billion. >> i had another question about maybe third party reimbursement for nonservice connected care, and i have heard that is an issue that the collections are not what they should be. can you give me a situation update with that? >> i think -- so our collections this year are actually up significantly. i have not refreshed that number in my head and i think it's about 7% higher than we anticipated, and we are working hard to improve the collections. a lot of patients who have insurance have a gap coverage, and without an eob they -- >> eob? >> explanation of benefits. because we are not medicare those providers don't pay us.

we are working hard to collect every penny that we can. >> i am out of time, apparently. >> mrs. titus. >> thank you mr. chairman. a lot of that money leftover though, was used quietly to pay for the continuation of the denver project, wasn't it? >> are you talking about the money from the treasury for the last five years? >> wherever you found that. >> it's not available to us. we can't use that money. we thought we could, and it's money that essentially becomes, as i said deobligated as expenses come in and also sometimes that -- there are new expenses for whatever might have happened in, let's say, in '14, and that money is used in that

year, so you can become anti-deficient after the fact, so to speak. so that $1.3 billion was not available to us. we had hoped it would be. i was the staff person that had the cryptic conversation with the house staff back in june and we had -- we thought we had a plan when -- i mean, in my opinion, quite frankly, we are a victim of our success. we have gotten many more veterans care -- >> okay. but where did you find that money for denver? >> the money for the denver project that we talked about for this year came from the current year budget not from previous years' budgets. >> also in that report that you reference, that's where you also listed as a possible solution for denver taking a 1% across the board cut, which in retrospect now seems like not a very good idea when we are so in

the hole now, we could not have afforded a 1% cut, but at that time apparently you thought you could? >> that's correct. >> well there is a lot of teeth gnashing and hair pulling here today, and i agree with many of the things that already have been said but the fact of the matter is we can't let hospitals close and we have to look for flexibility. i think some confusion here, over the difference in the care in the community programs that have been consolidated and choice, and it seems to me there is very little difference from those, aside from naming and contractors and they are both about care in the community. is that accurate? does that mean flexibility is not that big of a problem? >> yes, your statement is accurate in principle. in execution, though it's incredibly complex. i would ask you to look at the

chart that we gave you. what you will find, we have seven different programs all of which have different payment methods and exclusion amounts. i was traveling with a senator that brought in providers and they all complained to me about every program we had except for one, and obviously i knew the reimbursement rate for that program was higher. because you have different reimbursement rates you have providers distorting the system and encouraging one program over another. what we proposed legislation to the chairman and senate is to bring them all under one program and one reimbursement rate and make it easier for the veteran and va employee. >> doesn't that mean the flexibility that you need from the choice program to that consolidated community in the care would make sense? >> yes, ma'am. >> i am trying to help you, ma'am.

>> that's exactly right. >> our community care programs are what we used to call purchase care, and used to call fee, and there are a lot of things in those programs right now that are not covered by choice and will require statutory change to fix that. so long-term care is not covered by choice right now. home care is not covered by choice. >> can you work with us to look for legislative fixes and not just the senate but maybe some of us on this committee? >> we absolutely have. we are working on 13 things that we think need to be changed and we will have made a commitment to sit down from staff from this committee and the senate to address those issues. >> i have been notified that you all are looking at moving southern nevada from the sreuzin 22 to 21, and that means veterans instead of driving four

hours to los angeles will drive nine and ten hours to san francisco. i will be speaking this week later with somebody but i want to put it on your radar because this is something that we are very concerned about. >> thank you. we are trying to simplify the organization structure, but we want to make sure that it's better for veterans and not worse. >> thank you. mr. secretary you have provided us with draft legislative language that would combine -- >> i have not as yet. i made a mistake when i said that. we have not yet provided the consolidation legislation language. >> mrs. titus the biggest difference between the non-va fee care of what sits in there today and the choice, the non-va fee care money so that was the

biggest thing that was done from our standpoint. >> and mr. secretary i appreciate you coming. this is a very difficult discussion for me. i had great hopes we would move forward in the last two years to fix some of these programs, but as i see it you are coming here before us with the most massive short fall in va history, nearly $3 billion. i am not certain, when did you personally know when you had the short fall? >> around the middle of may. >> if i understand the numbers correctly in this particular line item it's approximately 50% over the budgeted amount?

is there a level where they come to you than halfway through the fiscal year to say, hey, we have a problem? do they not come to your attention until they are 50% over their budget? >> when there is budget overage, you try to fix it. >> there's a $10 billion source of funds called choice and what we are talking about -- >> i do know that. i do know that. what i would like to know is why you low balled va care estimates? the actuals -- you came in and projected they be 25% less of the actual figures for 2014. you came in and projected you would save $1.5 billion, and

they would be lower and they are coming in at 1.5 billion over your estimates. on one hand -- >> when did i say that? >> in the budget submission to congress. >> in my 2016 budget testimony. >> maybe your staff didn't tell you this, and that's why i ask about the 50%. fiscal 2014 $6.3 billion of actual spending and you come in and say we need a $4.9 billion, and that's a 24% cut, and then you are surprised to come in and say you are going to spend more than in 2014. you low ball the figures and then you come here and say not only did we not cut $1.5 billion, we are going to add another billion on top of it. >> i am not familiar with the figures you are talking about. >> i don't need your

explanations -- >> as i learned about it we got the information as quickly -- >> mr. secretary! please! >> we're here today. >> mr. secretary, i would like an explanation of why you projected a 25% reduction in this line item and now you are saying you want a 25% increase over last year? >> i am not familiar actually with the information that you have, and i would be happy to look at it. what i can tell you -- >> if i could yield back. >> very quickly, i believe it was the va cfo that did provide that information to us. >> here is my concern, mr. secretary, and i know in our closed door meeting in february you did tell us on this panel, you do support va choice, and then you come in and requested to raid those funds and use them elsewhere, and you hear from others in the department that you have many employees that are not very supportive of choice

and somehow we don't have a lot of veterans moving into choice, and came in well under best of my knowledget -- budget. but then somehow a few months later, we come in and we requests essentially what we wouldn't do for you earlier. i believe your department either low balled purposely or severely created a severe mistake. how can you claim that massive cut? that's what i don't understand. >> actually i don't know what you have, but i can tell you this year we started off with a budget of $8.2 billion for care in the community, and -- >> no you are wrong on that. that's what you spent last year. >> no, i am not wrong on that. >> the budget amount of $7.2 billion. that's what you put in your budget. >> what we budgeted internally

was $8.2 billion for purchase care and we had hopes that the choice program would offset some of that and we took $688 million out to pay for hepatitis c drug. >> out of a $3 billion that leaves 80%, and those are not the numbers you provided to the committee. i would like to see those clarified, mr. chairman. one last thing as well and for the secretary, for everybody here, i know yesterday you apparently told the vfw we were cutting the budget, and that has never happened, and hopefully that has been misreported in the media that you told them the congress cut your budget but i don't want to know how many employees have been fired for the waiting scandal. is that only two? is that correct? >> i think as you know we sought discipline terrym.bssx aq111dwzb%á(b%uqf

have pieces of that office in atlanta and denver. >>o1w so when that was consolidated, it sounds like there was an unintended consequence or inadvertent result in that you no longer had the information that is very regional, and i know in our area, these are individual decisions, and as the secretary

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has a cell phone on that needs to be turned off. we have $150 million that we

september out of the va to give to denver. is that correct? >> yes i believe so. i don't know for sure. >> so you knew there was a short fall coming but you thought it was critical that you go take $150 million and give to denver rather than allocate it -- >> mr. chairman i would not have sequenced it that way. please understand that every tool was being pulled out of the toolbox to do away with this, even to the point where we had medical center directors voluntarily reducing their salary budgets and we had employees willing to give up their compensation in order to meet the need of veterans in the community.

>> mr. secretary, good to see you and thanks for being here today. the problem that i don't understand with this, this is what i don't get, is that it seems like it keeps coming back to the issue of perception you know. you come today, you talk -- you have your stats and your tables and graphs and those kinds of things and we over here we want solutions just as badly as everybody else is because we are fighting for veterans in our district and doing everything we can do lillyhreul legally through a legislative process. and there are multiple hearings that go on every other day in this case, and we looked at the procurement failures and denver costs overruns and purchase card program, waste, fraud and abuse and i have been involved and every time your i.t. chief has been here, and getting answers,

do you need money to upgrade what you have? no, man, we don't. do you have a domain issue that has been increpted? no, we don't. that's what we have been up to and that's the american people have been up to, we have been sitting here and asks questions since the last time we met in a body like this and this issue of trust and issue of verify becomes dominant in my mind. because my fear is that, you know, i love the issue of flexibility. you know i sit with another member -- i am on the armed services committee and we have the dod and they need to be able to move funds and we understand that. there is history we could track that issparent and open, and there's a verifiable need, and my concern is what is going to be the guarantee today when we leave here? we're going to continue our pursuit of all the oversight of everything else that goes on in

the va that the american people hear about as well, and is there anything other than the threat of shutting down medical facilities to take care of the veterans, is there anything else that can be done? number two, if the flexibility of funds is the;gñ answer where is the guarantee? are we going to be looking for a marker that you can say in six months here is what you are going to see and i guarantee it i put the power of my office behind it? >> i think the only guarantee i can give you is one that we're putting on the right leaders in place, and that those leaders are leaders who are trustworthy and we have to earn your trust. i think that's the strongest guarantee i can give you. >> i understand and i appreciate that. with all due respect i accept that as your answer. i guess the problem is this that we have been at this longer than you have been at the table and we are still celebrating the day you came -- fplt and i >> and i apologize for

everything that has happened. >> your confirmation was a year ago and you have been helpful, and we talk about the flexibility and moving funds, and we don't see -- we are the eyes and the ears for a quarter million people and when we still get the information back and still sit here in hearings and don't have the verification on 1,300 people whether they were probation airy or full employees, those are the kinds of things that i want to see you know? it was not too long ago veterans were dying because of intolerable kinds of instances that were exposed here in this place through media of what was happening to the veterans. i wanted to see go to prison. there are people that died that will never be accounted for again, and gross abnormalities were happening at the hands of

the va workers. people are shaking their heads at the billions spent, no reforms and nothingeb♪is working and we still sit here today and i feel bad. >> i wouldn't say nothing is working. more than a year ago we had virtually 300,000 people on wait lists. today we have 7 million more completed apartmentt appointments and wait times, four days for primary care, and three days for mental health. i defy you to find another medical system in the country that has that. we are here and we are all for shining a light on what we are doing because we think it makes us better, and we appreciate your partnership -- >> i understand and i don't want

to make light of the fact this is an easy decision, and in the state of indiana where i live $2.5 million is more than real money and it's shocking real money, and we toss that around, am looking for somebody to say never again will we tolerate what has happened. i want a guarantee going forward that this will stop. the final question that i have for you, when did the president know that there was a crisis in the va? >> i think the president has been working on the crisis in the va for a long time. the first discussion we had is

when we nominated me. >> when did the president know about this hearing we are having here did you tell the president? >> the chief of staff sure. >> when did you do that? june? may? when it started happening? >> i knew about the middle of may, so it was around that time probably. >> thank you, mr. chairman. i yield back my time. >> i do have information your office provided the terminations, and 958 were probationary terminations. i had a town hall meeting this saturday, and as with almost every town hall i have it was dominated about concerns about access to the va and

mental health care access, and we're dead last in passing the ranks. one of the veterans that came up a wonderful young man and incredibly patient and polite that said that friday the day before, he had a mental health care apartment that had been scheduled for sometime, and it was at 9:30, and at 7:30 he was called to say his provider was not available, and nobody called him back and i came to the town hall to let me know and i called carol gram the interim director, and she got him an appointment that week and so i tell you that you show us 17 days. when i ask the veterans in my community, and we did a survey

with the margin of error under 4%, and they say it takes 64 days on average to see somebody. i want to register the note of concern, especially given the wait time scandal we had last year, and i don't think va statistics reflect that. i want to register that with you, and i want to thank you for your commitment to turning the situation around in el paso. it could not be a graver crisis. mr. secretary you said your worst nightmare is a veteran not being able to get care, and i think the nightmare in el paso despite record funding they are unable to get access to see somebody. >> whether it was 16 days, 34% could not get in at all.

i want to make sure we go back and look at the numbers and make sure they reflect the numbers. >> i would suggest we do that. let's get your numbers and our numbers together and understand the basis of your research and our numbers and see if #+f we can sort through it. obviously we have work to do in el paso and you and i have been working and others have been working, and we know that. >> we would love to work with you going forward and implement that or a better idea if you have got one, but we have been at the bottom of the barrel and that transfers into care denied, suffering on the part of the veterans and veteran suicides in my community and this cannot go on. i don't mean to be parochial but i have to on behalf of who i represent, tell you we are in crisis, let's turn this around.

i would like you to talk about -- i don't disagree with your request for flexibility. i think it makes sense. i don't know that i would have a problem long-term if i knew you were goingw fñ to be the va secretary for the next five or ten years to carry it out, but in thinking about a policy and set of rules that we laid down to follow going forward, how do we not create a moral hazard in the aurora funding in the $3 billion short fall and future requests for the va, and -- >> we want to help as we put together the proposed legislation, and we would like to put in the safeguards and restrictions we think would be necessary regardless of who is in office.

we think that's certainly a part of it and i said that in my prepared remarks. the thing we have to work on, we have to find a better way to predict what demand will be. i talked about the veterans accessing care and the 1% being another billion and a half dollars. we have to get a handle on that and get together on forecasting what that will be and building that system. 2014 the crisis was because of the vietnam veterans. if we don't get ready for iraq and afghanistan veterans today we won't be ready for them 20 30, 40 years from now as they age. >> i ask you again to consider an idea, not my original idea, and it was brought by the summers family at a hearing we had on survivors of families, and that suggestion was as you are referring care out, and you

said you had a 36% increase in community care last year, their suggestion, which i think holds a lot of sense is why not refer that care out that is comp prauable to what the civilian community would need, and i use the example of diabetes and the va can become a center of access for quality of care and outcomes. any quick thoughts on that suggestion from the summers family? >> my only quick thought is that patients like to go through the same medical doctor, so if you have a primary care physician you want that primary care physician connected to the specialty physicians. one of the things i want to give as we are giving community care, i am trying to improve the military standing culture among

the private sector doctors and we are working with secretary burwell on this. somehow we have to do this they have to ask the person, you have served, you have been in the military, and there's a different culture and set of questions that need to be asked if they have. >> i think we agree with your position actually. i think coordination of care issue says we need to provide as much of the services as we can but there are some things, and mental health is one of them that you cannot readily go out and buy and we have to be the center of excellence. we have to be able to provide the infrastructure to support the services for veterans. >> i would like to use the basis of agreement to prototype this in el paso if possible to see if it works. >> why el paso? >> i don't know, it just comes to mind. >> i want to wish you a very happy worth day to dr. rowe who

is now recognized for his five minutes. >> thank you mr. chairman, and a couple things, obviously, mr. secretary, you are here for the same reasons we are here and that's to provide the highest quality of care for veterans that we can provide in this country, as they have earned it. we have, as a committee -- i have been hear 6 1/2 years, and we keep providing more and more and more money, and then we have the va come back for more money. we see things like the building in aurora, and moves that costs hundreds of thousands of dollars. i think of a billion wasted in aurora that could have provided va veterans' health care. with i don't know where it went. we had a failed system that spent a billion trying to -- it was way before you tried to get here trying to integrated two

health care records and vanished, it's gone. that's a waste that i see. no way on this earth will you have allowed that to happen at your shop, and no way would i have allowed that to happen when i was the mayor of a local city or in my own practice, i couldn't have survived doing that. what has happened both sides of the aisle want to provide for the care and we feel like we're caught in a trap, and the chairman mentioned bonuses and all the other things we see. when we go back out and go home and talk to the veterans, and to mr. roarke's point, i have to tell you, in johnson city, tennessee, these numbers the mountain home va hospital, they do a fine job. as a matter of fact, i get veterans all the time that tell me they appreciate the care they get there. but no way on this earth primary care is four days, and the specialty care is five days.

i don't know where that information came from. it doesn't exist at our shop. i can tell you, and mr. roarke just pointed and not to beat a dead horse, but not to beat it but that's a fairytale where i live. >> i would like to get information, the veteran, the name, the date where you believe that's not true. we really do need to make sure that our data is -- has integrity, and the only way we can solve that problem is if we work together to make sure we have the right data. antidotes are helpful, but we need names and dates so we can dig into it. >> i have a big and long thick stacks of names and dates where people can't get in. i think that's amazing -- if this is true, i certainly couldn't do this in my own private practice, i could tell you that i couldn't meet that criteria, an average khreupb particular appointment in four or five days, and most doctors are booked up for a week or

month ahead. enough on that. and the choice program, as we envisions it was to get -- help get rid of the backlog, not the va care going on currently, and it was to eliminate the backlog, and if that is going to continue, i think you are absolutely right there ought to be one system of taking the veteran from the va to outsourced care, and i don't think there should be three or four ways to do it, and it ought to be easy. i will be delighted to let you talk to one of the veteran's service officers in hawkins county, tennessee that cannot make sense of the choice program to this day. his comment was it's a joke. i put that in the record his letter to us and he certainly doesn't mind using his name. the other issue i think, that

duh dis disturbed me, $300 million was administration. i don't understand why 60% of the money went to the bureaucracy, and $200 million of it went to get veterans into see a doctor. that just seems a little excessive to me. >> well, that was the amount that was required to set up the network, nevertheless, you know, we are trying to maximize the use of the network as much as we can to provide more care to veterans. >> i think the other thing i would look into and certainly the flexibility has been talked about it and you need -- any ceo needs that to operate their shop, i agree with that. the other thing i want to comment on in the last few seconds i have the morale at va hospitals is down now, and those folks are beat down, and there needs to be an evaluation of the morale of the physicians and so

far. the other thing i will do is bring a bill up as a trial process and a lot of people have done this. when you go to your doctor anymore, not only does an assistant come in but another person, it's a scribe, and a lot of doctors use a scribe, and i would like to do a pilot program and let scribes come in and see if the providers are not more productive. i guarantee they will be. i had my friends who work in the va say they could see 25% more p!j tq p r(t&háhp &hc% >> this is a big issue you ra about the scribe. we are piloting a program with scribes. it's uneven right now but we are in the process of system. we had a lot of people leave for

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to -- for our 7.6 billion estimates expenditures for the year. we questioned that data, right? it doesn't make sense, why would you have 40% more authorizationed and the obligation rate is not up. that's what we knew in february and we sat down and said we have to figure this out, and maybe there is a good explanation and it was not until april that we understood the problem and the magnitude of that problem. >> so that just sounds like semantics to me. >> in what way? >> you knew about a shortfall

sounds like you just don't want to say that word. >> no i think it gets to did we have a solution. i think what we said is we thought we had a solution until about the middle of may and that solution fell apart as we tended to work the different options for that solution. we said that earlier in the hearing. >> mr. secretary, if you can put it in 30 words or lessreason for the shortfall tell me hep c, just give me an idea. >> 7 million more appointments than a year ago. >> that's the reason? >> that's the reason. >> i kind of feel like this is -- have you seen the movie "groundhog day." the committee is sitting in front of you with members of the va talking about a crisis in the va, right? that's a recurring theme.

another request for yet more money, and -- and the most disturbing point to me is a complete and utter lack of accountability. >> i don't agree with you obviously. remember, this money is already appropriated. we are not asking you to appropriate new money but use money that has already been appropriated for the choice program for care in the community to be sent for care in the community. it's already appropriated. >> how are you going to pay for care in the community next year? >> what we are asking for is a part of the choice budget. what we have talked about is let's put together an integrated way of doing care in the community. one budget one way to do it not the seven that we have today that members of the committee already said veterans don't understand and members of the committee don't understand and our employees have trouble

actually executing. >> so where is the accountability is what i am asking for? there is no part of the shortfall that is related to misuse of funds or potential fraud or anything like that? >> there has been no misuse of funds or fraud. >> you have done an audit? have you had somebody do an audit, yes or no? >> we have not had an external audit. >> think that might be a good idea, yes or no? >> not sure that's a good idea. we had 34% for more authorizations in the community. you asked us to make sure no veteran was waiting no more than 30 days and we have done that. >> i have about 20 seconds left. what i think is disgraceful is

for you to insinuate by not giving money nobody on this committee cares about veterans. hold on a second. isecond. i am so sick and tired of that insinuation and i yield back my thyme. >> just to be clear, we didn't insinuate that. we all think you care for veterans dramatically. you pass the laws to give veterans benefits. you pass the budget to pay for those benefits and we have to execute that. when there's a mismatch between those laws and the budget it's a difficult proposition. i get letters from all of you every day trying to give more benefits to veterans and i'm all for it, but we've got to have the money to do it. >> the law also says the secretary must manage within available resources. but the choice act is not a

resource that is available to you at this point. mr. kaufman? >> thank you mr. chairman. >> mr. secretary thank you for your service in the united states army. although the president -- i'd like to think the president chose you in recognition of your experience at proctor & gamble and we had in this committee i think my predecessor on the oversight subcommittee had requested a gao study of major construction projects. and that study was done and published in april of 2013, and it said at that time that there were four ongoing projects. one in las vegas one in orlando, one in new orleans and one in aurora, colorado he listed as denver that they averaged $366 million over

budget. and that there were -- each, on average, was about three years behind schedule. we clearly knew there was a big problem. if you and proctor & gamble were to step in and you had a department that was that dysfunctional, you would have fired the management team, straightened it out and spun it off. when i look at the v.a. your core competency is really benefits to veterans is obviously health care being a significant part of that. construction management is not a core mission. and i would love it if you would re-examine extricating the v.a. from being involved in major construction management projects. i know we'll have legislation today that will reduce the amount -- i talked to sloan gibson about this on numerous occasions. he was at the $250 million

figure. probably just above that would be outsourced to the gsa or army corps of engineers. i think we have legislation today. $100 million. one of the problems in the legislation today is that the different construction administrative investigation board was supposed to be finished with their work in june and will not be done in june. may be done in september. but i just think it's real concerning. we held the subcommittee oversight investigation held an investigative hearing in denver on the aurora projects at our state capitol last year. the chairman was there. mr. landborn was there and mr. harbram was in charge of construction and stuck to this $604 million project number.

and lost on every kont this was a plan over a billion dollars that could not be built for $604 million. the army corps of engineers is in the process of talking over the project. we're talking about a shortfall today and also a half finished hospital that will cost another $625 million is the figure, which is more than its initial projected amount to finish the hospital. and so i would just really ask you, i mean as a veteran that it's just not the core competency of your organization and to focus on health care, focus on benefits and to leave as many other agencies in the federal government do major -- these major construction projects to others. i'd love your response. >> congressman kaufman, as you know, we agree in part with you.

the only difference between your point of view and ours is what that right level is, if it's 250 or 100. but i do want you to know we've takena a lot of steps to improve our construction process. we're doing integrated master planning now. we're requiring that major construction has at least 35% plans design made prior to cost and schedule information. we're doing very deliberate requirements, that we're instituting a project review board, using a project management planning system, that we're establishing a v.a. acquisition office. all of these are best practices that come from the private sector. at the same time we've met repeatedly with the association of general contractors. they had boycotted v.a. we met with them. deputy secretary gibson and i

did. we took them through all the changes we're making to our process and asked them our point of view if we're missing anything and are helping us redesign. wherever we end up with legislation, we are operating against a new and improved process and what happened in denver was regrettable, awful should not have happened, will not happen again. >> we've gone through these cycles before where v.a. was going to try to reinvent itself and wound up in the same position. i think a $100 million ceiling will be a $300 million ceiling when cost overruns are done. i just don't think the culture is going to change. >> ms. brown? >> as we move forward with this construction discussion, when you say general service or army corps of engineer, you've got to have some other input and no one likes the word czar but we have

to have someone because even when i look at the army corps of engineer, i know what happened with katrina n that project. we need accountability. i don't care what agency is hand lung ling ling it. >> you are introducing a new way of talking about contract, care with non-v.a. providers. providers not salaries within the v.a. is that correct? >> yes sir. >> so you are calling this care in the community. and on a bipartisan basis, we are encouraging the v.a. to cooperate more with what you refer to as the community or non-v.a. providers. i think you're trying to change the culture of the v.a. so it's not a conspiracy to disappear the v.a. that's what i'm reading. >> that's why we changed the

name from nan-v.a. care to care in the community. we in the v.a. own that care, even though it's in the community. >> relative to that i've seen others within v.a. health testifying before this committee that the concern, since you do own the care and are ultimately responsible for it, there need to be ways in which the contract providers are also accountable. that care is accountable. i've raised a number of times this issue of health records. you have centralized the billing and payment operations from the regional areas. and you are saying in your testimony, what i've heard, that centralization was -- had a lot to do with driving this shortfall. the misunderstanding that arose from what you knew from the regional billing to the centralized billing. is that somewhat accurate?

>> the requirement in the choice act to centralize the accounting and billing and administration of the choice act helped make it more obscure for us to figure out what was going on. >> so in february when you were seeing a discrepancy between the authorizations and payouts and weren't able to figure that out this centralization obscured -- was obscuring a clear understanding of what your cash position was? >> why siryes, sir. it was a new practice. >> is there any feeling the centralized authorization has resulted in inappropriate authorizations that -- because my concern is that the regional offices have problems with records that were paper records being passed back and forth and complaints that even registered

mail wasn't being acknowledged, and i envisioned stacks and stacks of records that had to be screened in and delays in payments to doctors because of that. has the centralization improved that situation at all? >> so far from what we know the centralization, not just of the choice act but across the payment function of v.a. has accelerated our ability to pay bills. and that's -- >> it's accelerated it but you're not worried about the rise in authorizations is authorizationed that were authorized that shouldn't have been? the accountability is -- >> if anything, centralization usually leads to better security. that's my experience. >> the care is still determined at a local facility level. a clinician seeing a patient decides the patient needs something. puts in that request and the authorization is entered at a

local level by the business office people at that facility into the system in the medical record information is transmitted to the third party administrator. >> there was a great deal about this surprise you know what is information that we have to act on rather immediately. but the overall narrative that i'm getting though is that more money is being pushed out the door appropriately. more veterans are being served. more veterans are finding out about the superior service, meaning you used the example of knee replacement. there's no co-paw and co-pays under medicare are significant. it's a rational decision that a lot of veterans who qualified for both programs are choosing to come to the v.a. can you give me that number again, the increase in the number of people coming to the v.a.? >> it's over 2 million. but what we're talking about is 7 million more apontements in

the last year -- >> i was looking at the increase. >> 7 million more apointments. 2.5 million in v.a. care. >> this was obscured by the change in the choice act and how you did the accounting. i don't like these short notices, but we have to act quickly. more important thing is that we serve the veterans. the good news is we are serving more and more veterans and let's keep doing it. >> dr. winstrom. >> thank you, mr. chairman. thank you both for being here. you spoke today about the increase in productivity. i think you said every 1% of increase is $1.4 billion? is that the number? >> i'm sorry. baseically veterans are getting 34% of their care from the v.a.

any increase of one percentage point of that leads to a $1.5 billion increase in budget need. >> sure. >> that's different than an increase in productivity. >> but on that vain with the increase in productivity, the v.a. is different than a private practice. when you increase your productivity, that's not money coming in. that's money going out, in most cases. there may be some silos there. you know, whereas on the flip side in private practice you increase productivity you have more coming in. that's the reality we all have to face. we ask for more productivity. one question is is that amount of productivity that increase within the same amount of hours? in other words, if i increase my productivity because i work saturdays and sundays that's different than did i increase my productivity during the same amount of time. >> right.

and also what we looked at was productivity disregarding how many more physicians we brought in. as we shared -- first chart we shared on the 8.5% increase in productivity. jim can drill down on this more. >> so the -- we've done it i think, increased productivity in a number of ways. one is what you suggested. we have evening clinics. we have had weekend clinics. and particularly those -- the evening clinics are -- have been very popular with younger female veterans in particular. >> one of the things we need to focus, and this is comparison of private practice to v.a., is how do we increase productivity within the same amount of time. we've talked about poor setups within a clinic. one room when you need four. those types of things. the increase in productivity has to be looked at realistically as well. these are good things to add,

but if we're not getting the caregivers more productive in the same amount of time, then we're hrting ourselves. >> it's a little bit of increasing productivity. and i think one of our biggest hurdles to improving access to care is the physical plan infrastruct are. if we can use that more efficiently by having extended hours, then everybody benefits. >> i had a little frustration before i came here which was before phoenix broke and i said i'll go into clinics with you. i'll go into the o.r. and tell you why you aren't productive and getting more out of your care givers. we've got doctors on this committee that would be willing to partake in that process. the other thing is we talked about third party payments. when people come to the v.a.

i'd love to see the v.a. be centers of excellence that our veterans wouldn't want to go anywhere else. and where people outside of that aren't veterans would prier if to go to the v.a. because we're centers of excellence. we have veterans that come in and have other insurance. and i think -- i'm not sure this has really taken play what percentage of capture, they can bring more money into the v.a. maybe we should turf that out to people who do claims like this all the time. take it out of the v.a. and increase the revenue to the v.a. these are productive things to do. as we see more people wanting to go to the v.a., especially if they have other insurance, that's what we should do. >> our collections are up substantially. we're re-evaltsing a lot of our business office practices, and one of the things we are looking at is whether that collections is something that should be outsourced. >> i would suggest we take bids

from some outside sources on what that would look like. the other thing is at some point we've got to be able to know what we spend per rvu relative value unit. if we don't know that then we really don't know what our cost is compared to when we pay somebody per rvu outside of the walls of the v.a. i do agree with you when you say care in the community. if i was still in practice seeing veterans i'd like to say i'm a veteran provider. >> we should come over and discuss that with you. >> i've been talking about it several times. secretary gubson said we can't do that. i'm tacklking about everything. i'm talking about your physical plant, staff supplies everything involved because that would be very important to this entire committee. >> we'll get you the

information. >> the cost of pampers is not just the paper. thank you for being here. appreciate it. >> dr. ruiz. >> thank you to the chairman and ranking member. when brave young men and women volunteer to serve in our armed forces they swear to support and defend the constitution of the united states against all enemies foreign and domestic. they make a promise to their country, to all of us to keep us safe and protect our way of life. in recognition of that service we promise to care for them when they return. so veterans have served and sacrificed to hold up their end of the bargain and we must do whatever it takes to hold up our end. many veterans in my district who are excluded from the strict requirements of the choice program are unable to receive care in the community for which they are statutorily authorized because the v.a. has begun delaying elective care due to this budget shortfall. as a physician even if a

condition arguably does not meet the v.a.'s urgent and emergent working standard for authorizing nonchoice purchased care it may feel painful and very rgeent to the patient. veterans being deprived of health care they have earned whether due to unforeseen costs, budgetary mismanagement at the v.a. congressional dysfunction or any other problem outside the veteran's control is unacceptable. and it is critical we stabilize the immediate problem and resume serving veterans who need community care at full capacity, prevent any furloughs or facility closures and reform whatever structural systems at the v.a. have failed. you are actively searching for new ways to predict the future needs of veterans. this is a problem due to the success of having 7 million more apointments. but as a physician and public

health expert, i understand that you really can't predict to the "t" the health needs of a growing population, of a system in transingstion that needs to take risk and identify best practices and understand some of these practices may fail and, therefore, we mayed me to ed meneed to learn from those lessons in order to improve. you mentioned the term managed budget, which is what this committee has done in the past. now you're managing to the requirement. i want to warn you the one requirement that you are managing to is only one of a larger piece and complex because whether a veteran gets seen within 30 days is not the same whether they get the quality care the respect that they need and efficiency ever care when

they are being seen. in a lot of our v.a.s, veterans rate their care very highly. so we need to manage to the veterans' health care needs with efficiency. to the point of measuring how much it costs to rvus. the percentage rate of cost due to -- or the amount of cost due to an increase in 1% of v.a. care, that reflects on the efficiency of the v.a. i really want to stress those points. and my concern here is the claims that we're shutting down facilities that it's not being -- and the way it's being presented is that you are holding these v.a.s hostage because you aren't getting your way. and that's absolutely i know with the sentiment, not true. can you explain more what's going on in denver and how this is affecting the care of our

veterans in receiving that care? and, two, one of the concerns is that if you take -- with this flexibility, which i think it's a great idea if you take money from one pot that you already have for another there's always going to be takeaways. so is this a surplus fund? is this -- what is the takeaway that is at risk here? >> the choice care act itself that congress approved was to provide care in the community for veterans. there's a $10 billion appropriation that is to expire in three years. what we're talking about is care in the community. largely another $500 million for hep-c drugs. we'd be using the machine for what it was set aside for, which

is care in the community. therefore, we're using the money for whatever it was set aside for, not another appropriation. the concern about denver you raised is because we have the flexibility of moving around within accounts, they do not affect the health care of veterans in other locations. so in that sense, denver has no impact. as i said we've got to get denver -- the denver medical complex, put that money in the 2016 budget. i'm concerned about that since the original house budget cut our construction by 50%. >> okay. thank you. yield back. >> mr. costello? >> thank you. i would like to associate my comments with those of congresswoman rice and congressman ruiz in terms of some of the frustrations at least what i'm hearing in my

district. and i just want to assure those veterans in chester and montgomery counties that i will work at 110% to make sure that there is no uninterrupted care for veterans out there. and i'm very confident in the leadership of this committee with chairman miller and minority -- ranking minority member brown that we are going to resolve this. so that there is, in no way a diminishment or any interruption in the care of veterans. but i do also want to focus on a couple couple things either in your written testimony or that i've learned that are very very frustrating for me. and i want to start with the issue of technology. i want to talk about technology and your use of the term flexibility. in 2004 the v.a. received $475

million for their i.t. system. gao report comes out and says that there's essentially nothing to show for it. in 2010, congress was going to provide another $400 million for another update and the v.a. pulled the plug on that. you weren't around then. i want around then. but it's clear in the past the v.a. has identified the need for updated technological capacity as well as congress being willing to invest in that. part, i feel of your explanation in coming here with this request relates to the financial systems that are in place as being -- as attributable to why you have a budget shortfall. i don't want to put words in your mouth but that's sort of what you've said in your testimony thus far. but on the issue of flexibility, you indicate and i'll just quote

you on page three. over 70 line items of the v.a. budget are inflexible. freed up they'd give us -- help us give veterans the v.a. you envision and they deserve. are you talking about the entire 170-plus billion budget and is that all the line items? >> yes what we're talking about is very simple. with the choice act we've given the veteran a choice whether thaw they get their car within the v.a. or outside the v.a. those two budgets cannot be commingled. i have to predict how that veteran makes that choice. >> right. >> or come back to you each week and say -- >> i get where he's going. you don't always know what the medical need is going to be. there has to be flexibility within a budget in order to appropriately address the medical needs of the veteran.

i also feel in a budget of $170 billion-plus, that if that is itemized amongst only 70 line items. 70 loan items for $170 billion really isn't that many line items. in terms of flexibility, the more money we say, here's the $700 billion. do what you'd like with it. i fear the more we get into the issue of $475 million disappearing into an i.t. budget or that didn't really work out over there and so i don't like the aspect of just shifting things around without there being accountability to congress. >> we agree with you. if we're able to do this, we'd work together on what are the restrictions and the budget that should be commingled. in the case where it's the same, i argue they should be comminghf co--mingled. >> next question related to that. you are looking to use choice

money and there's -- i continue to hear that there is just a reluctance by many in the v.a. to sort of buy in, pardon the pun, to the choice program. so congress last session made a legislative determine ags that from a policy perspective, the choice program was something that not only did we want to offer but wanted to encourage through the allocation of dollars. i feel because some in the v.a. either don't like that program or feel that sentenceince there's money left over and it was popular to institute that legislation that we can take it out of the popular programs and shift it elsewhere and it gets back to the issue of accountability and transparency. while you use the term flexibility, i also feel we could be paying too much of a broad brush when using the term flexibility for budgeting purposes and we'll lose the

accountability we need and haven't had and is the source of some of the problems that cause us to be here today. >> we're very much in favor of care in the community. as you would expect then, we're in favor of the choice program. if you or any of your veterans are enkonterring v.a. employees who are not in favor of that, we need to know about that because that would be wrong. we're trying to create a culture where we don't care where the veteran gets their care as long as they are getting great care. >> final point talking about a new i.t. system in order to better handle budgeting and planning, from my opinion, muss management ment -- mismanagement can be very -- i'm not accusing you of mismanagement. it can be vis ubl and not visible. on the i.t. side it's easy to

mismanage things and for those doing oversight to not really know about it. on the planning side it's behind the scenes. moving forward as you are talking about coming forward with what your capital needs are going to be for a new i.t. system it has to be thorough comprehensive and the ads hoc, we need money here and a little money the year after isn't going to work. has to be a comprehensive plan so we have confidence in what you are proposing is going to solve problems and over the long term reduce costs. from a management perspective you'll have more transparency and things will be more specific. >> we'd love to have laverne colonel council, our new head of i.t. come hoverover. she's been terrific for us. has experience with johnson & johnson and dell. we're taking the best out of the

private sector. >> thank you, mr. chairman. thank you, mr. secretary for your service both in the army and as secretary in this very complicated transition period. we're hoping it turns out well. my first question is with public/private partnerships. under secretary gibson mentioned at a june 25th hearing that he and you spoke about this and you were in favor. can i ask you that question. do you feel the v.a. could benefit from public/private partnerships? >> yes. one of the five strategies for my v.a. transformation of the v.a. is strategic partnerships. we've set up an office of strategic partnerships. we have a leader of that office matt collier. and yesterday when i was in pittsburgh working in our medical center, there was a wonderful example. i met with the chancellor of the university of pittsburgh the dean of the medical school. we have a great partnership between upmc, a medical

provider, with the university and with the v.a. this is a system omar bradley set up in 1946-47 to ensure veterans get the best care in the country. those partnerships are critical to us. >> thank you. mr. secretary, i have taken a look at this graph. you're familiar with it. the v.a. care and community finisheding ing funding shortfall. it's kind of a straight line. $3.6 billion per month. over even the first few months it's clear you're going to miss the target. why did it take so long given this kind of information or was this not available until just recently? >> actually we went back and reconstructed it. that reflect ss our actual obligations. what we projected earlier was lower. the obligation data was understated earlier in the year.

>> how much of the $3 billion shortfall is due to underforecasting? >> i don't think it's underforecasting. i think we had anticipated that more of the care in the community would have gone through the choice program and been paid for out of choice 802 dollars that were appropriated for the program. that program i'm not going to sit here and tell you it's working perfectly, but it's not. and it's a complex program that was, as it was structured. it is -- we have piggy backed on our c-3 contract to get it done because nobody else in the industry was interested in taking this on. and we have business processes that quite frankly need improvement. we're working on those things. i think we have a choice program

that we -- we and you thought were going to get more care in the community for veterans and make sure that veterans were not waiting over 30 days for care. we have not been able to get -- and maybe some of it is cultural. but we've not been able to get the volume, the number of authorizations through that program we had anticipated. that has not stopped us from trying to be fauthithful to the untention of congress when it passed the choice act, which is no veteran should be waiting. so really what we're asking for is to be able to use funds that were appropriated for the purchase of care in the community through the choice program to pay for care that we purchase in the community that -- not through choice but through our normal mechanisms because we have oversubscribed those programs. >> how soon do you think we can

provide that flexibility? >> we're asking you to do it before you leave in august. so by the end of this month. >> it would require -- >> i yield to the chairman on that, but, yes, i assume it's some kind of bill. >> we would have to authorize the transfer of those dollars out of a finite amount from the choice program. >> well, a painful question can you provide a list of the facilities that will be closed if you don't get that money? or how soon can you provide that list? >> we have an entire plan together which we can share with you. >> all right. >> i would just say when we run out of money, we will move funds

around between facilities. it will affect essentially every facility in the cannotountry. >> thank you, mr. chairman. >> dr. abraham. >> thank you, mr. chairman. let me just start by saying the old adage in business, you kandelcan can delegate responsibility. if you had come to the board of directors at the 11th hour like ms. brown indicated, they'd be incredulous at the shortfall the lack of vision. we understand that everybody in this room, certainly on this committee, you yourself and everybody in this room has the veterans' best interest at heart. and i do believe that. let me hit it just from the hepatitis c.

you and i both know it's a very insidious disease. i was back in my district this weekend and had three vietnam veterans come up to me and say they'd yet to receive anything from the v.a. because i understand that's in the pipeline and i understand the other other hepatitis c drug was only approved in 2013. that gives us a year and three-quarter, two years to formulate plans delegate how this medicine is going to be divvied up and it hasn't been done yet. can you give me some indication as to when our vietnam veterans iraqi and afghanistan veterans can expect some hard data as to if they are at this point of the disease they can get the treatment? >> yes so we -- of course the drugs were not approved by the fda when we submitted our budget. >> i understand that.

>> but -- so we have a plan. we've had a plan all along for the treatment of help sight cpatitis c. >> when will the veteran know i can get treatment? >> we've treated over 20000 veterans for hepatitis c. >> are you basing that on liver biopsy results? how are yodelio you delegating which veteran gets treatment? >> you may be getting over my head on that. we have a severity score based upon whether the veteran has advanced liver disease. >> i guess if you would just get me that information as to how that determine is made. their viral loads liver biopsy. i've treated hundreds, if not thousands of hep and c cases. if you could get me that

information. >> i would be happy to. and today we've treated over 20,000 veterans with hepatitis c today and continue to treat patients with advanced liver disease and patients who can go out into the community, have the choice program as an option to do that. >> and secretary, you said of that 2.5 to $3 billion that you are anticipating shortfall, that $500 million of that would be designated for hepatitis c treatment? for the treatment itself? >> yes. >> okay. i yield back, mr. chair. >> thank you, mr. chaurm. thank you, mr. secretary, for testifying today. with regard to -- they talked about the scribes. these are great private sector solutions and i know the doctor will have more time with the --

it's been proven the doctor will have more time with the patient. i had a town meetding that lasted four hours. people were bringing that up. so you want the doctor to focus on medicine. elaborate on that program that pilot program. >> i've heard a lot of this. i've been to 195 different v.a. facilities and every one i go to there's a different approach. but we're pretty consistent in the operation of a pac team a patient care team. on those teams today we don't yet have a scribe. what jim was describing was let's pilot the scribe so that's everybody on that team can be working on the patient and not just entering information into the medical record. >> i didn't come prepared today to really expect this question, so i will have to take it for the record and get you information about where we are in terms of standing up a pilot

program. >> thank you. any other innovative medical solutions coming from the private sector that you've implemented in the last year? do you have an advisory council set up to work on these ideas to make them more efficient? >> we have more than 25 advisory councils but two i'd like to tell you about. one is our special medical advisory council which is the best medical minds, i think some of the best medical minds in the cannotountry. it's chaired by john kerlin the chief medical officer of hca. he's also a former undersecretary of health. they are proudviding tremendous leadership. on the my v.a. work that we're doing to transform v.a. we've set up an external advisory council. we have many doctors that are part of that including toby

cosgrove, the head of the cleveland clinic, rich carmuna, a former surgeon general and also a veteran. but i have to tell you one of the things they are bringing is not only their innovations and ideas but taking away our innovations. we published an article picked up in medical journals not broadly in the newspaper about a newmonty carlo simulation technique used to predict suicide. if we can validate this model this will be a brackthrough for the v.a. and also a breakthrough for the american public. and a lot of what we've seen and tacked about in the past has been innovations that start in the v.a. part of our $1.8 billion of research spending that you appropriate and we appreciate

that result in positive results for the american people. here's a copy of the article. i'd be happy to put it in the record about this brackeakthrough. and we have more of these breakthroughs coming. >> sir, we need to get the word out on this choice program. you sent out a card. what else have you done to get the word out? and then i have another question with regard to access. >> we've mailed letters to everybody. we've mailed now three letters totally to everybody. first with their card and then follow-up. another flyer we've just developed. we have a website that we have just re-engineered. we've been doing surveys of veterans who use the choice program asking them what they think about the program. and one of the biggest issues they've had is with the website and availability of information.

we now have a redesigned website that's about to go live. it has a live chat so that the veteran, if they can't find the information, they can click the chat button and tacklk to somebody right then and there. we had a set of outbound phone calls to people who were initiallyinitial ly waiting for care more than 30 days. we've tried to do a lot of outreach. >> my constituents are having trouble getting access to the program. for the benefit of the constituents, our veterans, our heroes describe the scenario. they'd call the v.a. for an a aponte apontea apointment? >> if you are waiting more than 30 days for an appointment our

staff will tell you if you cannot get an appointment within 30 days the choice program is available to you. they have information they can hand out to the veteran about the choice program. at the moment, we are both booking an appointment for the veteran and making that referral to the third party administrator. the v.a. can decide which of those two options they want at either time. we're about to change that program so that what will happen is at the time the veteran asks for an appointment we will ask them if they want an apointment in the v.a. beyond 30 days or like to go to the community and then our staff will contact the tpa and get an appointment for the patient. we need to do a contract modification to put that program in place but it's coming down the pike and should improve the coordination and level of

service. if you are in the 40-mile group what happens is the tpa, our health net, already have your information and you can contact them directly. you don't need to go through the v.a. to get an authorization for care. >> we've got to make it easier for the veteran. >> we totally agree. >> thank you very much. >> members, we are not going to do a second round of questions unless there's one that's just absolutely pressing. and with that ms. brown, you're recognized. >> mr. chairman thank you for holding this hearing. as far as i'm concerned, failure is not an option. we've heard a lot of discussion today, and i find it -- well, when i was coming were there used to be a program on sergeant joe frey facts, ma'am, just the facts. i want people to understand the facts before they walk out that

door. i've seen a lot of people snapping pictures and us making different statements. i want you to give us a list of the facts why we're in this virginia situation emergency situation. if we don't act before we go home we'll have a kriscrisis at the v.a. every member needs to understand where we are. this is nothing new. you have been saying it from day one. you need flexibility, and we need to give you the flexibility flexibility. but to sit up here and act like whey don't have 7 million additional veterans coming into the system -- 7 million additional apointments and 4 million veterans, and we have a community program that you've taken taken money and used the choice where you could but it had limited ramifications how you

could use it. give us the facts before any of us walk out the door. >> we will. thank you. >> no, no, i want you to answer it. i want you to go back and check the boxes again. >> what i said was what we'd like to do is get the authorization to use $2.5 billion from the choice program for care in the community and $5005 $500 million for hepatitis treatment and get that before the end of the month because we've run out of care in the community money in the v.a. budget and want to keep our care going for veterans. we think we're in a good place in the sense more veterans are getting more care. 7 million more appointments. three days mental health, four

days. primary care five days specialty care. we have issues we have to work on in other parts of the country, but we're making progress in the right direction. we want to keep it going. or veterans deserve it. >> i'd like to just add that we continue to buy care in the community for patients so they were not waiting more than 30 days. when we ran out of money in our budget to do that we took money out of operations to continue to buy that care. wee we can debate whether that was a wise decision. had we not done that and used it in operations we wouldn't be facing any shutdown or closure, but we would to told people back in june there is no more care in the community. you either waited in the v.a. we continued to buy care for

patients that could not get care through the choice program. and so today, because of that we find ourselves not having money out in the field to be able to make payroll and stuff during the month of september. that's what we're asking today is to be able to use choice money set aside to buy care in the community to pay for care in the community. >> the last thing i know one of the discussions was we're having some problems in certain parts of the country, but some of the veterans particularly those in florida, they like the care that they receive from the v.a. and i don't personally want to see v.a. just going to a specialty. we need comprehensive care in certain areas and i do know around the country it's a real problem getting comprehensive

care. veterans, what is the percentage, from 80 something to 90 something like the care that they get. get you respond to that? >> that is what the vfw study told us. the other thing that we see is veterans have always had choice. remember 81% of veterans have multiple ways of getting health care whether it's medicare, tri-care, v.a. what we're seeing as we improve care is more and more veterans are deciding to xlcome to v.a. the thing we have to be more vigilant about is as we continue to improve care, how many more of those veterans are going to be coming to v.a. for their care? >> all right. thank you, mr. chairman, for this hearing. thank you for the time, and i yield back. >> did i hear you just say that in june you were at the point that you were going to have to

tell veterans you were out of money and there was no longer the ability for them to have care provided for them in the local community? >> to the purchase care program we started pulling money about 290-something million from vera to supplement that pool of money in probably early, middle of june. >> is that an accurate statement to say that veterans would not be able to have care provided for them outside of the v.a.? >> except through choice. >> except through choice. again, you couched your comment to make it appear that you were going to shut the spigot off in june. there's $9 billion-plus finite dollars, which is why we've been so protective of that money. you are the ones that sent out

the notice with the card saying that it's a temporary program. and as you drain the money out of this program and somebody made a budgeting decision and you've already said rightfully or wrongfully, you missed. you thought you could weather the storm and just squeak by but you can't. you got caught. somebody made a bad decision. veterans will still get health care in the community through choice. doctor, is that right? >> some veterans will get some -- >> i understand. look. i know there are some restrictions on dental issues and things like that. but you are making it appear with the statement you just made that as of june you thought you were going to have to start telling veterans they couldn't receive care -- >> i think i said that veterans who could not get care through

the choice program would have to wait for care. >> it's not exactly what you said but i'll go back and check the record. >> i stand corrected. >> we are at a crisis situation. many of my colleagues have already brought that -- scaring veterans that their hospitals are going to close, that we're not going to be automobile to pay their salaries, i think is just that. trying to scare them. we are the ones that will have to make the decision whether or not this money gets allocated. i don't think there's a single person that allocates anything less than trying to solve the problem that exists out there. what we're asking is when these issues arise internal alalinternally the sooner you can inform us, the better off everybody is. we're still not satisfied with where we are with the choice program. i don't think you are either. you have made those comments,

but all hands need to be on deck. with that, i'd ask all members have five legislative days to revise or extend their remarks. with that, this hearing is adjourned. if you missed any of today's house hearing on the v.a. health care and budget, you can watch it again shortly. it will be available in our video library. go to c-span.org. now on c-span3 we're going to take you to another live hearing we're covering today. a hearing on broadband technology. members are expected to focus on investments for such services nationwide. the hearing got under way about

15 minutes ago. we join it now live in progress. >> it's hard to be optimisting that they'll do much better this time around. there have been some changes in the market that make deployment of competitive broadback markets less attractive. corning has developed eded eded bendable fiber. google can target areas where the company has the best chance of earning an acceptable return. while some call thad redlining as it typically means broadband won't be built to the lower income communities, it has been successful in boosting overall project returns. it's a way of ensuring all the children in the class are above average. still, the broader takeaway is the returns to be had from overbuilding, being the second or third broadband provider in a given market are generally poor.

simply stated market forces are unlikely to yield to fully competitive broadband market. neither does wireless appear to offer imminent competition for incumbent wired broadband providers. they aren't engineered for the susstauned through put. and wireless networks earn poor returns on capital. returns for verizon and at&t are middling and for spruntint and t-mobile are poor. neither is satellite broadband a compelling replacement. costs are high and it's the nature of satellite connection that it has to travel 22,000 miles and back such at latency is going to be a problem. overbuilding is going to be somewhat limited given poor financial returns expected and

alternatives are few and far between. that gives rise to the impulse to regulate incumbent networks already there. it's not unreasonable that any attempts to foster competition will be ultimately unsuccessful and regulation of incumbents is therefore, required. the counterargument that regulation will only stifle competition and make the problem worse and will in the process generate unwelcome, unintended consequence is equally well intentioned and supported by historical evidence. there are no easy answers here. i'll conclude by adding a few additional observations about the cable industry. the cable video business is facing unprecedented pressure. cord cutting has been talked about for years and is starting to show up in a meaningful way and soaring programming costs are eating away at profit

margins. the video business and broadband business are opsutposite sides of the same coin. pressure on the video profit pool will naturally trigger a pricing response in broadband where cable operators have greater leverage. it's not intended to be nefarious. it's an observeation that cable providers have benefited that their infrastructure can support two different businesses and each can be delivered at a lower cost than if that were not the case. the aca, american cable association, has made this argument that an effort to restrain cost growth video will be unprofitable and broadband will be left to carry the burden of incremental deployment. even new builds of broadband will become economically challenged and less and less likely. or as i'm quick to add, they'll have to sharply raise the price

of broadband. the pressures in the video business are relatively broad based and attributable to more than just cost inflation and it may be an i'll leave my remarks there. if they sound gloomy, they're not meant to. the u.s. brood band infrastructure is the enemy of the world notwithstanding statistics that would say otherwise. broadband is an infrastructure that is very difficult to support two of and in some cases even one of and the micro economics of the business deserves or demands a eat at the policy table. thank you for your time and the opportunity to testify today. >> their very much, mr. move forget you will need a pull a

microphone very close. >> chairman walden, ranking member and members of the subcommittee thank you for the invitation to testify today. we believe a successful agenda for band width abundance will benefit consumers and the economy. i currently serve as the directser of google fiber city teams. i oversee the operations, business strategy and on ground network to bring speeds to cities where we deploy google fieb across the united states. we have long believed that the next chapter of the internet will be built on gig awidth speeds. think about it in these terms. if today we're riding a bike, having a gig means we could be driver a race car. that's why we launched google fiber which provides connections of up to 1,000 mega bits per

second to make the web faster, affordable affordable, relevant and useful for everyone. in addition, we're in the process of building our network in six other markets and exploring bringing it to others. we built a network from scratch, one street, one pole, one house at a time. this means reviewing infrastructure and working closely with cities to design and build a brand new network. this experience has given us insight into barriers to deployment. i'll outline thoughts on policy changes that could reduce delays and barriers. first, policy makers can ease dwyane gaining access to infrastructure. you need access to existing infrastructure such as poles conduits, on a consistent and cost effective and timely basis. while the fcc has taken

important steps to improve rules related to infrastructure access, our own experience in building new broadband networks demonstrates that more work needs to be done to reduce delays and barriers. second policy makers can ease rights of way. the expense and complexity of obtaining access to public rights of way in some jurisdictions may increase the cost and slow the pace of broadband deployment. policies that facilitate partnerships between entities and companies doing local construction can be beneficial. we see a lot of benefit in instituting the policies which may involve the installation of an oversized conduits bank by any network building within the right of way. third, policy makers can help resolve the challenge of high rates for access to video programming. this would help smaller players in the business negotiate fair terms for access to popular broadcasts and cable content and make it easier to attract and

retain subscribers for broadband networks. finally, i would be remiss if i failed to mention the importance of balance spectrum policies that row motor innovation in the wireless sector. federal agencies should pursue a balanced approach to spectrum reallocation that allows for licensed and unlicensed commercial uses at a variety of frequencies. i will note as we think about deploying gig abit speed networks we need to keep in mind that about 30% of americans still don't use the internet at home. this means they are at a disadvantage when it comes to education, job opportunities, social and civic engagement. so one of our main priorities, we are guided by a couple of main principles make the internet more affordable, make access a part of the community and teach people how to get online. just last week as part of the connect home initiative announced by president obama and hud secretary castro, we committed to bringing google fiber internet service to residents in select affordable housing properties across our

cities for zero dollars per month. we are partnering on community organizations on computer labs and digital programming. we are grateful for your attention to this important topic. thank you again for the invitation to speak at this hearing and share our views on how to remove barriers, give americans more choices and help reach the goal of nationwide broadband abundance. >> thank you, we appreciate your testimony. we'll go to our final witness today, executive director of next century cities. thank you, and please go ahead with your comments. >> good afternoon. thank you for holding this hearing on such an important topic. my name is is deb socia and i am the executive director of nick century cities a city to city collaborative formed just last october. we have grown to over 100 member cities, all of whom are dedicated to ensuring access to fast affordable and reliable

brond band. high speed access is essential to america's future. what can be complicated is making it happen on the ground. cities face a range of technical, economic and political changes, including obstacles at the state and federal levels. more and more providing for this critical need has emerged as a core responsibility for local governments. many cities and towns from around the country are taking diverse and creative steps to secure their internet future. when it comes to providing access to high quality internet everyone has a role to play. it's an issue that spans political party an issue that crosses the urban/rural divide, and an issue that relies on many sectors of our society. there's no single pathway to next generation broadband network. in several of the most innovative solutions have emerged in the most unexpected places. the small towns in idaho and mount vernon washington have

developed a gig abit open access network. local developments, directly involved in building the infrastructure and leasing access to competing private providers. just outside of baltimore they have initiated a partnership with a provider of fiber internet service. residents can now experience speeds at an affordable rate. cities like lafayette louisiana and chattanooga, tennessee have some of the fastest and globally accessible internets available. our membership represents an inclusive cross-section of america from small rural communities such as win tlop minnesota, to large urban areas like l.a. and boston. what unites these mayors is a commitment to the imperative of broadband access for continued

growth and an understanding that local governments are best situated to understand and provide for the needs of their residents. it's an exciting time, a time for creative local solutions to usher in a new generation of innovation as the internet continues to transform all aspects of society. next century city has recently developed a policy agenda showing how multiple stakeholders can help communities develop the crucial infrastructure needed today. consistent with our mission, this new resource provides guidance that will be useful to communities regardless of how they choose to pursue their broadband goals. part of the policy agenda looks at steps local and state government can use to ensure high quality access. locally governments can institute dig one's policies that minimize disruption as well as take other steps to ensure their cities are fiber ready. at the state level, the policy agenda addresses changes such as modernizing state regulations and making investments in the

middle mile infrastructure. we're here on capitol hill today and i wanted to emphasize some recommendations we heard from mayors about steps the federal government could take to help empower local communities. first and foremost congress can encourage competitive local markets through national legislation and other avenues. in addition, you have the ability to provide a national platform for the issue of broadband as necessary infrastructure. hearings such as this help to elevate this discussion and attract national attention to this critical issue. finally, the policy agenda discusses how congress could better require information about available internet access, including speed of connection, price for consumers and areas of operation for service providers. as clear from everything we've heard so far today, the need for fast affordable and reliable broadband internet access is undeniable. innovative leaders in communities across the country recognize this urgent need and

are developing the critical broadband infrastructure that will allow their residents and their cities to thrive. it's evident by the over 100 next century cities i'm speaking on behalf of today, communities that represent over 18 million americans. thank you for providing this platform for communities to share their experiences and develop opportunities for collaboration with federal policy makers. i look forward to working with members of this committee and your colleagues to ensure that communities across the country have the next generation access that all americans need and deserve. thank you. >> thank you for your testimony and insights. i'll start off with questions. mr. to develop a master contract to simplify the placement of wireless antennas on federal buildings and other property. last year the administrator of the gsa said the