as a result, on the 10th of june i called on either the secretary or the deputy secretary to testify on the state of va's budget. as a consequence of my calling this hearing staff received a prehearing briefing again at our request on june 18th. it was at this briefing that va for the first time publicly revealed a possible $2.5 billion shortfall in funding. not with standing this briefing there was no mention of a hospital shutdown. on the 23rd of june we received a letter from the secretary citing the looming shortfall of $2.5 billion and also requesting of the appropriations committee a transfer of funds from the medical facility's account to the medical services account.

again, there was still no mention of a hospital systemwide shutdown. and finally at the hearing on june 25th itself there was no mention of a hospital system shutdown coming in august. mr. secretary, i'm disappointed about the slow, painstaking revelation of this crisis by the department that's led by you. i understand their excuses as to why we are in it this position, however, somebody somewhere took their eye off the ball. just as congress established a cap on spending for the denver project that va busted, congress also provided a budget for va for fiscal year 2015 which the president signed into law and it, too, is now busted. in both instances va has left congress with very little time to react to a crisis created by va's own management decisions. while we will not penalize

veterans for va's management, or transparency failures, the days when va can come to congress and just say cut us a check are gone. asking for flexibility without supporting information is not enough. similar to the way a large cooperation board of directors sets a budget and a corporate management implements that budget, the president, 535 members of your current board of directors set a budget and expect you and your staff to carry out the department's mission. that is, to manage the taxpayers' resources in a

fiscally responsible manner. just as emerging circumstances in the private sector might cause a ceo to go back to the board armed with information supporting a request for additional resources or flexibility, we have the same expectation. despite unsupported hints of a problem by the department, that supporting information was not provided until extraordinarily late. we've already passed legislation to take va out of managing major construction programs. perhaps we need it to bring in an outside entity to manage the department's finances. i hope not. i recognize ranking member brown for an opening statement. >> thank you, mr. chairman. and thank you for calling this hearing today to discuss the va's current budget shortfall and the possibility that va may have to close hospitals or ration healthcare. mr. chairman, i know everyone in this room agrees that this committee is committed to providing the resources that va needs to take care of our veterans. we all need straight answers to our questions, how much is needed and why? we are all supportive to make sure our veterans get the care

that they need but yet again we are faced with an 11th hour va budget crisis. we must all work together. va and congress, in order to properly anticipate the resources needed for va. the va must do a better job of predicting requirements. it is important that va starts planning, anticipating what our veterans will need and where they will need it. we have been hearing that this shortfall is due to the increase of veterans coming to get medical care, resorting in more veterans being treated outside of va. i also think it takes care of the veterans with hepatitis c.

many of whom are vietnam veterans who we recently honored in a celebration in the capital should be one of our highest priorities, but i wonder if this shortfall is fundamentally due to lack of planning and forecasting or for a variety of programs which provide services to our veterans. so today let's figure out what we need to to to ensure that our veterans are getting the healthcare they have earned and begin to if i can what steps we need to take, a fix that will prevent any more 11th hour budget crisis. in february the secretary began asking this this committee for more flexibility to move money between accounts that would enable him to run his administration more like a business and better care for the veterans. let me repeat that. in february -- and, again, in

march -- the secretary came right there and asked us to give him the flexibility to run the va like a business so he could care for the veterans. we have over 60 additional accounts that the va has to decide whether or not to allow flexibility. and as we track the vso support in providing, allowing the secretary access to charge towards funds i want to present for the record the va physician productivity is up 8.5% and it gives the account of every category that we are servicing veterans for fiscal '15 and the increase. i want to submit that to the

record. in addition -- >> no objection. >> in addition to that, i want to submit for the record a letter from each of the service organizations indicating that they support the secretary having the flexibility to move this money around. when we did the choice act the purpose of the choice act was to provide services to the veterans. we didn't say what services? just services to the veterans. and the secretary needs the flexibility enable to provide those services. with that, mr. chairman, i yield back the balance of my time. and did you take the va's without objection? >> yes. >> the letters? >> without objection i will accept those letters. and i do appreciate you submitting those letters of support and remind my colleagues that all the veteran service organizations also support my accountability bill as well.

so as we meet later on this week to talk about t i hope that we will keep that in mind. i would remind the members that this committee and the senate as well rejected on a bipartisan basis an attempt to go into the choice fund to fix the budget shortfall at the aurora hospital as well and i think we need to focus, rightly so as ms. brown has pointed out this morning, forecasting and getting a better grasp on what's going on with the dollars that are appropriated to the department of veterans affairs and that's why we've asked the secretary to be here. and i know you had to change your schedule in order to come and i appreciate that. without question once we spoke the secretary said, i will be there, along with dr. schmidt.

so, mr. secretary, you are recognized four your opening statement. i know you also have some charts you brought with you. i don't know it if we are going to post them up here or if people have -- >> we've given them out, mr. chairman. >> okay. all right. thank you, mr. secretary. you're recognized. >> mr. chairman, if i may, i'd like to start -- and i know you would agree with this -- by honoring our five service members who were senselessly killed in chattanooga. on behalf of all veterans and on behalf of our department i extend my deepest condolences to their families, their fellow service members and their friends who grieve their loss. we will never forget their service to our nation nor their supreme sacrifice on behalf of all of us and the freedom that we so cherish. thanks to the chairman and the ranking member for joining your senate counterparts at our most recent four corners meeting at va's central office last thursday morning. and i appreciate this

opportunity to it continue our dialogue publicly so veterans and all americans can understand these important issues. representing veterans and service members this morning our senior leaders of some of our most important part years, veterans and military service organizations and i want to thank them for being here as well. a year ago today at my senate confirmation hearing i was charged to ensure that va is refocused on providing veterans with the highest quality service that they've earned. i welcome that opportunity. for the last year i've been working with a great and growing team of excellent people to fulfill that sacred duty. over the last year since my swearing in nine of the 17 top leaders in va are all new. we have to get the right people on the bus and we have to get them in the right seats on the bus. because of their hard work, va

has increased veterans' access to care and completed 7 million more appointments this year than last year. 2.5 million within va and 4.5 million in the community. so 7 million total, more than last year, 4.5 million in the community, 2.5 million inside va. we've increased va care in the community authorizations, including choice, by 44% since we started accelerating access to care a year ago. that's 900,000 more authorizations than the previous year. while choice has been just a small proportion of that 4.5 million, it's on the rise and utilization has doubled in the last month. today because of growing -- growth in access the department is struggling to meet veterans' needs through the end of the fiscal year. we need your help. you've already appropriated funds to meet these needs, but

you haven't given me the flexibility or the authority to use them. without flexibility we will have no option at the end of july but to defer all remaining nonchoice care in the community authorizations until october. provide staff furlough notices and notify vendors that we cannot pay them as we begin an orderly shutdown of hospitals and clinics across the country. these are unfortunate conclusions to an otherwise productive year of progress. in had fact, we've doubled the capacity that we thought was required to meet last year's demand by focusing on four pillars: staffing, space, productivity and va community care, or what we sometimes call choice care. we have more people serving veterans.

since april 2014 we've increased net staffing by over 12,000, including over 1,000 new physicians and we've used choice act funding to fire over 3,700 medical center staff. we have more space for veterans. we've activated over 1.7 million square feet since last fiscal year and increased the number of primary care exam rooms so providers can care for more veterans each and every day. we're more productive, identifying unused capacity, optimizing scheduling, heading off no-shows and we're also stopping late appointment cancellations and extending clinic hours at night and on the weekends. we are aggressively using technology like telehealth, secure messaging and e consults to reach more veterans. clinical output as you can see in this chart has increased 8.5% where our healthcare budget has increased only 2.8%. we are aggressively using care in the community. the choice program and our

accelerating access to care initiative increased veterans options for care in the community. we provided va care in the community authorizations, including choice, for 36% more people than we it did over the same period last year. a total of 1.5 million individual va beneficiaries. in short, we're putting the needs and expectations of veterans and beneficiaries first, empowering employees to deliver excellent customer service, improving or eliminating processes and shaping more productive and veteran centric internal operations. that's my va. our top priority to bring va into the 21st century. our strategy is paying dividends for veterans. we've increased va care in the community authorizations,

including choice, by 44% since we started accelerating access to care a year ago. that's 900,000 more authorizations than the previous year. between the end of june last year and may we've completed 56.2 million appointments, a 4% increase over last year. and there were 1.5 million encounters during extended hours, a 10% increase. that's particularly important to our women veterans. even with that increase we completed 97% of appointments within 30 days, 93% within 14 days, 88% within 7 days and 22% same day appointments. for specialty care, wait times are down to an average of five face. for primary care, wait times are down to an average of four days. and we have an average of about three days for mental healthcare. so we're making verifiable

progress for veterans and with your support va can be the best customer service agency in federal government. but even as we increase access and transform, important challenges remain and there will be more in the future as veterans' testimony graphics evolve. it's now clear that the access crisis in 2014 was predominantly a matter of significant mismatch of supply versus demand exacerbated by greater numbers of veterans receiving services. that sort of imbalance predicts failure in had any business, public or private, especially when we promise veterans' benefits without the flexibility to fulfill the obligations. so a fundamental problem is va working to a budget, not to the package of benefits and services veterans have earned and have been promised by congress. budgets are static, our requirements are fluid, and changes in veterans' needs and preferences for care far outpace the federal budget cycle.

here is an example. last year on average we added 51,000 veterans to our healthcare rolls each month. this year -- this year the average monthly -- monthly average of new enrollees has been 131,000. 131,000. that's 147% increase. and we welcome them all and i'm sure you do, too. but we can't miss that today enrolled veterans only rely on va for 34% of their care. just 1 percentage point growth in reliance increases costs by approximately $1.4 billion. let me say that again. today enrolled veterans only rely on va for 34% of their care. just a 1% increase, a 1

percentage point increase in reliance increases costs by $1.4 billion. so we're working hard to best serve more veterans but without flexibility we can't provide what they need the way you've directed it. we've reached a decision point. congress can either shape a different benefit profile for veterans or give va the flexibility and money for legislated entitlements. my worst nightmare is a veteran going without care because i have the money in the wrong pocket. i earlier compared the inflexibility we faced to having one checking account for gasoline in your household and one checking account for groceries, the price of gasoline falls in half and you can't move money from the gasoline account to the food or grocery account. well, the inflexibility we're talking about today is even worse than that, it's even more puzzling. i can't move money from the food account to another food account. from a care in the community account to another care in the

community account. altogether we have over 70 line items of budget that are inflexible, yet the veteran has choice. freed up they would help us give veterans, the va that you envision, and that they deserve. we need flexibility to move money from line item to line item just like you would a business. we need flexibility to move money from va community care to choice and from choice to va community care. both are care in the community. we need flexibility to transfer both directions depending upon demand because we will not ever be able to predict the demand exactly. we owe it to veterans and ourselves to be more agile 15 years into the 21st century. it was february we asked for flexibility to move resources. it was may when we again asked for flexibility to use some choice program funding to

provide care in the community. i'm asking again for the simple flexibility to serve veterans with the money you have already appropriated so we can resource the capacity that we've grown. more flexibility will go far toward meeting veteran care and increasing access across the country. money for the denver replacement medical center will be depleted by early october and work on the project will cease unless we receive congressional authorization for the full cost of the project and flexibility in fiscal year '16 to transfer $625 million of our existing resources to the major construction account. we have presented several plans to congress, the latest being on june 5th and we will have an update shortly. we anticipate the corps of engineers will award a contract to complete the facility in october and assume construction management on the project if we receive full authorization and

that flexibility that we seek. to improve community care for veterans we need to streamline an antiquated business processes for purchasing care. for years a variety of authorities and programs have provided community care to veterans and i have trouble holding this up and talking at the same time, but you have had this at your table. today we have seven different programs for providing community care. each one has its own exclusions, each one has its own payment options. it's incredibly confusing. we have traditional va care, we have choice, we have patient-centered community care, we have two separate plans for emergency care in the community, we have something called arch, we have indian health service and tribal health program and these don't include other programs for veterans' beneficiaries. it's all very difficult to understand. veterans don't get it, providers

don't get it, our employees don't get it, and i can tell you from our breakfast earlier last week members of congress don't understand it completely. we look forward to continuing to work with you on an integrated network of va and community care and a single integrated reimbursement system to get the providers we need on board. you see what happens is providers cherry pick the program to get the highest reimbursement rates. on may 1 we sent you our proposal, the purchased healthcare stream lining and modernization act, a bill to make critical improvements in provider agreements and give us the flexibility to provide timely local care to veterans. our proposal modeled on the purchased care authority in the choice act includes protections for procurement integrity, provider qualifications and reasonable cost. flexibility with respect to choice is central to resolving the budget shortfall and

ensuring veterans continue receiving timely care as we strive to meet the 30-day access goal. on top of the $7.5 billion of va community care we already provide, congress added new entitlements for veterans in the choice act, but there are many programs that the choice act doesn't cover. because choice authorizations and community care authorizations are in different buckets, we have a funding short fall, in spite of the fact that both types of care are community care. at the current rate we expect care in the community in 2015 will cost an additional $2.5 billion. new hepatitis c drugs for veterans will cost an additional $500 million. all we seek is flexibility. flexibility through limited authority to use money for

community care to the extent those exceed our fiscal year 2015 budget. to meet these growing requirements next year va needs the adequate funding the president's 2016 budget request provides, but the house proposed $1.4 billion reduction means 688 million less for veterans' medical care meaning as many as 70,000 veterans may not receive care. further, it means no funding for four major construction projects and six cemetery projects and 17,000 veterans and family members may not receive va burial honors. the construction budget was cut 50% and that's at a time when over 50% of our buildings are

over 50 years old. the increase this in requirements were seen anticipates greater challenges ahead. services and benefits peak years after conflicts end. remember during my budget testimony i talked about the fact that we're now seeing the peak years of the vietnam crisis, even though the vietnam war ended 50 years ago. the healthcare requirements and the demand for benefits increase as veterans age and exit the work force. so full funding of a 2016 budget request is a critical first step in meeting these challenges, but we have to look much further ahead for the sake of afghanistan and iraq veterans. in 1975 just 40 years ago the year i graduated from west point, only 2.2 million american veterans were 65 years old or older. that's 7.5% of the veteran population. by 2017 we expect 9.8 million will be 65 years or older,

that's 46% of the veteran population. what does that mean? well, consider this. va provides the best hearing and technology -- hearing aid technology anywhere. medicare doesn't cover hearing aids and most insurance plans have limited coverage at best. so choosing va for hearing aids saves veterans around $4,200. as va continues to improve access, more veterans are going to come to the va because they want to and because it makes financial sense. so it's a foregone conclusion that the cost of fulfilling our commitments will grow for the foreseeable future. it bears repeating that the 2014 access crisis was in part a vietnam debt, not a debt of afghanistan and iraq where service members still serve. so we can't be short sighted, we have to respond today with a long-term view that underlines a commitment to va transformation.

veterans who have preserved our freedom are watching us, as the military draw down continues service members are also watching us. and young men and women who might choose to serve are watching us. they rightly expect us to fulfill our obligations with the same degree of dignity and fidelity with which they put their lives on the line for our nation. if we choose shutdown we fail all of them. given the commitment we made at breakfast last week to keep working together, i know we will honor all of our obligations to veterans and their families of every generation. thank you very much, mr. chairman, and committee. we look forward to your questions. >> thank you very much, mr. secretary. i would like to ask, you talked about additional enrollees this year and i don't have the numbers right this front of me. did you say that was a net number so it would include those

that died or is this just new enrollees? so you had 100,000 new enrollees, how many folks tied and came off the system? >> i don't have the number, mr. chairman, of how many died, but i can tell you that with 7 million more appointments this year versus last, that a lot more are alive than are dead. >> and i understand that, but you made a point of talking about how many new people enrolled into the system and i just want, for clarity purposes, i think it's important not just to focus only on that number. >> we will get you that number. >> that we get a net number. >> we will get you the number of the number of people who died and the number of enrollees. >> and i think the simple question i think that we need to talk about today -- and i know you wanted to focus on the appropriations process which is still ongoing, i will hope very soon that the senate will move and move a piece of legislation so we can get the va budget passed, i think it's critical that we get that done, but if we didn't have the choice program to fall back on today, that $10 billion, $9 billion, whatever

the number is today, how would this problem be solved? >> well, mr. chairman, we agree with you, as we said last week, and as we've said from the very beginning, we very much favor the choice program. the choice program is the shock absorber that has allowed us to care for veterans at a time when -- when more veterans are entering the system and when that care is necessary. you know, the choice program allocated $10 billion for care over three years. we're already spending $6 billion for community care from the current va budget. so the idea that has been propagated in the media that shower' against the choice program or we're gutting the choice program is absolutely positively wrong, proven by the data. $6 billion we've overspent $6 billion this year in in community care. community care is absolutely essential. >> i think the issue is your

hepatitis c drug, $1.5 billion or whatever the number is for hepatitis c is part of the issue, and i don't think any one of us thinks that we should not be providing that drug. in no budget submission that i can recall was it discussed about that, although i'm hoping that somebody -- and ms. brown actually talked about the forecasting -- that somebody was looking at the approval of that drug and that it was coming on and that if it did come on that it was going to cause a significant issue as it relates to the non-va care item, line item he, of $6 billion, which is gone now, it's never been gone before, but all of a is sudden this year it's disappeared. and my question was if we didn't have the pot of money that

you're looking at now to solve this crisis, how would we solve the crisis? >> mr. chairman, what we're saying is that based on the laws that the congress has passed there are certain benefits we have to give to veterans and the budget has to match that. without the choice act the budget clearly would not match the laws that we provide to veterans. remember, as i said, only just about over a third of veterans are using the system and with every new 1 percentage point of veterans who enter the system we're talking about $1.5 billion. i think an incremental $1.5 billion. i think the point you make on the hepatitis c drug is an important one. i talked about the length of budget cycles in the federal government. we started the appropriate appreciation for 2015 because

it's an advanced appropriation sometime around 2015. these drugs were invented between 2013 and 2015. i couldn't have been anticipated. we had two more hepatitis c drugs come out. how do we work together to create the flexibility in the budget cycle so that we can deal with incremental demand of veterans and new special causes like new drugs? and that's what we're proposing to work together with you on. >> according to your staff the veterans health administration has taken a number of steps to curtail the shortfall, including revised guidance on the use of non-va care, halting all nonessential hires, purchasing and travel and pulling salary dollars for medical center can accounts. one area that i see that hasn't been looked at and that is the issue of bonuses. what is sacred about the bonus $350 million bonus pot that would prevent you from accessing

that money and if you need flexibility we will be glad to give you flexibility to use that, too. would you not look at every crevice possible? >> mr. chairman, you probably recall the meeting you and i had in your office where we went through the relative ranking and the accountability steps that we've taken within va. one of those steps as you may recall, is nobody in in the veterans health administration, nobody, is receiving a bonus for 2014. and also the relative ranking that we did of their performance, no one in the veterans health administration received an outstanding rating and i would deny you, as i did that day, to compare our relative rating, our relative performance rating, versus the relative performance rating of any other department of government and the best companies in the private sector because we were following the principles of the best companies in the private sector.

>> and i appreciate the meeting that we had, the information you provided and my time has expired but i want to get for clarity, nobody within the veteran health administration is getting a bonus? >> no executive. yes, sir. >> there's a very distinct difference between executive and the line employee. i just wanted to make that clear. ms. brown. >> thank you, mr. chairman. first of all, let me just say that it was a beautiful services that we had here last week in the capital for the vietnam veterans and, you know, that glitter is very nice, i mean, they deserve it, but they also deserve the services. now, i participated in every choice meeting, every conference, voted on it and the purpose of the choice was to provide veterans services to veterans, their care.

can you expound more on the flexibility that you need? because when i think about it, i think about the gi bill. veterans can go to any school that they want to, so the money follows the veterans. so can you expound on that flexibility that you need, that you've come to congress both openly and in private and explain to us that you need the flexibility. >> yes, ma'am. thank you ms. ranking member. as we've said, there are about 23 million veterans in this country, only 9 million are signed up for our healthcare system and probably only 6, 7 million use it on any given day. so there's an opportunity for every veteran to use our health system and we would like that, but in order for that to happen we've got to have the flexibility to be able to deal with an influx of veterans as we improve care. one of the things that you're probably aware of is if you get

your knee replaced with medicare it will cost you roughly $5,000, if you are a veteran and you get your knee replaced using the va you save $5,000. so to the degree we improve our system and we improve access to our system more and more veterans will enter the system. as we said earlier, every percentage point of veterans who enter the system is going to add another $1.5 billion of cost. with 70 plus line items of budget where we can't move money interest one line item to another it distorts what we do. it causes situations like we're this today and the whole purpose of the choice act was to improve care for veterans. the whole purpose of the choice act was to get veterans' care in the community. what we're talking about is a shortfall in care in the community. so it really defies my logic to understand why we can't use

choice care money for care in the community since that's the reason it was appropriated. the money has already been appropriated, it's sitting there, we'd like to use it to care for veterans. as more veterans come into the system we want to care for them, too. >> one of the complaints or challenges is -- that you talked about knee replacement. so if someone goes into one of the choice programs for knee and the doctor determined that both knees need to be replaced, you condition do it based on exactly how the choice is working right now because that other knee has had to carry -- i mean, i know it's getting technical -- can the medical person explain to me why? >> so i think if the veteran needs both knees replaced under the choice program they could get both knees replaced, it would require a second authorization for the second

procedure that needs to be done. i think that the challenge for us is really, you know, the chairman asked, well, what would we do if we weren't in the situation where we have the choice funds. and the fact of the matter is we probably this year would have done what we always have done, we would have managed to a budget, but we didn't do that this year. we managed to our requirement and that requirement was that no veteran would wait more than 30 days for care. and while we have worked very hard to make the choice program an option for that patient who needs that knee replacement the fact of the matter is today a lot of our care is going -- we're buying it through mechanisms outside the choice program, but we are doing it so that no veteran waits more than 30 days for care. and then accessing the resources to be able to pay for that is, i think, our challenge today. >> my concern is those community programs that we've been working with for years, universities, other stakeholders.

what's happening to those programs? because we've cut the uses of some of those programs because of the shortfall. >> we have curtailed the use of those programs for elective care today. our interest is actually making choice programs the premiere program. to make that program the predominant way that we get care and we have worked very hard with both health net and tri-west to get the 87,000 providers that we have used in the past, some of those are our academic affiliates, to sign up to be providers under the choice program. and for our academic affiliates we offer them both indirect and direct medical education overhead expenses and the reimbursement that they have negotiated with cms. >> thank you. thank you, mr. chairman. >> mr. lamborn, you're

recognized. >> thank you, mr. chairman. thank you for having this important hearing. secretary mcdonald, you've come in here basically demanding $3 billion or healthcare in large part shuts down on august 20th. and i'm just amazed that we're in this position. do you -- do you and your leadership team at the va have any accountability or any responsibility at all for this happening, and if so, how much? >> well, of course we do. and as secretary -- deputy secretary gibson laid out in the last hearing on the same subject, just a few weeks ago, there are many reasons that we are where we are. and i think we all share some of the responsibility, including members of congress. we have a new program called the choice program, it's hard to predict new programs, we have seven different ways of providing care in the community and at the time the choice --

>> okay. >> excuse me, is sir, you want to interrupt? >> yes. let me interrupt because my time is limited. we've described what the layout of the land is, you -- >> i was going to go through the reasons we are where we are and i was going to show you what accountability we have. >> okay. do you have any role in this? >> we all do. >> is what i'm getting at. >> we all do. one of the first things you learn your first day at west point is to say no excuse, sir. one of the thing that baffles me is we're dealing with a computer system that's over 30 years old, called the fms system, it's written on cobal which was a language i wrote in 1973. we've got to change the management system of the financials of this enterprise called the va. the problem that we have is when we benchmark private industry our it budget is about 50% of what a healthcare system i.t. budget is so we've got to fix that. at the same time we've got to

improve our management of the financial systems and we're going to work hard to do that. at the same time it would help us if we had flexibility rather than over 70 line items of different budget that we can't move around. >> see, my issue is that every time one of these problems comes up on an almost weekly basis it seems like this year, we want -- we hear pleas for more money or more flexibility to go forward but we never get to the bottom of what caused it in the first place. that's what i and the rest of us are trying to get to the bottom of. >> i you want me to repeat my opening statement? i thought i was clear about what caused it. last year you talked about miss management not giving veterans care, no you miss management is giving veterans too much care. >> no. no. no. here is my -- here -- here is my

real problem here. you say that on august 20th there's no other option for -- except for an emergency supplemental by congress, you're going to start closing down operating rooms, hospitals, clinics all over this country and there's -- and with a $60 billion healthcare budget out of $160 billion total budget there's no other way for you to see around this problem than to tell veterans they can't come into the operation room after august 20th. >> sir, i didn't say that. i did not talk about a supplemental. what i talked about was using part of the $10 billion that's already been appropriated by congress for care in the community to pay for care in the community. that's -- that's the lunacy of why we're here talking about this. we're talking about using it to pay for care in the community. >> mr. chairman, i yield back.

>> mrs. brownley. >> thank you, mr. chairman. thank you, mr. secretary for your continued leadership to right the ship here. i appreciate it very much. i do think that flexibility is part of the solution. it's not the panacea, but it is part of the solution. i think clearly we need to be more nimble to serve our veterans and to serve them appropriately, and the way they deserve it. closing hospitals is not a choice as far as i am concerned. i think we have an i.t. system that can't track spending and can't reconcile a budget in a timely way, and i would argue -- and i think you've eluded to this in your testimony, but i would argue that, yes, there has been an increase in demand from our veterans, but i would also argue that the v.a. is pushing more resources out the door than

they have in the past. and that's a good thing. because pushing more resources means that more veterans are being served and being served appropriately. i guess, you know, my question, you mentioned about areas that we need to improve upon, and you mentioned i.t., we're spending 50% of what private industry spends in their i.t. systems, and better management, checks and balances. what are we going to do? i think before we need before we move forward in any way, shape or form, we need assurances these kinds of things are going to get fixed. we can't move towards flexibility and hope and pray the next time we will be better off. we need assurances that these are going to be fixed and we will know in a timely way where we are if we ask the question

today, we know exactly where we are in terms of money that has been spent and what the balances are, so share with us the specifics and when you think these things are going to be fixed so that we don't approach another fiscal year with the same kind of calamity that we are facing today. >> thank you, and i, again, want to reiterate, we do own these problems and want to fix the problems and i didn't want to give any different kind of impression with the questions, and it starts with getting the right people in place. as you know, we just got confirmed, mr. laverne counsel who is the secretary for the office of information technology. she was the i.t. leader for johnson & johnson and dell, and i have been working to recruit her for many months, almost

since the day i was confirmed. we have to get the right leaders in place, and i think we now have them. what we then need to do is benchmark other operations, which we are doing. in the case of the fms, the cobalt system i am talking about, we have to replace it and until we replace it we have to take brute force effort to make sure we are doing a better job of keeping track of the budgets and keeping you informed of them. one of the issues here was when you pass the choice act, you demanded in the choice act that we account for here in the community in a different way than we were doing it previously. you asked us to centralize that, and that change helped exacerbate this situation. nevertheless, we tried through brute force to try and keep that accounting whole so that we could understand what was going

on. but there is no question we have got to do a better job. >> mr. secretary, for me at least, i presume we have the right resources to find the people for the right job, and that's part of the solution. i have to say i don't have a lot of confidence having served on this committee now for 2 1/2 years that the v.a. -- you have not asked us for additional money for an i.t. system, yet. i assume that will come. and i don't have the confidence that within a year we will have a new i.t. system that provides tools that we would need to be able to have a timely data and timely information in terms of where we are. is there something that you are working on specifically --

>> obviously, this is a high priority for us. before we design an i.t. system to deal with seven different ways of paying for care in the community, we ought to work together as we talked about at the breakfast, to making one way to pay for it and making the i.t. system will be easier. >> thank you, mr. secretary for being here, and i guess my biggest problem, frankly, and i agree with having more flexibility in accounting, and nothing irks me more than seeing new windows put in a v.a. and we don't have other things, so i agree with that. i am concerned about the fact that we didn't know about this whole situation until, what, two weeks ago or less than that? we had mr. gibson here, and all of a sudden it's like a crisis. i think from my perspective i

was kind of hoping that you would have a plan to reform the v.a. and, you know, make it, you know, all good, and you talked about some of that here, but i have not really seen you come out and tell me -- maybe the chairman knows something, but i don't know about the reform process going on. i am really disappointed in the $3 billion shortfall. why didn't we know more about this in advance? what is the story with that? why don't we know about it sooner? >> i want to draw your attention to this, we give you this on june 5th. it was about denver, about replacing the denver facility, but i thought it was important at the time we published this to give you a heads up on the work to reform the v.a.

if you turn to the back of the book, the last 56 pages are all about the transformation of v.a., and we have sat down with those members of congress who are interested and gone through the detail, and they happen to be mostly in the senate, but we would love you to take you through the detail, and we set up an advisory board that includes some of the most outstanding ceos in the country helping us, and every member on this committee has 56 pages of what is going on. we're happy to spend more time with you, and we would like you to be part of it and in fact we would like to have hearings talking about what we are doing to transform the future. relative to the shortfall, our first knowledge of it was around the middle of may. at the time we had a meeting with the eight corners, both the senate and the house appropriations and authorizing, and at that time we mentioned three issues, one was hepatitis

c, and one was denver, and denver was the reason for the community, and the third was the cost of care in the community and at that time we thought we could solve the problem, we thought we could solve it by putting more veterans into the choice program and therefore not relying as much on our internal care for the community budget. we obviously could not solve the problem. we thought we could use unspent money from previous years to do it, and we got legal opinions and omb opinions -- >> is there unspent money from previous years? >> yes, sir. anytime you have budget line items over 70 where you are inflexible in moving money from one budget line item to another, you will have unspent money. one way to rid the government of unspent money -- that's the way businesses do it.

>> so in the last five years, and as those obligations are expensed the obligations -- there are funds that get deobligated, and those funds sit in the treasury. >> how much is there? >> for about the last five years, there is $1.3 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.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. >> that money is in the

treasury. 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 vision 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. that's what i don't understand. >> i'm not familiar with the figures you're talking about. maybe jim is. >> i don't need to hear an explanation. >> i got the information as quickly forward as we can. >> mr. secretary -- please. >> the deputy secretary was here and we're here today. >> i would like an explanation of why you projected a 25% reduction in this line item. 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 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 terry action for six gone and two already retired and we have over 100 investigation for wait-time manipulation, and last week i think you saw an announcement that the fbi actually indicted someone, so these investigations do take time, congressman, and the good news is they are getting to fruition, and as they do we are taking action. as you know, i have been secretary, since over 1,300 people have been terminated. we have nine of our 17 members and new leadership team in the medical centers, and 91% of the

medical actors are new, and i hope we have a change in culture and performance and that's why we have 7 million more appointments this year than last year. >> thank you. >> mr. secretary we do have an outstanding question in to you in regards to the 1,300 have been terminated, and how many were probationary? >> we will get that to you. we have to count that by hand. >> i want to try and focus in on an issue that i think may be causing confusion. community nursing homes, i think

-- the v.a. redefined it to include some other programs. state veterans homes of which i'm very proud of the one in new hampshire. community nursing homes. i think you've mentioned home health care. and i just want to be realistic, given the aging demographic of veterans in new hampshire. we have 65,000 vietnam veterans who we are committed to serving. but just so that we all understand going forward, we're referring to this as sort of a crisis situation in the short-term, but long-term, if we're making the commitment, a bipartisan commitment that we've made to shorten timeframes for waiting, to provide greater access to hire more professionals, i want to

understand exactly what is in this umbrella of community care and how we expect to meet this need and pay for this need going forward. >> so we -- in the legislation, we were required actually to centralize all these programs under the chief business office and to centralize those -- >> required by whom? >> by the choice legislation. >> so we did that and when we did, we have always called them purchased care really. when i came in 23 years ago, it was fee care. we were calling it non-v.a. care. when 20% of our care on a cost basis is out in the community, it's not non-v.a. care anymore. it is v.a. care so we call it now v.a. community care. we're trying to change how we talk about it and the mindset in the organization about what

we're trying to accomplish. so you are correct. both outpatient and inpatient care that you think of, it also includes our nursing home care, our state home care home care, champ v.a. those list of things are there. i'm happy to get you the detailed list of those and the breakout financially of what's being spent in each of those. >> and is it your proposal going forward that we would consolidate all of those into one program that we on capitol hill refer to as choice but it could also be referred to as community? >> so we have all these programs and then we also have as the secretary said seven different ways of acquiring those services, through sharing agreements, through contracts pc3, arch, all these things. i think our proposal, and we really want to sit down with the

staff and jointly hammer out what a future state might look like. i think that the choice program is a good program. i think that if we can figure out how to make that model work across all of these community care benefits so that we have a more unified and structured way where we have one billing system, one way to authorize the care one way to get information back, the same kinds of providers that can provide those services, then i think we would be much better off. we can actually explain it not only to other people, but to ourselves. >> and then let me understand when that was consolidated under the choice act to a central -- presumably here in washington, or is it located somewhere else? >> well the chief business

officer is here, but we have pieces of that office in atlanta and denver and austin. >> when that was consolidated it sounds like there was an unintended consequence or an inadvertent result in that you no longer had the information that is very regional. i know in our area these are individual decisions, and as the secretary mentioned the reimbursement rates, whether a particular clinic a particular nursing home, a particular home care program is going to accept this rate, enter into a contract. have we -- is it fair to say inadvertent that congress wrote it that way -- is it fair to say that's created a problem? >> i think you hit the nail on the head. i think that these programs -- most of the outpatient care, the big bulk of it, the nursing home care, state homes all that

stuff, was managed locally by a medical center. they had a budget for it. they had the clunky information systems that we had. but they kind of were able to keep track on it. and when we centralized that maybe we should have anticipated some of the problems but we didn't. and i think that we lost a lot of intelligence about the obligations that were being made, because you have the authorizations in one system and you have the obligations in a different system. and at a time, quite frankly when we have unprecedented volume of care that we're buying in the community. so maybe we should have anticipated those things, but i think it was an unintended consequence, and we did not expect this to happen. >> and i appreciate your candor. this is something that we also have to own on our side of the table, having drafted the legislation that way. i think we were probably

anticipating a better data system, which clearly we have a problem with. but this is not unique to the v.a. that the federal government made authorizations and obligations, and then ends up having to pay the piper. so our focus is meeting the needs of the v.a. and the veterans all across our districts in every corner from el paso to pittsburgh my northern most town in new hampshire on the canadian border. but the question becomes going forward, how do we reintegrate that vital information? my time is well up. i apologize, mr. chair. i was watching his clock. i thought i was on the way down. i was on the way back up. excuse me. >> was there a question that needed to be answered? >> mr. chairman, i think the answer is we're going to work with you to develop that

legislation that integrates all the different ways of community care. >> ms. brown has a statement. >> i just want a follow-up to that question. because once we passed the choice and we move how -- we had the accounting system. you all caught the problem because when you all reviewed it and you were looking ging at it coming in, it wasn't adding up. so that's when you all went in for an individual audit. can you explain that? >> yes, that's exactly correct. so back when the first quarter ended, we were -- it was clear that we had about a 40-something percent increase in the authorizations, but we were on plan with our $7.6 billion expenditures for a purchase care in the community. when we sat down and said somehow this doesn't make sense i could think of a lot of reasons why it might actually

make sense, but we didn't really know and we felt like we needed to look at this. so we did. in january and february look at that. it took us a while to understand exactly what the problem was going through the system. and then once we did that, we had to sit down and reconcile millions of authorizations by hand to understand the magnitude of the problem. and it wasn't until really late april that we understood that, the magnitude of that problem. we put a plan together, which we thought was going to resolve the situation. and as i said, the pillars of that plan started getting pulled out kind of from underneath us. and it wasn't really until may, the middle of may when we said look, the plan is not viable and we don't really know how to fix this problem without driving more of the care really through

choice and accessing choice dollars for their intended purpose, which is to buy care in the community. >> thank you. >> i do think it's important to note that just prior to folks finding out that this was an issue, we swept -- >> is that you? >> no but somebody's got a cell on on that needs to be turned off. we've got $150 million that we swept out of the v.a. to give to denver. is that correct? >> i believe so. i don't know for sure. >> so you knew that there was a shortfall coming. but you thought it was critical that you go take $150 million and give to denver rather than allocate it -- >> i wouldn't have sequenced it that way. i think the action on denver pre-dated this understanding

that was discussed. i mean please understand that every tool was being pulled out of the tool box to do away with this. even to the point where we had medical center directors voluntarily reducing their salary budgeted their compensation budgets. we had employees willing to give up their compensation in order to meet this need of veterans in the community. >> maybe some bonuses, too. >> mr. secretary, good to see you. thanks for being here today. you know, the problem that i don't understand with this -- this is what i don't get. so that it seems like it keeps coming back to this issue of perception. you know, you come today, you talk -- you have all your stats you have your tables and your graphs and those kinds of things. and we over here, we want solutions just as badly as everybody else, because we're fighting for veterans in our district and in a bipartisan everything that we can do legally through a leg slave theislative process but what we've been up

to is multiple hearings that go on every other day in this place. we looked the at the continued whistle blower retaliation, failure, systematic failures in philadelphia, oakland, denver cost over runs and i've been involved and every time your it chief has been here and we talked about this as well earlier, getting answers from the i.t. department do you need money to upgrade what you have? no, ma'am, no, we don't. do you have what you need and have needed to keep up with? yes, we do. do you have a domain issue that's been encrypted? no, we don't. that's what we've been up to and the american people. we've been sitting here asking questions since the last time we met permsonally in a body like this and this issue of trust and verify is dominant in my mind because my fear is that i love the issue of flexibility. you know i sit with another

member, i am on the armed services committee. they need to move funds i understand that. there is a history i can track that is transparent and open and the american people seen there is a verifiable need. my concern is back to the other points folks made is what is going to be the guarantee today when we leave here and we're going to continue our pursuit of all this oversight of everything else that goes on in the v.a. that the american people hear about and i sit here shocked thinking we just heard about that crisis and is there anything other number one than the threat of shutting down medical facilityiesfacilities, is there anything else that can be done but if the flexibility of funds is the answer, where is the guarantee? are we looking for a marker you can say in six months this is what you'll see and i guarantee it. i put the pow of my office behind it. >> i think the only guarantee i can give you is one that we're putting 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 and with all due respect, i accept that as your answer, i guess the problem is this, that we've been at this longer than you've been table and we're still celebrating the day you kale and came and took this and your confirmation was a year ago and in some areas you've been incredibly helpful. my concern is this, that when we talk about being flexible and moving funds and we don't see and you know, we're the eyes and ears for a quarter of a million people, that's what we hear and see and when we get the information and sit here in hearings and don't have the verification on 1300 people we don't see the shake rattle and roll of your side and those are the kind of things that i want

to see you know. it wasn't too long ago veterans were dying because of intolerable instances exposed here in this place through media of what was happening to the veterans. i want to see people go to prison. there were people that died that will never be accounted for again and the gross abnormalities happening at the ends of v.a. administrators and i would think with the 1300 people terminated the fbi investigation and those things that maybe we wouldn't have as many hearings as we've had but we still have instances of offenses against whistle-blowers. i.t. issues american people shake their head at no reform and we sit here today and i feel bad. >> i wouldn't say nothing is working. a year ago, more than a year ago we virtually 300,000 people on wait lists. today we have 7 million more completed appointments and wait

times on average that are five days for specialty four days for primary care three days for mental health. i defy you to find another medical system in the country that has that. i mean we are here and we are all for shining light on what we're doing because we think it makes us better. and we appreciate your partnership to do that like we appreciate -- >> i don't want to make light this is an easy decision and don't want the american people to think in the state of indiana, $2.5 billion is more than real money. it's shocking money. we toss that figure around of $168 billion budget like we're asking for this little amount of money but i'm asking for a guarantee and for somebody someplace to stand up and say, you know, never again on my watch, never again on the secretary of defense watch or anybody else's or this president will we tolerate what happened and i want a guarantee that says here is what history says, we're

still having hearings on massive amount of issues. that's what history says. i want a guarantee going forward this will stop and the final question i have for you is when did the president know that there was a crisis in the v.a.? >> i think the the president has been working on a crisis in the v.a. for a long time. >> when did the president know about this budget crisis? >> the first discussion i had with the president is the crisis that we have. >> when -- >> that's -- >> when did our president know about this hearing we're having today we're $2.5 billion short? did you tell the president? >> pardon me? >> did you tell the president? >> of course told chief of staff, sure. >> when did you do that, in june? may? when it started happening? okay. >> i knew about the middle of may so probably around that time. >> i appreciate it. thank you mr. chairman. i give back my time. >> i have information your office did provide to us regarding terminations and i have 958 were probationary terminations out of that number.

mr. ororke. >> thank you for your answers today, your testimony and your service to the country. i had a town hall meeting this saturday, and as with almost every town hall it was dominated by concerns about access to the v.a. and primarily mental health care access which seems to reflect your own recent rankings as of july 1 out of 141 mental health care systems within the v.a. el past sew ranks 141s, we're dead last. one of the veterans who came up wonderful young man, incredibly patient and polite said that friday, the day before he had a mental health care appointment scheduled for sometime at 9:30 a.m. at 7:00 a.m. he was called and told his provider wasn't

available. he would be called back. nobody called him back. he came to town hall to let me know. i called gail gram and she got him an appointment this week so he's going to be seen. but i tell you that anbecause we're ranked worst in the country for access, show us at about 17 days when i ask the veterans in my community and we did a statistically valid survey about access with a margin of error under 4% they tell me that it takes about 64 days on average to see someone. so i just want to register this note of concern especially given the wait time scandal we had last year that i don't think v.a. statistics and reporting on wait times reflect what veterans actually experience and when i ask veterans as opposed to the v.a., i get a very different number. and so i just want to register that with you and i want to thank you for your commitment to turning the situation around in

el past sewo. we haven't provided flexibility. the worst nightmare for veterans and currently experiencing in el paso, they are unable to get access to see somebody and 34% of the veterans could not see a provider at all for mental health care access, whether 16 days, 60 days 34% could not get in. i want to make sure that we go back and look at those numbers and make sure they reflect the reality as veterans are experiencing. >> i would suggest we do that. let's get our numbers and your numbers together and understand the basis of your research and the basis of our numbers and see if we can sort through it. we have work to do in el paso, you and i and others have been working on that. we know that. >> we've submitted a proposal a pilot project to you and i thank you for reviewing it so quickly would love to work with you going forward to implement that or a better idea if you got one

but we've been at the bottom the of the barrel and that translates into care deferred, care denied, suffering on the part of veterans and veteran suicides in my community. i met with too many families, surviving members, this cannot go on. so i don't mean to be but i got to on behalf of the veterans tell you we're in crisis now and need your help. whether it's our plan or yours, let's turn this around. i'd like you to talk about i don't disagree with your request for flexibility. i think it makes sense. and i don't know that i would have a problem long term if i knew you were going to be the v.a. secretary for the next five or ten years to carry the this out. but in thinking about a policy and a set of rules that we laid down for future secretaries and the v.a. to follow going forward, how do we not create a moral hazard in the aurora funding in this $3 billion short

fall in future requests from the v.a. that whatever happens at the v.a. and what additional resources are needed congress will provide them without necessarily getting accountability or safeguards going forward we won't need to plug additional gaps to the tune of billions of dollars. >> we want to help with that as we put together the proposed legislation, we would like to put in safeguards and restrictions we think would be necessarily regardless of who is in office. that's certainly part of it and i said that in my prepared remarks. the thing we got to work on is we got to find a better way to predict what demand will be. i talked about the 34% of veterans who are accessing care in a 1% take point defense being 1 billion and a half dollars. we got to get a handle on that and we've got to work together forecasting what that will be and building the system. as i said 2014 the crisis was because of the vietnam era of veterans, not because of iraq

and afghanistan if we don't get ready today we won't be ready 20, 30, 40 years from now. >> i'd like to ask you to consider an idea, not my original idea, it was brought by the summers family at a hearing we had on the survivors veterans that committed suicide because of lack of access or problems within v.a. and that suggestion was as you are referring care out and 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 comparable to what the civilian population would need? i use the example of diabetes where you have the flu or dental care and for those signature disabilities and conditions related to service and combat, posttraumatic stress military sexual trama, v.a. becomes the center of excellence for access 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 doctors so if you have a primary care physician, you want the primary care physician connected to the specialty physicians. one of the things i'm trying to work given we're given community care is to improve the understanding of the military culture among private sector doctors. we've been working with secretary burwell on this and if somehow we've got to do that. the primary care physician has to ask the person have you served? have you been in the military because there is a different culture and set of questions that need to be asked if they have. we are working on that. >> i think we agree with your position actually, i'm not, i think coordination of care issues says we need to provide as much of the services as we can but there are some things, 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 those services for veterans. >> great. i'd like to use this basis of agreement to prototype this in el paso, somewhere to see if this actually works. with that i yield back to the chair. >> why el paso? >> i don't know. just comes to mind. >> i want to wish a very happy birthday to dr. row who is now recognized for his five minutes. >> thank you, mr. chairman and couple of things. obviously, mr. secretary you're here for the same reasons, to provide the highest quality care for veterans that we can provide in this country as they have earned. i think one of the frustrations that i've had on this committee is that we have as a committee i've been here six and a half years and we keep providing more and more and more and more money and then we have the v.a. come

back for more money. and we see things like the building in aurora, beat that horse to death. i think of a billion dollars, those wasted at aurora that could have provided v.a. veterans health care. i don't know where it went. we had a failed system between dod and v.a. that spent $1 billion to try to integrate two health care records vanished. the money is gone. that's the waste that i see and no way on the this earth would you have allowed that to happen at your shop when you were and no way would i allow that to happen when i was the mayor where i was or in my own practice i couldn't have survived doing that and what has happened is both sides of the isle want to provide for the care and we feel like we're caught in this trap and the chairman mentioned bonuses and things we see, we go back out and go home and talk to our red

veterans and i got to tell you in johnson city, tennessee these numbers in the v.a. hospital they do a fine job and matter of fact, i get veterans all the time that tell me how much they appreciate the care they get there but there is no way on the this earth that the primary care is four days and the mental health is three 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. ororke just pointed it. not to beat a dead horse, but i don't know where that came from. >> i would love to get the information from you, the veteran, name, date where you believe that that's not true because 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 but we those are

helpful but we need names and dates. >> i can get a big long thick stack of names and dates of people that can't get in and i think that's amazing that you can, if this is true, i certainly couldn't do this in my own private practice. i couldn't meet that criteria an average clinic appointment four days or five days. most doctors are booked up for weeks ahead or at least a month ahead. anyway, enough on that. the other thing i wanted to bring up and i think the choice program, as i understand it as we envisioned is to help get rid of the backlog not the v.a. care but eliminate the backlog. if that program is going to continue and it is sunset, i think you're absolutely right, there ought to be one system of taking a veteran from the v.a. to outsource care. i don't think there ought to be three or four ways to do it. it ought to be easy. i've talked to several veterans and i'll be delighted to let you talk to a veteran service

officer and hawkins county, tennessee that can't 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 doesn't mind using his name. the other issue i think that disturbed me was when the veterans choice program came out, the first $500 million that was spent and we had a hearing on that, $300 million was administration. i don't understand that. i don't understand why 60% of the money went to the bureaucracy and $200 million of it actually went to get veterans in to see me as a doctor and maybe that was needed. i don't know. that seemed excessive to me. >> well, that was the amount required to set up the network. nevertheless nevertheless, we're trying to maximize the use of that 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, you need any ceo needs that to operate the shop. i agree with that. the other thing i want to comment in the last few seconds i have the moral at v.a. hospitals is down. those folks feel beat down. there needs to be an evaluation of the moral. the other thing i'll do is bring a bill up very soon as a trial process and a lot of people have done this. when you go to your doctor, not only does the assistant come into the room but another person and that person is described and because of electronic records, they use ascribe to enter da tomore patients. i want to let scribes come in and see if physicians that are providers are not more productive. i guarantee they will be.

i had friends that work in the v.a. say they can see 25 30% more people. >> this is a big issue about the scribe. we're piloting a program with scribes. it's uneven right but we're in the process of it. moral also is a big issue. as i've said earlier we have 91% of the medical centers with new leadership teams, we had a lot of people leave for various reasons and moral is a big issue and v.a. people one-third of which are veterans don't want to be called out as somehow different and failing to perform. they really care about veterans and working hard every single day. >> i yield back mr. chairman. >> thank you, ms. rice? >> thank you mr. chairman. mr. secretary i just want to make sure i heard you correctly. you said you found out about the extent of the short fall in may? >> yes.

>> so i believe that we were given information, this committee was given information the short fall was actually discovered as far back as either february or actually, we actually think it goes back to december. can you explain that discrepancy discrepancy? >> no, i can't. i haven't heard that. >> i don't think we knew there was a short fall. what we knew in february was that there was a different between the increase in authorizations that were up substantially and the obligations for that care which were on plan. so all the data we had in february actually suggested that financially we were on path to, for our 7.6 billion estimated expenditures for the year. we questioned that data right? the that doesn't make sense why would you have 40% more

authorizations but obligation isn't up. that's what we knew in february and it was at that time we sat down and said we got to figure this out. maybe there is a good explanation and makes sense but maybe it doesn't. it wasn't really 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 short fall, you just don't want to say that word. >> no, i think it gets to do you have a solution? 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. >> okay so. >> we said that earlier in the hearing. >> mr. secretary if you can put it in 30 words or less, tell me hep c, give me an idea.

>> more veterans are coming for care. 7 million more appointments than a year ago. >> so that is the reason? >> that's the reason. >> so i kind of feel like, you see the movie, mr. chairman "ground hog day" this committee is sitting here with members of the v.a., whether it's you or sloan glib son or anyone else talking about a crisis in the v.a., right? that's a reoccurring theme. another request for yet more money, and and the most disturbing point to me is a complete and utter lack of accountability. >> yeah, i don't agree with you, obviously and remember this money is appropriated. we're not asking you to the appropriate new money. we're asking you to use money appropriated for the choice program for care in the commune city to be spent for care in the

community. >> how -- >> that's what we're asking. it's already appropriated. >> how are you going to pay for care in the community next year? >> what we're asking for is a part of the choice budget, what we've talked about is let's put together an integrated way of doing care in the community. one way to do it, not the seven that we have today that members of the committee said veterans don't understand, members of the committee don't understand and our employees have trouble actually executing. >> so where is the account accountability accountability? there is no part of the short fall that is related to misuse of funds or potential fraud or anything like that? >> there has been no misuse of funds or fraud. >> have you done an audit? have you had someone maybe the externally do an audit yes or no? >> we've done an internal

reconciliation. >> is that a yes or a no? >> we had not had an external audit. >> do you think that might be a good idea, yes or no? >> i'm not sure it's necessary. we have 40% more authorizations for care in the community. you asked us to make sure that no veteran was waiting for than 30 days for care. we've done that. that's exactly what we are trying to do. >> okay. what i think is disgraceful because i have about 20 seconds left is for you to insinuate by not giving money no one on this committee cares about veterans. hold on a second, i'm so sick and tired of that insinuation and i yield back my time. thank you, mr. chairman. >> thank you. just to be clear, we didn't insinuate that, we think you-all care for veterans dramatically. what we're faced with is you passed the laws to give veterans benefits. you passed the budget to pay for the benefits and we've got to

execute that. when there is a mismatch between those laws and that budget it's a difficult proposition. i get letters from all of you every single day trying to give more benefits to more veterans and i'm all for it. we got to have the money to do it. >> i think the law says that 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. ms. secretary, thank you for your service in the united states army and although, i think that the president, i would like to think the president shows you recognition of your experience in packroct the or and gamble, we requested a 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 on going projects, one in las vegas, one in orlando, one in new orleans and roar ra colorado listed as denver that they averaged $366 million over budget and that so we knew there was a big problem. if you and proctor and gamble were to step in and you had a department that dysfunctional, you would have fired the management team, straightened it out and spun it off. and your core competency health

care being a significant part of that construction management is not a core of mission and i would love it if you would re-examine the va from being involved, we'll have legislation today that i talked to sloan gibson and the figure projects above 250 million dollars would be outsourced to the gsa or army corps of engineers. one of the problems in the legislation today is that the denver construction administrative constriction board was supposed to be finished with work in june and will not be done in june may be done in september.

we held a hear income denver on the aurora projects at the state capitols last year the chairman was there. and stuck to this $604 million figure the project could be built for $604 million lost in litigation late in 2014 on every count this was a plan over $1 billion that could not be built for $604 million. the army corps of engineers is in the process of taking over the project but we're talking about a short fall today and we're also talking about a half finished half hopefully a little over half finished which is for than the ininitial projected amount to finish the hospital.

i would really ask you as a veteran that it's not the core come competency and leave as many other agencies that the federal government do that these major construction projects to others. >> i love your response. >> congressman coffman, we agree in part as you indicated the only difference between your point of view and ours is what the right level is. 250 or 100, i do want you to know we've taken a lot of steps to improve our construction process. we're doing master planning now and requiring that mayor construction has 35% plans and that we're doing very deliberate

control process that we're instituting a private review board and that we're establishing a v.a. activation office. i could go on. all of these are best practices that come from the private sector at the same time we also have met repeatedly with the association of general contractors, they had boycotted v.a. we met with them deputy secretary gibson and did. we took them through changes we were making to our process and we ask them their point of view if we're missing anything and they are helping us redesign. wherever we end up with legislation, we are now operating against the new and improved process and what happened in denver which is regrettable was awful should have never happened will not happen again. >> we've gone through the cycles before where. v.a. was going to try to

reinvent itself. we'll end up in the same position. a $100 million ceiling will be a $300 billion ceilmillion ceiling. >> thank you. >> i want to be quick but as we move forward with this construction discussion, when you say general service or army corps of engineer, i think you got to have some of the input and i know no one likes the word but we have to have someone i know what happened with katrina and that project. we need accountability, i don't care what agency is handling that. i yield back. >> thank you mr. chairman, mr. secretary, introducing a new way of talking about contract not care with non-va providers

providers not sallied within the v.a., is that correct? >> yes, sir. >> you will care this care in the community and on a bipartisan we cooperate more and non-v.a. providers and trying to change the culture of the v.a. so that there is not a conspiracy to disappear to the v.a. that's where i'm reading. >> that's why we change from non-v.a. care to care. we own the care even throw in the community. >> relative to that, i've seen others within v.a. health testify before this committee that the concern since you do own the care and ultimately responsible for it there needs to be ways in which the contractor, the contract providers are also accountable, that that care is accountable

and we've raised the issue of health records. you've centralized the billing and payment operations from the regional areas and you're saying in your testimony that what i've heard is that centralization had a lot to do with driving the short fall the misunderstanding that arousalse from the central 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 onbaman obscure for us. >> in february you were seeing a discrepancy between the authorizations and pay outs and you weren't able to figure that out, this centralization on

cured wasobscuring a clear understanding of what your cash position was. >> yes, sir, a new practice. >> my concern is there any fueling the that centralized authorization resulted in inappropriateina prop inappropriate authorizations because the regional office had problems with records that were paper records being passed and complaints that stacks and stacks of records and delayed payments. has the centralization improved that? >> so far from what we know centralization not just of the choice act but across the payment function the v.a. accelerated our ability to pay

bills. >> we're not worried about the rise in authorizations, authorizations that were authorized that shouldn't have been? the accountability in the system -- >> if anything, if anybody, centralization usually leads to better security. that's my experience. >> the care is still determined at a local facility level, clinic in addition seeing a patient, decides the patient needs something, puts in the request and the authorization is entered at a local level by the business office people at that facility into the system and the medical record information is transmitted to the third party administrator. >> there is always a great deal about this surprise and information we have to about on rather immediately. the overall narrative that i'm getting 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 that you used the example of knee replacement. there is no co-pay and co-pays under medicare are significant. it's a rational decision that a lot of veterans are choosing to come to the v.a. that accounts for, can you give me the number again, the increase on the number of people coming to the v.a. that you had before? >> it's over 2 million. 7 million more appointments in the last year. >> doctor, i was looking at the increase 4.5 million in community care 2.5 million in v.a. care. >> well, and this was obscured by the part of it by the change and choice act and how you did accounting. well i don't like these short notices but we have to act quickly and the important thinltg is we serve veterans and let's keep doing it.

>> dr. windstrom. >> i thank you both for being here. we spoke today about the increase in productivity and i think that every 1% of increased is $1.4 billion is that the number i got? >> i may have confused you. basic ly basically veterans getting 34%. in any increase leads to a $1.5 billion increase in budget need. >> sure. >> that's different than an increase in productivity. >> okay. >> but on that with the increase in productivity the v.a. is different because when you increase productivity, that's not money coming in, that's money going out. there may be some silos there but, you know, whereas on the

flip side, your productivity you got more coming in. that's the reality that we have to face in this situation. we ask for more productivity. one question i have is that is that amount of productivity, that increase, within the same amount of hours if you will in other words, if i increase on saturdays and sundays that's different than did i increase my productivity during the same amount of time? >> right. also what we looked at was productivity disregarding how many more physicians we brought in. but as we shared first chart we shared was on the 8.5% increase in productivity. jim can drill down on this more. >> so we've done it, i think, increase productivity in a number of ways. one of them is what you suggested in that we have evening clinics, we have had weekend clinics, and particularly those evening

clinics have been very popular with younger female veterans in particular. >> one of the things we really need to focus and this is a comparison of private practice to the v.a. is how do we increase the productivity in the same amount of time? we've talked about poor setups within a clinic. you have one room when you need four. those things. the increase no 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 hurting ourself. >> we are. it's a little bit of both. it's a little bit of increasing productivity during their kind of normal hours, as well as using extended hours and one of our biggest hurdles to improving access to care is the physical plant infrastructure we have and if we use that physical plant infrastructure more efficiently by having extended hours, having

weekend hours, everybody benefits from that. >> i know i had a little frustration when i came here before phoenix broke where i went to the former secretary and said i'll go into clinics with you, as a doctor, i'll go into the o.r. and tell you why you're not productive and getting more out of caregivers. we still need to do that. we got doctors that would be willing to partake. the other thing is we talked one time before about third party payments. i would love to see the v.a. be centers of excellence for something our veterans wouldn't want to go anymore else and people outside that aren't veterans would prefer to go to the v.a. but in that process, we have tretveterans that come in and have other insurance and i'm not sure how this is really taking place what percentage are capturing that can bring more money into the v.a. but maybe we should turf that out to people that do claims like this all the time and take it out of the v.a. and let it be done and increase

the revenue to the v.a. these are productive things we can do and when we see more people going to the v.a. and if they have other insurance, that's what we should do and be good at it. >> our collections are up substantially this year but we are sitting down and reevaluating a lot of our business office practices and one of the things we're looking at is whether that collections is something that should be -- >> i would suggest we take bids from outside sources on what that would look like. the other thing we talked about before is at some point we have got to be able to know what we spend per r.v.u, relative value unit. if we don't know that, we don't know our cost compared to when we pay somebody per r.v.u. outside of the walls of the v.a. i agree, care in the community. i agree with that rather than non-v.a. care because if i was still in practice seeing