>> there's that word again. from your point of view, what barriers are preventing veterans from selecting a prosthetist of their own choice? veterans don't know their rights? >> i think unflaherty with their rights. >> okay. you talked about older veterans a the your practice complaining that there appears to be new administrative hurdles to prevent their continuing to receive care at non-va facilities. can you give us some examples? >> we've seen in our own facility where veterans who have received care from our company for a number of years, and actually i've heard a similar story from other providers where they've gone back to the va for other services, prescriptions, et cetera, and the patient has been, i'll use the word discovered to be an amputee and they've been directed to receive their care within the va system, versus, again that outside provider.

>> okay. i'll yield now to the ranking member and see if he has additional questions. >> doctor, do you have any additional questions? >> i have a few questions. >> you talked about the quality of the orthotics. and you mentioned the masters degree program.

>> uh-huh. >> is it easy to find people that can do this work? i mean, is there a lot of people out there that do this? i'm kind of curious as to the experiences that you have in finding qualified people to do this job? >> frankly, there's probably not enough, between certainly the growing problem we have in this country with diabetes. we've got increasing veteran population. the baby boomers in general. so the need and demand for these services are growing, and the reality if it is we have a limited number of schools. so graduating students for, that have their -- their training in orthotics and prosthetics. it's an issue and concern, yes, but one we face in the private practice as well as within the veterans administration. >> do you think the qualification for the va orthotics are pretty much the same as a private practice person? >> i would like to think they

are. there are two national credentialing agencies, american board for certification and the boc and i believe that both inside and outside the va that they should be -- >> those folks are members of your -- >> i believe so. >> is there ongoing certification required for that? >> ongoing continuing education required. yes. >> okay. i think that's about all i want to ask. thank you very much, sir. >> thank the gentleman for yielding back. >> i thank the witnesses and have no further questions. >> our thanks to the panel. you are now excused. thank you for your testimony today and for responding to our questions. i now invite the second panel to this table. on our second panel we will hear from dr. charles scoville, chief of amputee patient care service at walter reed national military

>> and ms. linda holiday at the u.s. department of veterans affairs office of inspector general. mr. halladay is accompanied by mr. nick dahl, director of the bedford office of audits. evaluations and mr. kent. both of your complete written statements will be made part of the record. you are now recognized for five minutes. >> chairman johnson and distinguished members of the subcommittee thank you for your opportunity to provide a perspective and how the department of defense cares in particular prosthetic cares and collaboration between dod and department of veterans affairs. it's always important for us to look back before we look forward to take from lessons learned. the washington post reported in a few days the army will print a

formal evaluation to give officers the opportunity to return to active duty. this was written in 1951. fast forward to 2003 we repeated this within the military return individuals to active duty. to date we have had over 305 individuals who remain on active duty and over 53 of these have redeployed into iraq or afghanistan. the goal of our program is to return patients to athleticism or their preinjury level of activity. it is a philosophy to have our patient tell us how far they want to go and then we work with them to achieve those goals. dod has a significant lowered patient population than the va. our patients are significantly different than the vast majority of the va patients.

they are young active service members frequently with severe trauma and multiple limb loss that desire and deserve to return to highest levels of function including returning to active duty. they are strong willed warriors who challenge us daily to improve how we care for them. we start would a small program and built it into a program recognized as a world leader in amputee care and meeting our patient's needs. va and d.o.d. have long worked together. in 1945 the army prosthetic research lab was established. in 1948, v.a. established the prosthetic research headquarters in new york city v.a. many of the devices were continuing to be used at the time the current conflict started. in 2004 congress provided $2.5 million for prosthetic device

enhancement and clinical evaluation at walter reed added an additional $10 million in 2005. and the project for upper extremity prosthetic devices program was $30 million. much of the research completed in partnership with the va and would not have been able to complete without the partnership. for example, the advanced arms developed have first been tested in v.a. facilities and then migrated to dod facilities. and the newest research to help our patients return to the highest level of function is a study projected to begin either later this year or early next year with the salt lake city v.a. on integration. this if successful will allow patients who are unable to wear prosthetic sockets to availability to wear prosthetics. why dod has led in the efforts. one of the keys is the

interdisciplinary program, pulling together providers from a wide range to address the basic patient daily needs. while standard of care required in the wounded warrior is to be seen within seven days. we at walter reed have set the standard, they are seen within 72 hours. another factor is the logistics and contracting within prosthetic services. walter reed embedded a warranted contract officer in the prosthetic service which enables same-day ordering of new prosthetic devices with next day delivery. the development of blanket purchase agreements have ensured best value through discount pricing and fixed component costs. a logistics technician provides the ability to warehouse non patient specific items further reducing delay in delivery and care. a third factor in the success of the d.o.d. has been the research efforts with partnerships of industry and the v.a. in

providing new devices such as the microprocessor knee the bionic robotic ankle and power knee. so the department uses the both civilian and contract prosthesis within the facility. and enabling the d.o.d. best value was guaranteed within the contract and in a bid phase of the procurement. the civilian model has wide degree of variability costs. based on the use of not otherwise classified codes in the health care procedure coding system. what non otherwise classified procedures and components they proposal to bill for and what reimbursement they will seek. the representative may reject any bid with a non otherwise specified code determined to be excessive.

a large percent of our patients receive a significant portion of their care within the veterans health care administration at v.a. this is crucial to the success of both d.o.d. and v.a. patient care. the d.o.d. does not have the capacity to provide lifelong prosthetic care for our wounded warriors. we continue to work closely with the v.a. and we have their providers working on clinics at walter reed in san antonio creates a great relationship where we share knowledge and assist the patients as they transition to long-term care within the v.a. system. through our long history of d.o.d. and v.a. collaboration, we continue to meet the needs of our wounded warriors and veterans. thank you. >> thank you, dr. schofield. ms. halladay, you are now recognized for five minutes. >> chairman johnson, ranking member conley, and members of the subcommittee, thank you for the opportunity to discuss the results of the oig report

dealing with how v.a. acquires prosthetic limbs and manages its prosthetics inventories nationwide. we conduct these audits at the request of the house veterans affairs committee. i'm accompanied by the director of the oig bedford audit operations and our director in our atlanta office. before i discuss the results of our work, let me make one thing clear, the oig supports that veterans should generally be able to receive the limb that they and their clinicians determine are best for them from the source of their choice. either v.a. or commercial vendors. our audit focused on the effectiveness of v.a.'s acquisitions and contract administration practices. we did not examine nor do we offer an opinion on the definition of the prosthetics or whether the v.a. labs are the preferred source for prosthetic limbs rather than contract

vendors based on cost comparisons or other factors. in our first report, evaluated vha's practices used to buy prosthetic limbs and examine the procurement practices and costs paid for limbs. we identified opportunities for vha to improve payment controls to avoid overpaying for prosthetic limbs and improve contract negotiations to obtain the best value for prosthetic limbs purchased from contract vendors. overpayments for prosthetic limbs were a systemic issue at all 21 veteran-integrated service networks. we identified overpayments in 23% of the transactions paid in fy 2010. we found vha overpaid contract vendors about 2.2 million of the total $49.3 million spent on prosthetic limbs in that area. the overpayments generally

occurred because vha paid vendor invoices that included charges in excess of the prices agreed to in the vendors' contracts with v.a. we also found that contracting officers were not always negotiating to obtain the best discount rates with vendors. without cos negotiating the best discount rate, vha cannot be assured it receives the best value for prosthetic limbs. we noted that taking action to ensure cos consistently negotiate better discount rates should in no way compromise the quality of prosthetic limbs purchased for veterans. in addition, prosthetic staff should periodically conduct evaluations to ensure prosthetic labs are operating as effectively and economically as possible. we found officials suspended the review of labs in january 2011.

after reviewing only 9 of 21 nationwide. as a result, the prosthetic labs were unsure of its in-house fabrication capabilities and generally lacked the information that was needed to know if the labs were operating effectively and efficiently. our second report provided a comprehensive perspective of the suitability of vha's prosthetic management inventory policies and procedures. we reported that strengthening v.a. medical center's management of prosthetic inventories will reduce costs and minimize risks of supply expiration and disruptions to patient care due to supply shortages. for almost 60% of the inventoried prosthetic items, v.a. did not maintain optimum levels for approximately 93,000 items, we estimated vamc

inventories exceeded current needs for about 43,000 of these items and inventories on hand were too low for another 10,000 items. this situation occurred because v.a. medical centers did not consistently apply basic inventory practices and techniqu techniques. for example, we found vamcs did not set emergency stock levels and automated systems for over 90% of the prosthetic items. in conclusion, until vha improves the acquisition and contract administration practices used to buy prosthetic limbs, v.a. will not have sufficient insurance that its practices are effective or economical. improvements and inventory practices and accountability for these inventories needs strengthening. and vha needs to remain committed to replacing its existing inventory systems with a more modern inventory system

by 2015. we are pleased to see that v.a. is responding to the issues we identified in our reports and that they agreed with our recommendations. v.a. is adopting practices to ensure the financial stewardship of the funding needed for prosthetic care. chairman johnson, my colleagues and i would be happy to answer any questions. >> thank you, ms. halladay. we will now begin with questions. and i recognize myself for five minutes. ms. halladay, did the inspector general use the v.a.'s definition for prosthetic in its recent audits? >> we looked at the definition and i believe in the inventories we really didn't find any real problems with it because it was defined and we could then apply it against the purchases we reviewed. >> your testimony mentions that overpayments generally occur because vha paid vendor invoices that included charges in excess

of prices agreed to in the vendors contracts with v.a. did you find any reason as to why or how the v.a. purchasers failed to obtain best value even with the contract in place? >> well, the question on the best value led to the contracting officers not trying to negotiate discount rates. the problem with the overpayments was because the invoices that were being received were not receiving adequate review by the kotars prior to certification of the payment. they were not looking at the invoices. >> you also discussed how v.a. purchasing agents following the terms of contracts would not compromise, i quote the quality of the prosthetic limbs provided to veterans. would the quality of prosthetic limbs decline if purchasing agents followed their training?

>> no, i don't see any reason for it. >> do you know why prosthetic and sensory service suspended the review of labs last year after reviewing only nine visits? >> you have that one. >> my understanding is that at the time they made that decision, they weren't -- they weren't sure what the need was for conducting those reviews. there was a change in leadership, and i think they probably just decided that they weren't getting enough information from those reviews to continue them. >> okay. why is there such widespread failure to use ecms? >> ecms is not considered user friendly. it does take some training,

we've had some of our staff. what we have found through many of our reviews is that contracting staff use it as a shell, they'll put the basic information in. they won't put all the information in to give you a good understanding of the contract actions that lead to a ward and through contract closeout. >> okay. will the v.a. be able to effectively recover money that it overpaid to vendors? >> yes, they will. because these overpayments were in excess of the contract terms. and we do believe the $2.2 million is a conservative estimate. so i think that v.a. -- the vha staff and dr. beck took action immediately to start looking to recover those overpayments, those moneys can then be reprogrammed for more

prosthetics care in v.a. >> okay. and do you think overpayments will cease in the near future? >> we would like to see a more rigorous review of invoices against contract terms throughout all of v.a. i think that there is the knowledge now that there's a systemic problem, and i think more attention will be brought to that based on the discussions we've had with the v.a. officials. >> okay. turning to the d.o.d., does the department of defense use any mechanism similar to section 8123 for title 38 of its acquisition of prosthetic appliances? >> no, it does not have any similar. >> do you know whether or not d.o.d. allows it to procure items and disregard any other provision of law? >> no, it does not. we've researched that, and there is no similar provision in the d.o.d. >> okay.

are there any instances where d.o.d. doesn't document procurements? whether they're on or off contract? >> none that i'm aware of, sir. >> okay. i think that's all of my questions. i'll yield to the ranking member for his questions. >> thank you, mr. chairman. dr. scoville, when you look at the v.a. processes, what do you think are some of the best steps they can take to provide even better care in this area? when you look at how things are done on d.o.d.'s side and the v.a. side. what are some of the tips you can give us to operate better? >> the d.o.d. and v.a. has a significantly different population. we're treating the newly wounded that haven't been out for a long period of time and can provide the unified care at our

facilities so we don't need to rely on a large nationwide network. the approach that we found very successful was embedding the warranted contract officers within our facility, which is something the v.a. is now proposing or looking to do. what that did was it allowed our providers to have more time to work with the patients. and it gave us the all the appropriate authorities to do the contracting, make sure we were hitting all the requirements, meeting all regulations. >> is d.o.d.'s definition of prosthetics as broad as the v.a.'s? >> no, the d.o.d. definition of prosthetics is an artificial substitute for a missing body part determined to be necessary by the secretary of defense because of significant conditions resulting from trauma, abnormalities, or disease.

and it is limited to artificial limbs, eyes, nose, and fingers. >> so by that definition, biologics would not be included? >> no, sir. >> can you explain why the use of blanket purchase agreements and indefinite deliver, indefinite quantity ensure the best value when acquiring prosthetics? >> these are -- are small business set aside competitive contracts that provide the d.o.d. to look at the cost and make assessment and select the sole source that will provide at the best value to d.o.d. >> this will be for ms. halladay. do you have any opinions as a result of what you've looked into as to items the v.a. may be

including in the definition of prosthetics that would be better suited for purchase outside of section 8123? >> there was a large inventory of prosthetics when we looked at the medical centers. i think v.a. really has to take a look at which items are not unique but just standardized that you would use on a regular basis, and that would be -- take a review to do that. and i understand that the vha is moving in that direction. there's just so many, i think, when it's unique like a limb, an arm, or extension, there are very specific requirements and it has to be tailored to the veterans' needs, and the clinicians will work with the veterans, but when we get into the medical center, there are many items that can be standardized. >> thank you, mr. chairman.

>> dr. banichek? >> thank you, mr. chairman. ms. halladay i have a couple of questions concerning the overpayment. you said on average there was like a $2,300 overpayment. was this systemic through all the hospitals you checked? or were there some hospitals that were paying the right amount and others that weren't? just trying to figure out across the board. >> i think we figured out there was a 23% error rate in overpayments. we looked at the contracts within, and all the actions to buy the limbs and it was systemic across all 21 of the network offices in v.a. >> didn't look at the contracts at all then? that's the impression you get? >> the impression we got was that the contracting officers

technical representatives were not doing a good job of reviewing the invoices once they're submitted by vendors before they're certified for payment. clearly the vha, it's called i think a handbook requires them to do some review of those invoices against the contract terms and that wasn't happening. >> was there some difficulty -- mentioned that the software is difficult to use or call up these contracts. should these people have this at their fingertips as they're doing this? it seems to me that they would be -- >> yeah. >> having these contracts right available to them and they should know all this as they were doing these reviews, right? >> you could get transparency for all the contract actions if you had a good dedication to using the ucms system and you'd be able to find out much more

about the progress and what the contract was and the terms and be able to do these reviews much quicker and better. >> is there a defined training level that -- with a competency requirement for the people that do these reviews that includes something like that? are you aware of that? >> yes, there are. the cotars, a contracting officer technical rep, there is training for that. takes them through a process where they're delegated responsibilities, and the contracting officers will clearly lay out the responsibilities to review such things as the invoices. normally the cotars come into play much more after the award of a contract. so they're looking at that contract administration piece. >> so since your investigation has anyone changed the way they're doing business here? or is this going on the way it is?

has there been a review of the process? has anyone been reprimanded for not following the rules? anything that occurred? >> at this point i'd have to say it's too early for us to assess that. the department has accepted our recommendations in the report, and they're moving forward on some 18 different recommendations to tighten up the controls associated with what we saw as weaknesses in the contract administration. we would have to give them time to get all of those controls in place and we could come back and assess the effectiveness of their actions. >> is there a time line for that then? >> normally we give the department a year after we've issued an audit. and i believe our audits were issued in march. of this year. we'll be looking to do some testing and follow-up work within the next year. >> i'd be happy to see that report. thank you.

>> thank the gentleman for yielding back. we'll go to mr. beryl from georgia. >> thank you, mr. chairman. just to follow a little more. just how is the government going to go back, getting back to the money that's been overpaid? >> could you ask that question again, sir? i'm sorry, i don't believe i heard you. >> sure. i overheard you say that we acknowledge that money's been overpaid because some of the offices weren't scrutinized. some folks got paid something they shouldn't have gotten paid. i think one point, are we going to walk away from it? and i think i got the impression that somehow we're going to be pursuing recoupment, reimbursement. >> yes, it is the responsibility of the contracting officer to make the final determination on funds that have been overpaid and set up builds of collection and work with the vendors to recoup those moneys. >> and what if -- is there any possibility or likelihood it might be difficult to recoup the money because someone don't want to p