2013. DHA provided a response in 
December of 2013. While there are no official appeals of the GTMCPA 
decision, TRICARE has shared detailed claims data on which the 
decisions are based with hospitals who fail to meet the GTMCPA 
criteria. DHA met with Carthage and the MCSC in January 2014 to resolve 
any discrepancies. In addition, on two separate occasions DHA shared 
the detailed claims data with Carthage and provided an opportunity for 
feedback. There was no communication/feedback from Carthage for a time 
period of approximately 18 months.   [See page 12.]
    Admiral Bono. The process is very transparent. It is outlined in 
the TRICARE Reimbursement Manual (TRM) that is available to the public. 
The starting site for the TRM is at http://manuals.tricare.osd.mil/
pages/Search.aspx.
    Hospitals who serve a disproportionate share of Active Duty Service 
Members (ADSMs) and Active Duty Family Members (ADFMs) may qualify for 
the discretionary payment. The exact numbers/requirement is found in 
the TRM language. Upon request by the facility, TRICARE will provide 
detailed claims data that was used to evaluate the hospital's GTMCPA 
request. Further, the TRICARE Regional Office also serves as a liaison 
between the requesting facility and the MCSC in the event the facility 
expresses concerns, has questions regarding the process, and needs any 
assistance regarding the qualifying criteria or their application for a 
GTMCPA. The hospital has assistance from start to finish if they have 
questions about the process.   [See page 12.]



      
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              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                           February 24, 2016

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                  QUESTIONS SUBMITTED BY MR. O'ROURKE

    Mr. O'Rourke. During questioning, the Honorable Jonathan Woodson 
stated that patient capacity at military treatment facilities (MTF) is 
market-dependent and differs based on whether the care is inpatient or 
outpatient in nature. Based on this, we have the following questions: 
First, what is the current inpatient capacity for each MTF?
    Secretary Woodson. The Army has 1,810 current beds. Army inpatient 
capacity by MTF is provided below:

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 Navy Medicine currently has 842 beds. Navy inpatient 
capacity by MTF is provided below:

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 Air Force currently has inpatient capacity of 664 
beds, which includes staffing 166 beds at Walter Reed and San Antonio 
Military Medical Center. Air Force inpatient capacity (staffed beds) by 
MTF is provided below. The second columns reflects the results of the 
Air Force's staffed beds'' analysis. Also, highlighted in ``green'' are 
the non-AF MTFs where the Air Force Medical Service staff beds and the 
quantity. The analysis is based upon the AFMS FY17 PB MPPT file.

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 Current NCR MD inpatient capacity is 390 beds. 
The NCR MD current bed capacity by MTF is listed below.

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 Mr. O'Rourke. How do you expect the inpatient capacity to 
change for each MTF in the event that the Department of Defense's 
proposed FY 2017 TRICARE reforms were to be implemented in their 
entirety?
    Secretary Woodson. Army: The Army expects capacity to decrease by 
150 beds in FY17. Three MTFs are transitioning to outpatient 
facilities, representing a loss of 69 beds (Ft Knox, Ft Sill and Ft 
Jackson). Whether additional capacity will be available for new 
patients will be based on a confluence of both the Choice Act (pulling 
people away from the MTFs) and TRICARE Reform, which if approved, 
financially incentivizes beneficiaries to seek care at the MTFs.

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 Navy: Since the FY17 TRICARE reforms would primarily impact the 
delivery of private sector care, Navy Medicine anticipates minimal 
effects to MTF inpatient capacity. MTFs will continue to utilize its 
eligible beneficiary population enrolled in a managed care option, 
self- managed option, or TRICARE for Life, to optimize its inpatient 
and outpatient capacities to sustain critical medical skills and 
capabilities. The proposed reforms attempt to support military 
readiness and funnel beneficiary care to the MTF while balancing 
beneficiary choice, access to care, and cost containment. The proposal 
expands choice for non-active duty beneficiaries to choose a health 
benefit option that best meets their needs. The co-pay/cost-sharing 
structure is also modified to provide incentives to select the managed 
care option and highlights the MTF as a preferred place of care. 
Implementing an enrollment fee to participate in TRICARE for Life will 
also have minimal impact to MTF inpatient capacity and can continue to 
utilize the TRICARE Plus program and other recapture of care mechanisms 
to support military medical staff readiness and training.
    Air Force: Enacting PB17 would not change inpatient capacity at AF 
MTFs. If fully enacted, the plan would maintain current workload levels 
at our facilities by preserving TRICARE Prime as a healthcare option 
for retirees and their family members. The plan would also continue the 
practice at not charging copays at for care provided at our MTF to 
incentivize patients to seek their care at the military facility.
    DHA (NCR MD): PB17 should not impact inpatient capacity at Walter 
Reed National Military Medical Center (WRNMMC) or Fort Belvoir 
Community Hospital (FBCH)
    Mr. O'Rourke. In what MTFs does the capacity currently exist to 
potentially accept non-TRICARE Veteran's Affairs patients?
    Secretary Woodson. DHA: Currently 97 MTFs (hospitals and clinics) 
provide care to (have capacity for) VA patients under DOD/VA sharing 
agreements. Further, Army Medical Winn Ft. Stewart, GA, and Air Force 
Medical Travis, CA, are examples of 2 hospitals that have provided VA 
patients mental healthcare through the sharing agreement program. FY17 
TRICARE reforms are not the only influencers of VA patients being seen 
in DOD hospitals. VA is experiencing a budget shortfall in non-VA 
purchased care funding currently used to pay for DOD hospitals' 
provided care. Due to this shortfall, VA Directors are making the 
choice to re-direct VA patients downtown. VA is not authorized to use 
Choice dollars to pay for DOD provided care unless DOD MTFs become VA 
Choice (network) providers or legislative relief is given to allow 
Choice dollars to pay for DOD care. Since implementation of the 
Veterans Choice Act and VA's funding shortfalls in accounts used to pay 
DOD MTFs, DOD saw a decrease of referrals to DOD in summer 2015 and in 
2016.
    Army: The Army currently provides capacity to and $50M in 
inpatient, outpatient and/or specialty care to VA beneficiaries. The 
Army does not anticipate having additional capacity for VA patients 
beyond current levels. If the VA pulls its referrals from Army MTFs, 
similar to what is occurring in Air Force and Navy MTFs, inpatient and 
specialty care capacity will be available, which there Army will fill 
by inviting DOD retirees back into the MTFs. Army MTFs currently 
providing care to VA beneficiaries are:
      Tripler AMC
      William Beaumont AMC
      Eisenhower AMC
      Basset ACH
      Womack AMC
      McDonald AHC
      Ireland ACH (Transitioning to an AHC in FY17)
      Keller ACH
      Martin ACH
      Moncrief ACH (Transitioning to an AHC in FY17)
      Reynolds ACH (Transitioning to an AHC in FY17)
      Lyster AHC
      Evans ACH
      Gen Leonardwood ACH
      MEDDAC Korea
      Guthrie AHC
      Landstuhl RMC
    Navy: Excess capacity to see VA patients varies based on Navy MTF:
      Navy MTFs seeing the most VA patients include Naval 
Medical Center San Diego, Naval Medical Center Portsmouth, U.S. Naval 
Hospital Guam, Naval Hospital Pensacola and have capacity in clinical 
specialties that support graduate medical education and/or readiness.
      Within the last year, Naval Hospital Bremerton and Naval 
Hospital Lemoore began seeing VA patients.
      Naval Hospital Camp Lejeune treats small amount of VA 
patients, while Naval Hospital Camp Pendleton and Naval Hospital 
Jacksonville have expressed interest and explored the topic, but not 
yet signed agreements.
      Naval Health Clinic Charleston, Naval Hospital Beaufort, 
and Naval Branch Health Clinic Key West have entered joint ventures 
where the Navy provides space and equipment and VA brings in providers 
and staff who then sees both VA and DOD beneficiaries. Workload 
generated at joint venture sites are recorded in each agency's 
respective Electronic Health Record.
    Air Force: Currently there are 48 active DOD/VA sharing agreements 
involving 6 inpatient and 20 ambulatory care facilities. Included in 
the 48 are 9 Master Sharing Agreements that cover all available 
services at those sites allowing them to see veterans throughout the 
available clinical services based on capacity and capability. With the 
exception of the ambulatory surgical centers most of the sharing 
agreements at the 20 ambulatory care facilities are for education and 
training, laundry services, or other administrative requirements. 
Available clinical services at most ambulatory care facilities are 
generally for primary/family care and rarely include specialty care 
clinics. Based on the availability of clinical services, there are at 
least nine sites that provide significant levels of care to the VA and 
have capacity to see more. The nine sites include: 10th Medical Group 
(MDG) at the USAF Academy, 59 MDG (San Antonio Military Medical Center) 
at Lackland AFB, 633 MDG at Joint Base Langley-Eustis, 673 MDG at Joint 
Base Elmendorf-Richardson, 60 MDG at Travis AFB, 81 MDG at Keesler AFB, 
96 MDG at Eglin AFB, 88 MDG at Wright- Patterson AFB, and 99 MDG at 
Nellis AFB. The seventeen other sharing agreement sites may see small 
numbers of veterans but have only minimal capacity to see more with the 
exception of 779 MDG at Joint Base Andrews who appears to have 
additional capacity as an ambulatory surgical center.
    DHA (NCR MD): Both WRNMMC and FBCH currently provider care and have 
capacity to accept non-TRICARE Veteran's Affairs patients. NCR MD is 
actively engaged with VISN 5 to best determine how NCR MD facilities 
can assist the VA in meeting demand for specialty care and inpatient 
services.
    Mr. O'Rourke. Highlight specifically as it pertains to capacity in 
mental healthcare treatment.
    Secretary Woodson. Army: The Army does not anticipate having 
additional mental health inpatient capacity for VA beneficiaries
    Navy: Currently, within Department of the Navy, there is limited 
excess capacity in mental health that could be offered to VA 
beneficiaries based on current access to care priorities.
    Air Force: Information is provided on two MTFs participating in the 
current DOD/VA agreement:
      Travis--Currently capped at 8 beds due to a temporary 
nurse shortage (anticipate expanding to full 12-bed capacity by early 
Apr 2016). There is a VA sharing agreement already in place. Capacity 
would not change without manning solutions, particularly provider 
staff. Demand exceeds current capacity. Travis accepts AD and VA 
patients on a first come, first served basis.
      JBER--Capacity of 10 beds; limited by current provider 
manning. This capacity exceeds current demand of 2-3 inpatients; 
therefore, potential exists to provide beds to VA patients. This is 
also a DOD-VA Joint Venture hospital.
    DHA (NCR MD): In the NCR MD, there is little excess capacity in 
mental health available and would need to be prioritized based on 
current beneficiary demand.
    Mr. O'Rourke. What, if any, additional facilities would have this 
capacity in the event that the Department of Defense's proposed FY 2017 
TRICARE reforms were to be implemented in their entirety?
    Secretary Woodson. Army: Enacting PB17 would not change inpatient 
mental health capacity at Army MTFs
    Navy: Should the proposed FY17 TRICARE reforms be implemented, Navy 
Medicine anticipates very little impact to current mental health 
capabilities and capacity. There are currently 62 Navy MTFs with 
dedicated outpatient or inpatient mental health services.
    Air Force: Enacting PB17 would not change inpatient mental health 
capacity at AF MTFs.
    DHA (NCR MD): Implementing PB17 would not have a significant impact 
on NCR MD capacity.