that do not apply to 97% of the v.a.'s prosthetic purchasing program can still delay needed care for our veterans with limb loss. congress authorized the v.a. to go to great lengths to assure veterans access to prosthetic services in his or her community. if you are a veteran in need of prosthetic care, the v.a.'s been given legal authority to do what it takes to secure prosthetics and or thotics from the provider of the veteran's choice. aopa urge this is subcommit tee do everything in its power to assure that the necessary procurement legislation, authority, and policies remain in place to guarantee the veteran's right to choose their own provider. it seems like we shouldn't have to urge the committee to remain vigilant on this point but we do because aopa shares the concerns of several organizations that the veteran's choice of providers is being eroded. there are real and increasing

barriers being elected to non-v.a.-provided care. for one example, one veteran recently told how he could receive only a high tech knee from the v.a. services department that was more than two hours away, and not from the community-based prosthetics whom he had been caring for for more than 11 years. after much push back from the veteran and his local prostheis, he could receive the knee from the v.a. more than two hours away or his local could resubmit all of the paperwork and it would take up to three months time for the approval to come through. that veteran switched to the v.a. care because he was tired of arguing for his own rights. aopa don't believe this is an isolated incident. i could go on with similar stories. the question is why is the v.a. establishing policies to

undermine the veteran's choice. it's suggested by some cost may be a factor. the average cost of a prosthetic limb fabricated in house is about 25% of what an outside contractor charges. that analysis almost certainly fails to take into consideration v.a. staff salaries, benefits, facilities and administrative cost. community based providers working under contract provide high quality care to veterans at rates below the industry standard that have been approved by medicare. the goal of procurement system for property thetics and orthotics should be to deliver the highest quality, timely care possible to all veterans regardless of their age, geographic location, their ability or willingness to be the squeaky wheel and demand appropriate care. procurement policy shouldn't

serve four basic elements. veterans have access to the provider of their choice without having to overcome artificial unnecessary barriers. veterans must be able to receive timely care from the provider whether that provider is v.a. or an independent practice. the prostheticist should not only have the minimum qualifications sbrut the training and experience to meet the specialized need of veterans. this will be more and more after va length for the v.a. and independent practices as the requirement for master's degree is implemented. contracting and other policies should require the measurement and continuous improvement of veterans' outcomes. until each veteran achieves their highest level of restored function. mr. chairman, members of the committee, thank you for the invitation to testify. and for your commitment to providing the highest quality prosthetic and orthotic care to

our nation's veterans. i look forward to answering questions you might have. >> thank you moros. mr. shaw, you are recognized br five minutes. >> members of the subcommittee, thank you for the opportunity to appear before you today to discuss the department of veteran affairs prosthetic purchasing practices and impact on academy medical, v.a. various fired small business. i'm the managing partner of academy local in florida. academy is a reliable source of supply of biologics and hold as mandatory source federal supply contract ffs contract by v.a.'s acquisition center. my managing partner and i graduated from the nafrl academy in 1991, acad knee medical is so named to pay homage. with me is steven kent our director of government sales and mr. steven schirr, a subject matter expert in the field of

biologics. my testimony is over taken by events. may 23, 2012, the veterans health administration notified vha procurement and prosthetics personnel engaged in the ordering of biological implants on policy on ordering implants using the program. we're very pleased with this change in vha's position which levels the playing field and respects the mandatory source nature of the program. we have worked long and hard to get vh, to adopt this. i have a copy of the policy and would like to offer it in the record of today's hearing. we hope the subcommittee will encourage the v.a. to have it codified to amend the v.a. acquisition regulations. policy of this magnitude should be formalized for purpose to youty as policies are easily forgotten or through leadership changes. this is especially true given there is likely to be a short and long term resistance to this policy especially by purchase

card holderings. one concern we have is whether the vha policy applies to all biological procurements, to include those as government purchase card holders. we estimate 95% of biological implants are acquired by purchase card holders neither trained in the use of ffs contracts. it could potentially result in no improvement for ffs contract holders. how vha will enforce compliance is still unclear. the policy memorandum is silent on this. we hope this new policy will make a difference. we estimate v.a. purchases $175 million annually in biologics. this will be a nice cost savings to the taxpayer. in addition, v.a. makes better use of the schedules program it will avoid competition and contracting act violations. it will be assured of receiving high quality protds and reap the

revenue from the program funding fee used to fund its supply change management operations. what is hurting academy is v.a. use of authority under section 8123 title 38 united states code. although vha's policy for the procurement is welcome news to us and other ffs contract holders the section looms large as long as this authority exists and is likely to be applied to biologics not through the program. we recently learned that v.a. determined and notified this subcommittee trump even the veterans first contracting program authorities contained in section 812 tlefrn and 8128. the unprecedented contracting authorities granted the strxt a. under its veterans contracting program were effective june 2007. it would seem in passing public law 109461 the veterans benefits health care and information technologies act of 2006, congress would have specifically

exempted section 8123 procurement from 502 and 503 public law 109461. but it did not. in light of vha's new policy this needs to be addressed given that nonprocurements will be conducted on the open markets. in closing, the news of vha's new implant procurement policy gives us hope and levels the playing field. for that we are grateful. we seek only to be a reliable source of biological implants, treated respectfully and give at any opportunity we have earned to be v.a.'s industry partner. we have no ax to grind. we simply have a business to run, and will work to create an environ wmt trust, mutual respect and cooperation as the v.a. provides service to america's heroes. thank you, sir, for your leadership and that of this subcommittee. we hope to match our private sector success in the v.a. market place. we never sought an adversarial relationship with v.a., seek to be trusted with v.a. and give at

any respect and opportunity we have earned. thank you for holding this hearing, mr. chairman. we'll be happy to respond to questions you or your members may have. thank you, mr. shaw. we'll now begin with questions. i'll yield myself five minutes. mr. shaw, who is the national regulatory agency for biologics throughout the country? >> if i may, it's -- the fda is not a formal regulation body, it's the american association of tissue banks, it's a voluntary regulatory body. >> okay. could you briefly explain some of the criteria that the association of tissue banks aatb has to ensure patient safety? >> yes, sir. the aatb monitors that there are safety regulations such as testing for each donor through a variety of tests, the cancers,

the hiv, hepatitis, koreanings to make sure each done ser safe to move on to processing. >> i'm sorry, let's go back. mr. scherr and mr. kent, would you tell us where you are from and who you represent. >> yes, sir. i'm steven scher with academy medical. i'm a subject matter exsbert a long history in biologics. >> i'm steven kent from wellington, florida and i'm the director of government sales for academy medical. >> thank you. how can a surgeon or v.a. facility be assured that the biologics they purchase are indeed safe for the patient? >> all biologic companies that are in the hospital systems and are to serve patients and are implanted in patients, follow the aatb guidelines, therefore all are deemed safe. >> how can or do biologics vary

from manufacturer to manufacturer? >> all biologic companies share -- there's just a handful of donor facilities that supply the processing plants. so, pretty much they all come from the same sources. where do biologic manufacturers procure their donors? >> again, there is a handful of donor facilities that dispense and supply the donors to the processing facilities. and move on to the biologic companies. >> where exactly do these donors or cadavers, where are they procured from? do they come from corner countries or the u.s.? >> part of the aatb they all come from the united states. >> how do the various biologics manufacturers work cohesively

together? do they comingle? >> they certainly do. they all share in the donor pool. >> do they share and swap products and brands? >> absolutely. >> with regard to traditional biologics what special training, experience, tooling or technique is required on behalf of the surge tune use the various biological brands. >> to my knowledge all pretty much follow the same technique guides. with little variance. >> regardless of the supplier. >> correct. >> so, to clarify you're stating that the surgeon's ability and technique to use brand a over brand b is identical, not altering the surgeon's skills in any way at all that would jeopardize patient safety. >> it's how it's prepared in the or, whether it's rinsed or soak soaked, demineralize bone prad

might be a variance how many minutes it is. it's a small difference. >> mr. or ork s, you talked about four elements of care that in your experience comprise quality. how does the v.a. oversee, supervise and hold community based providers accountable for providing quality care to veterans and how does that compare to the way prosthetic t prostheticists. >> it's the system that goes back to a clinic-based system. there aren't really measured outcomes if you will, from the time most veterans begin their care, at least in the -- i would say my experience is solely with the v.a. system. they will be seen in amputee clinic, for example, the

prosthesis is prescribed. they receive their service and go back for a check. there is no objective measure other than asking the patient to walk around a little and demonstrate that they can, in fact, move with their prosthesis but there aren't functional outcomes tied to the care provided either in-house or outside the system. >> i have additional questions and we may have a second round for this panel. that the time i'll yield to my colleague representative donnelly for his questions. >> thank you, mr. chairman. and to all of you thank you for your service to our country. and mr. shaw, my nephew is a 2005 academy graduate and flew helicopters in iraq and as a noter dame graduate you have been unkind to us in football these past few years. thank you for being -- sorry?

>> that's a long time coming. >> yes, it was. >> i point out that ohio state's trying to be unkind. >> and it was well deserved, mr. shaw. your players were extraordinary to watch every time i had the chance. i wanted to ask you, section 8123 prevented the v.a. prom providing veterans with assisted devices they may need? >> i'm not sure i tuns question, sir. >> okay. have we been able to get the best products that the vets have needed through section 8123 or do you think there are some better ways? >> i think as we've discussed, there really is little difference in the products. what we've tried to express to the v.a. is that there is no difference in biologics and products we have on federal

supply schedule there is no difference. or story is that we feel like as ffs contract holder we can provide these same if not better at a more affordable price to the taxpayer. >> mr. oros, you indicated that you disagreed with the inspector general's audit which indicated the average cost of a prosthetic limb by contractors is more expensive than if the v.a. made it in house. what do you consider the average cost of a prosthetic limb made by contractors compared to the v.a.? >> it's hard to answer that because when you describe a prosthetic limb you could talk about a simple below the knee which might run to 8 to -- >> on average. if the v.a. made it or -- >> i think they would be remarkably similar. if it was a true apples to apples comparison. because the reality is the component costs are, should be relatively similar from the

manufacturer to either the v.a. or the outside clinician. there are industry standards for what the practitioners make that should be relatively similar. benefit costs should all be relatively similar. >> where do you think the comparison like the audit, where do you -- what do you think they are missing? >> well, the hearing two weeks ago, the i.g. said it was actually footnoted in the report that it wasn't meant to be an apples to apples comparison because and i'm going to paraphrase, the v.a. didn't have really good assessment of their own internal costs. as someone who looks at you know, our business is pnls pretty closely. my sense is that without knowing those costs, for human resources et cetera, that's a big component. >> let me ask you this. if there is no handle on the -- if there is no estimate of the

cost as you said, does any comparison even stand up then if the numbers are not the same? >> in my mind no. >> i field back. again, thank you all for your service to the country and as you well know, the most important thing we can do is to make sure that every veteran is served properly. thanks again for what you do. >> i thank the gentleman for yielding back. our colleague now from michigan. >> thank you, gentlemen, for coming and testifying today. i have a couple of questions. mr. oros, are the members, the people that work at the v.a., are they members of your association too? i mean do they have the same access to the same prosthetics as the people on the outside? >> yes. they should. >> because one of the questions i have, i've done amputations and had to have people take care of it. of my patients.

and one of the things you brought up in your testimony was sometimes simply the fact of going to the v.a., sometimes is a travel issue. or a comfort issue with the orthodist. do all of these people have contracts with the v.a.? are we having to deal with this special section a lot with dealing with outside orthodists? >> the majority of v.a. care is provided outside the v.a. system. through contracted, independent contracted providers. >> i'm trying to verify the v.a. and the other providers are providing comparable care, they have the access to the highest quality orthotics and all that. >> the care should be comparable. it's more a matter of the what is in fact the veterans choice. is it receive care locally or go to the v.a. and i think the

position is that should be the veterans choice and it's fine if it's within the v.a. system but it should be >> seems your testimony is indicates sometimes the v.a. seems to discourage the outside presence? >> that's absolutely the case. >> all right. so is it the issue that you think that it's just charging? v. athinks they're charging too much? or they already have their own overhead involved? is there a reasoning for that? >> i guess i can't speak for what the v.a.'s stated intention or unintended, you know, steering of patient care. >> in my district i have a very rural district and people have to travel hours to get to the v.a. facility and especially to contract, it might be further to go to a specialty clinic way outside the area. i think increased access to a local orthodist would be

important. let me ask mr. shaw a question. talking about bone implants for the most part? >> yes, sir. bone, any type of device, milk bone, acl tendons, skin grafts, things of that nature. >> for now we have a contractibility, where before people were, for the most part, going out of the section 8123, is that the issue here? >> yes, sir. we have an sff contract and were one of the few vendors too took the time to get an sff contract and our situation is, as we're going out and marketing our contract, we're coming up against the leadership that is invoking 8123 and saying that because with 8123 they don't have to abide by any contract that our sff contract is irrelevant for the purchase of

biologics. >> i don't believe they're the same thing as prosthetics to tell you the truth. and i would prefer to see most people have a contract. is there a wide variety in the price? tell me the variety. >> we found we're probably 20% to 30% more affordable than some competitors. >> what percentage of the business of the v.a. is with a contractor like yourself then? is it mostly non-contracted? 81-23. >> yes, sir. it's maybe 97%, off contract, versus our small 3%. we estimate that the v.a. spends about $175 million annually in biologics, and to be honest, there isn't -- there hasn't ever been a vendor putting these products on contract. and we've gone through that arduous task of getting it on contract and letting them know we're out here and as a veteran owned business, we want to be

your partner and it's relatively fallen on deaf ears. >> is there a cost structure between your company and the other companies that make the difference in the price that you're aware of? >> i think ---i can't speak for my competitors and what their situations are, but i think that if you don't have to -- if you're not asking for a discount when someone is swiping a purchase card, they're not going to get one. >> how much different providers are there of these biologic -- >> six or eight. i would say six or eight that are kprashl, comparable, that provide good quality products. >> my question, then, to the committee, would be to see if we can investigate this a little further. not only does it not seem to be an orthotic to me, just the process itself doesn't seem to be quite right. so appreciate your time. i see my time is up. thanks. >> thank you for yielding back. we'll go mr. beryl from georgia.

>> thank you. gentleman, thank you for your testimony. i want you to pitch that hay down real low where goats can get at it. with respect to something is as important as prosthetic devices money is not object. spent to get folk what's they need. there's a noble impulse in that. i understand what you're saying, we're spending a whole lot more, not getting enough for the taxpayers and benefit for the veterans at the same time. is that the upshot of this? >> yes, sir. >> help me understand how you would rewrite 8123 to make sure we preserve that directive, no object as you're trying to replace a vital function for folks. we're not going to cut corners. we're also not going to waste money in the process. how would you suggest we change 8123 so we can continue to take the attitude of we're going to get whatever you need but not waste money. how should we change 8123?

>> sir, i don't think you need 8123. i think most purchases could be -- the federal acquisition regulation does a pretty nice job, i think, nor applications of even prosthetic limbs. >> do up have any concerns that the red tape -- trying to make sure we get stuff off the shelf at the lowest price. bulk rate that kind of stuff isn't going to interfere with folks getting exactly what they need with respect to something that's much more out of the ordinary than something, you know, off the shelf? >> yes, sir. there's a v.a. waiver form. if a client had a specific appliance he felt would specifically need for that patient, there's a waiver form that's quite easy for them to fill out. i think many clinicians would most likely fill it out for the -- for that patient. >> and in that context, how would things work differently than they do right now? if that were -- if we did that?

>> i think -- i think what would happen is, there would be several contracted vendors. most likely your more reputable manufacturers. and that's most likely what most would use on a straightforward case. again, if you have a patient that needed some care, the patient would get the care he needed. >> thank you. mr. orace? same question. anything to add to that? >> there might be a slight difference when it comes to traditional prosthetic care. i'll highlight your first call was to provide whatever's the best for the individual patients, and they're really not commodity-based services. so to that end i think you want to eliminate whatever type of barriers and i don't think you necessarily want to lump it in with something, for example, like biologics. so i would absolutely tighten the definition of 8123 to mean replacement of artificial limbs,

and orthopedic devices. >> how about you, mr. shaw? you feel the same way? >> i would agree. >> think that would accomplish -- >> i think if -- if the committee felt like their needed to be an 8123 and felt 8123 was necessary, i'd limit to limited access and certainly ensure that it could not be delegated down. >> thank you, gentlemen. i only got a minute and a half and happy to yield so much of that time as either the ranking member or the chairman would like to have. i thank the gentleman for yielding back and will agree to a second round. i do have a few more questions and we'll see if our colleagues have any. you testified 80% to 90% of veterans orthotic care is provided by community-wide providers. i'm sure this is an unyielding system of contracts. what in your view is the advantage to veterans of sustaining this contract-based system?

>> it's simply that access to their individual provider. and the reality of the va's network. you're right it is unwieldy, but the fact of the matter is, it's that our injured veterans might be originally cared for in a vod facility, but then they want to live their own life. and to have to go to a v.a. hospital two hours away is more than an inconvenience. >> maybe you've already answered this question. some of your comments, but if you were going to design a system, mr. orace for the va to evaluate the quality of care provided to veterans, what would you do? what provisions would you put in that system to improve the quality of care for veterans? that veterans receive? >> i would start to look at implementation of functional outcome measurement. at the time of the original prescription, then follow it throughout that veteran's care so that you see there has been

restoration of function. that can be done with validated instruments and also technology available that can support that kind of measurement. >> okay. as one of the elements of quality, you described the need to educate veterans about their right to choose a provider for, of prosthetic care. the committee is starting to hear more and more stories about veteran whose say that the va is creating barriers to their selection of non-va care. what has been your experience? have you heard from veterans that this is a growing problem? >> well, i've seen it locally. i mean, i think that's what i can speak directly to, locally we no longer have access, and it's been at least two years that our company, while we've had a va contract has not been invited to that amputee clinic i referred to previously. or really those referrals are and those, the veterans ability to communicate with the prosthetist are all present in the same building.