Honorable Mike Coffman

Oversight and Investigations

Remarks

“Circumvention of Contracts in the Provision of Non-VA Healthcare”

June 1, 2015

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 employee 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.