VA Testimony of Arthur S. Hamerschlag before Congress on June 18, 2001

United States Department of Veterans Affairs

STATEMENT OF
ARTHUR S. HAMERSCHLAG
DEPUTY CHIEF FINANCIAL OFFICER
VETERANS HEALTH ADMINISTRATION
DEPARTMENT OF VETERANS AFFAIRS
ON
REVIEW OF DIRECT GOVERNMENT COMPETITION WITH PRIVATE SECTOR SMALL BUSINESSES
BEFORE THE
COMMITTEE ON SMALL BUSINESS
U. S. HOUSE OF REPRESENTATIVES

June 18, 2001

Thank you for this opportunity Mr. Chairman. I think the record of the Department of Veterans Affairs ( VA) in support of small business in America is a good one, and under the leadership of Secretary Principi we are taking steps to further improve that record.

The VA has authority to purchase health care resources needed for veterans' health care from community providers and, in limited circumstances, to sell resources to other community entities. This authority is found in Title 38 USC Section 8153.

Let me first say that VA has one primary mission and that is to serve the needs of veterans, and to do so in a cost effective and efficient manner. It is not in VA's interest to knowingly enter into a sharing agreement that would have a negative impact on any community provider of that service.

In FY 2000 VA used this authority to purchase $290 million in health care resources. The five leading resources purchased included: diagnostic radiology ($27 million); organ transplant ($25 million); radiation therapy ($24 million); and primary care ($20 million). We also used this authority to sell $32 million in health care resources to other community entities. The leading resources we sold in FY 2000 included the following: medical space ($8 million), primary care ($4 million) and diagnostic imaging ($4 million). We also sold $2 million in hospital laundry services system wide in FY 2000.

Starting in 1997 VA took several steps to ensure that the agency acted responsibly with the contracting authorities granted and expanded by Congress. These steps included VHA Directive 97-015, and VHA Directive 1660.1. Directive 97-015 was issued in March 1997, and Directive 1660.1 was issued in August 2000. Directive 97-015 established a Rapid Response Team ( RRT) made up of staff from the Office of General Counsel, the Medical Sharing Office, and the Office of Acquisition and Materiel Management. Since 1997 we have required that all sharing concept proposals under 8153 authority must have the approval of the RRT, before negotiations start. The RRT is responsible for determining that that the resource to be sold is consistent with statute, VA policy, and common sense.

As a matter of policy Mr. Chairman, VA is not interested in competing with any other provider of a community health care resource or causing harm to any commercial provider of a health care resource. That activity would not benefit VA or America. We do however, actively enter into and seek community partnerships under sharing authority where the agreement results in improved services to veterans as well as a benefit to other Americans living in the community.

Mr. Chairman, before I discuss the specific case at hand, I want to be sure the Committee is aware of the VA policy. Our policy and practice is simple. If VA becomes aware of an adverse impact to a commercial interest, we will not provide those services. That is what was done when our laundry at Hines considered contracting with Loyola, and will be done for any proposal about which we receive notice of complaint. That is and will continue to be our practice. This example proves our policy is in place and, in fact, does work. Mr. Chairman, you should also be aware that at this time the Hines VAMC does not provide laundry services to any other non- VA entity, and does not propose to do so.

Mr. Chairman, I would be happy to answer any questions.