September 30, 2009
Michael Victorian
(202) 639-6405

For-Profit Health Care Contracts Jeopardizing the Strength of the VA, Union Says

(WASHINGTON) – The American Federation of Government Employees today told Congress that the Department of Veterans Affairs’ over-reliance on private for-profit health care providers is straining medical center budgets and jeopardizing veterans’ health care. AFGE represents 180,000 employees on the frontlines of the Department of Veterans Affairs (VA).

Health care contracts are one of the many tools available to the VA to increase access for rural veterans and to address other gaps in care. However, “the VA often fails to adequately consider the risks of contract care, as compared to other options,” said Mary A. Curtis, a psychiatric clinic nurse specialist and 1st vice-president of AFGE Local 1273 at the Boise VA Medical Center, who delivered the testimony before the Senate Committee on Veterans’ Affairs.

According to the union, contract care requires that the VA give up a certain degree of control to for-profit outside entities. The use of these for-profit providers leaves the VA less able to control costs, quality of care, provider qualifications, and medical privacy or to ensure that care is timely. In the long term, this may compromise the VA’s capacity to provide veterans with a full range of services, as well as its exemplary research and medical education programs.

Congress clearly recognized these privatization risks when it enacted legislation that authorizes contract care in very limited circumstances, when care is not available from the VA. Unfortunately, medical center directors seeking short term fixes for patient wait lists and staff shortages often ignore these criteria and opt for fee basis care and other costly contract care arrangements without adequately considering alternatives that would better serve the veteran and the VA health care system. As a result, in many cases, the VA ends up spending more on for-profit contract care than it would cost to more fully staff the VA health care workforce.

In its study of the VA’s Fee Program (VA OIG Report No. 08-02901-185), the VA Office of the Inspector General found that VA medical centers have made large numbers of improper payments for fee care. These findings mirror concerns previously voiced by AFGE, including a strong recommendation that the VA strengthen controls over its for-profit contract program to reduce payment, justification, and authorization errors.

During her testimony, Curtis also criticized the VA’s continued expansion of the pilot for-profit contract program, Project HERO. Through a contract with health care giant HUMANA, the VA launched Project HERO as a pilot program in 2007. The program essentially injects an additional private contract layer in the contact care process through the use of for-profit care coordinators, who manage the referral of veterans to health care providers outside the VA. The idea of contractors managing other contractors is ludicrous on its face. “These contractors provide little or no value added to the VA health care system. In some cases, veterans end up traveling even further to HERO providers and the VA ends up paying more to Humana than it would if it had contracted directly with providers without an intermediary,” said Curtis.

In Curtis’ testimony, AFGE called on the VA to comply with a new directive from the Office of Management of Budget that directs federal agencies to end their overreliance on contractors, conduct an inventory of current contracts and “insource” or bring back in-house work that is more appropriately handled by the government. AFGE also recommended the use of joint labor-management training on the VA’s for-profit contract care program to enable front line health care employees to monitor decisions to contract out care. Finally, AFGE requested that Congress withhold funding for the fourth and fifth option years of Project HERO and prevent further expansion of the pilot, pending an investigation of its actual costs, its impact on health care quality can access, and its effect on the VA’s own capacity to provide veterans with the services they need.

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