THE DEPARTMENT OF DEFENSE TASK FORCE ON THE FUTURE OF MILITARY ...

THE DEPARTMENT OF DEFENSE TASK FORCE ON THE FUTURE OF MILITARY CARE A subcommittee of the Defense Health Board July 25, 2007 Key Bridge Marriott Arlington, Virginia ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 * * * * * PARTICIPANTS: Task Force Members Present: MAJOR GENERAL NANCY ADAMS, USA, RET. MAJOR GENERAL ROBERT SMITH, USA, LIEUTENANT GENERAL JAMES ROUDEBUSH, USAF, RET. ROBERT HALE CAROLYN CLANCY RICHARD MYERS DR. ROBERT GALVIN THE HONORABLE ROBERT HENKE REAR ADMIRAL JOHN MATECZUN DAVID SMITH Task Force Members Non-Present: SHAY ASSAD GENERAL JOHN CORLEY, USAF LARRY LEWIN DR. GAIL WILENSKY ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 P R O C E E D I N G S MR. HALE: Could I get your attention, Good morning. please, we'd like to get started. I'm Bob Hale, I'm a Task Force member and today the Acting Chair of the Committee in the absence of General Corley and Dr. Wilensky, our normal co-chairs. So I appreciate everybody that's here and look forward to a productive session talking about contracting activities. And with that, I'll turn it over to Colonel Bader, who's our -- what's your exact title? COL BADER: The Alternate Designated Federal Official for the meeting, as well as the Executive Secretary for the Task Force. morning and welcome. So good As the duly appointed Alternate Designated Federal Official for the Defense Health Board, which is a Federal Advisory Committee to the Secretary of Defense and serves as a continuing independent scientific advisory body to the Assistant Secretary of Defense for Health Affairs and the Surgeons General of the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Military Departments, I hereby call this meeting of the Task Force on the Future of Military Health Care, a sub-committee of the Defense Health Board, to order. Welcome. Before we begin the session, I'd like to make a few administrative comments. I would like to thank Lieutenant Colonel Nanette Patten, Sheritta Cooper-Porter, Mr. Abbey, Mrs. Freeman, and Ms. Fox for their invaluable assistance in putting this meeting together, and of course, to all of our speakers who have worked very hard to prepare the briefings and their statements for today's meeting of the Task Force. If you have not already done so, please sign the general attendance roster on the table in the lobby. And for those of you who are not seated at the main table, your handouts for the briefings are in the lobby, as well. If a handout is not available, you can receive one online at www.dodfuturehealthcare.net. I now ask that everyone please turn off their cell phones and blackberries so as to not ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 member. MR. HALE: Bob Hale, Task Force member member. RADM MATECZUN: Force member. DR. CLANCY: Carolyn Clancy, Task Force John Mateczun, Task member. MR. HENKE: Bob Henke, Task Force interrupt the meeting. The signal from these devices interferes with the sound system and the recording capability. Lastly, in keeping with an open meeting of the Federal Advisory Committee, this session is being transcribed for our official records. Please ensure that you state your name before you speak and use the microphone so that our transcriber can accurately record your questions and your comments. At this time, I would like to go around the head table and have the Task Force members introduce themselves for the record. Thank you. MAJ GEN ADAMS: Nancy Adams, Task Force ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 member. COL BADER: Thank you. This morning and member. MAJ GEN SMITH: Bob Smith, Task Force Secretary. GEN MYERS: Dick Myers, Task Force and Acting Chair today. COL BADER: Christine Bader, Executive this afternoon we will be hearing presentations regarding health care, acquisition, and procurement. We are pleased to have each Service We will begin our and TMA represented here today. presentations with the Tricare Management Activity, which is responsible for the program management for Tricare, the comprehensive Health Benefits Program for the Department of Defense. We are eager to learn about the development of Tricare's policies, as well as the acquisition of the Tricare contracts. Additionally, we will hear about the implementation of two acquisition-related medical initiatives resulting from the Quadrennial Defense ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Review. The Army's representatives will brief us on acquiring medical solutions to support the operational force now and in the future, recognizing that the Army's current operational tempo challenges the acquisition community to be innovative in providing medical service contracts in support of the Military Health Care System, our soldiers, and their families. The Army's medical command health care acquisition activity has identified these challenges and will present solutions. The Navy will present a unique approach that uses centralized requirements, definition, and contract execution to achieve high quality, cost-effective health care service contracts to support war fighters and their families. And finally, the Air Force is proud of the fact that in 2004, the Air Force Medical Service was one of the first groups in the Air Force to establish a Commodity Council to look at strategic purchasing of services, and now serves as the model for five ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 new councils. We will begin our presentations with the Tricare Management Activity. this morning is Ms. O'Bar. Representing Tricare Jean Storck and Mr. Mike Ms. Storck is the Chief Health Plan Operations of the Tricare Management Activity, Office of the Assistant Secretary of Defense for Health Affairs. She is responsible for five large organizations consisting of a total of 167 government personnel, three that are run by senior executives. Health Plans Operations Program provides the program, acquisition, and contract management support for centralized purchased care contracts and program management support for developing managed care programs, develops and executes operational guidance for delivery of the Tricare benefit, and the interaction of purchased and direct care health systems, coordinates and administers the Military Health System dental program, and manages the Tricare Overseas Program. Also present with Ms. Storck is Mr. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Michael O'Bar. He is the Director of Benefits Division of the Tricare Management Activity. After retiring from active military service as a naval aviator, Mr. O'Bar worked for five years in the private sector as a consultant for defense acquisition matters before joining the Tricare Management Activity as Deputy Director for Resource Management. Currently, he is the Director of TMA's Benefits Division. In this capacity, he leads the development, implementation, and interpretation of Tricare health plan policies. His responsibilities include advocating policies that enhance Tricare beneficiaries access to both the private sector and the direct care system. welcome you both. presentation. MS. STORCK: Thank you for the I'm Jean We And, please, you may begin your opportunity to address this Task Force. Storck and I'm from the Tricare Management Activity. The agenda this morning that I'm planning to go over with you, I hope that I met ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 the request from the Task Force in terms of what we're supposed to cover this morning, I wasn't really sure. But basically what I'm planning to do is give you kind of a broad overview of Tricare and also our acquisition activities, and go through a little bit of the organizational structure, the acquisition organizational structure, go through our acquisition strategies for purchased care and non-purchased care activities and TMA, just talk a little bit about the acquisition staff that we have, and some of our pay for performance initiatives that we have in our contracts, and just discuss at the end our current initiatives and some of the challenges that we face as we go forward. Just to remind everybody, and I'm sure you know, that basically Tricare's mission is to provide a comprehensive health benefits program for those that are entitled. And we need to fulfill this mission in order to maintain medical ready force with our warriors and to provide ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 entitled benefits, health care benefits, just like any employer, in terms of providing coverage, and we kind of do it from cradle to grave now with the implementation of Tricare For Life. And to accomplish these things, we have a relatively integrated medical structure comprised of what we call the Direct Care System, which we would consider to be our most preferred venue for delivering health care. And in those instances where we are not able to provide care within the Direct Care System, we have contracted for services that kind of wrap around the MTF's and provide for comprehensive health care specialty care and primary care. Also, for those beneficiaries who do not live within a catchment area -- the area around an MTF, we provide full Tricare coverage, and we do that world-wide. For those of you that have seen the stakeholder's report, this is just a snapshot of kind of how comprehensive our program is. As you can see, we have about nine million covered lives, and we have about five million enrollees. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Just to give you a sense, a week in the life of Tricare, we have, in the Direct Care System, we have in-patient admissions, about 20,000, and you can see the out-patient workload. We dispense a tremendous amount of drugs within our system. order to do that. We have several venues in And we process a lot of claims for care that's provided within the civilian community. And you can see that in the unified medical program, we are a very large component of the Defense budget. The TMA organizational structure, we're an operating field activity under the Personnel and Readiness Under Secretary, and work under the direction and authority of the Assistant Secretary of Defense for Health Affairs. Our Director of Tricare Management Activity is Doctor Casscells, who is also the Assistant Secretary of Defense for Health Affairs. He is double-hatted in a functional capacity. The day- to-day activities of the Tricare Management Activity is run by Major General Granger, who is ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 our Deputy Director. And as you can see, my organization is a chief functional within the overall structure of the Tricare Management Activity. We have as chiefs, Medical Officer, for Self-Protection and Readiness, and the Chief Financial Officer--are all Health Affairs Deputy Assistant Secretaries who are also double-hatted as chief functionals within the Tricare Management Activity. We have the Chief Information Officer We have Chief of who works for Tricare. Pharmaceutical Operations, which is Admiral McGinnes, who has presented at this Task Force. And then we have our Regional Directors to manage the day-to-day activities and provide contract oversight. In my organization, Health Plan Operations, we basically run the Tricare program and a myriad of other support activities. I have a Deputy Chief of Tricare Acquisitions that's located in Aurora, he's a senior executive. And under his guidance, we have the actual Acquisition ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Management Support, who is a health care -- who's the health contracting activity -- head of contracting activity for TMA. Generally speaking, the contracting and acquisition activity within the Tricare Management Activity is comprised of three separate types of contracts in terms of requirements. We have the purchased care, which is the care that's delivered, the health care that's delivered outside of the Direct Care System, the Military Medical Treatment Facilities. And we use our internal head of contracting activity to do all of our procurement activities. And the head of contracting is in Aurora, Colorado, and they are responsible for all health care contracts that we write requirements for. Our annual obligations are approximately 16 And basically the majority of our health billion. care contracts are related to implementing entitlements that was provided by the Congress for authorized beneficiaries. We also have requirements for information technology for the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Military Health System. The Department had decided to centralize the procurement of large information systems for the entire Military Health System, which includes the Military Treatment Facilities. Most of the acquisition activities, the actual contracting, occurs with contracting activities outside of TMA. The head of contracting in Aurora does not do or do not perform contracting activities for information technology. We purchase those through external contracting activities, primarily through other DOD contracting activities. The current annual obligations to support our information technology is about 700 -- 800 million. Lastly, we have a number of management consulting and program support. They are executed also, not through our contracting activity in Aurora, but through -- primarily through the same contracting activities or similar contracting activities that we have agreements with externally. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 And most of those acquisitions are related to requirements analysis, budget support, acquisition support, business process engineering, and a myriad of other program support. The annual In obligations at this time is about 350 million. terms of the capabilities of our contracting office within the Tricare Management Activity, it's a contracting activity comprised of warranted contracted officers, and AM&S is the organization and it acts as the head of contracting activity. All of the staff are appropriately certified, and they -- all of our contracting officers, warranted contracting officers, are compliant with the FAR, the DFAR, and all DOD requirements. And we consider the DPAP, the Defense Procurement and Acquisition Policy Office, to be the head of agency for us with HCA and TMA. I had presented previously to the Task Force the myriad of health care contracts that we do in TMA, and I'm not going to be going through them today. But what I wanted to do was focus on our big ones, which is the managed care contracts. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 And we had a very structured -- we have a very structured process in determining requirements and actually in the conduct of that procurement, and this graph just gives you a depiction of the authorities and the major players. First are Milestone Decision Authority, we consider it to be the Under Secretary of Personnel and Readiness, Doctor Chu. And under him would be -- in conjunction with TMA's head of agency, which would be the Director of Procurement Activity within the Department DPAP. And DPAP appoints the selection authority for us and approves our acquisition plan and strategy. The head of our activity, the Tricare Management Activity and the Assistant Secretary of Defense for Health Affairs is considered the Tricare Acquisition Executive for this procurement, which is the large three managed care support contracts, which is comprised of the bulk of the purchased care activities and dollars. The Deputy Director for TMA is ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 considered the Program Executive Officer. T-3 Program Manager is me. And the I'm the Program And I Manager for this particular acquisition. have the Director of the HCA working under a senior executive who works for me. And we have a formal structure that, if you look on the slide where it says the T-3 Executive Council, that forum, which was the over arching IPT for this particular procurement, was chaired by the Assistant Secretary of Defense for Health Affairs, who's also the Director of the Tricare Management Activity, and we -- that Committee or that Executive Council reviewed all policies related to the procurement. We started from this current -- the requirements that we have in our current contracts, and we went through all major policies related to what the Department wanted to procure for the next round. That decision process was documented, and we have minutes of those meetings. And the decisions that come from that overarching senior executive body, which is comprised of the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Assistant Secretary, plus the three Surgeons General, plus all the Health Affairs Deputy Assistant Secretaries, plus the Acquisition Managers, decisions -- policy decisions that came from that organization were then fed into a lower level senior executive group, the T-3 overarching or oversight committee, the TOP, and that group took the requirements, the big, broad policy requirements, and translated into procurement requirements for our next generation of contracts. And once you have overarching policies, they need to be developed into operational language that needs to go into a procurement. And so any kind of technical decisions that needed to be made that was not within the authority of the HCA would have gone to this oversight committee. If it was of a broad policy nature, then it would have been taken to the Senior Executive Council. And as you can see, we had a number of work groups that assisted in the development of alternatives to change our requirements. can see those in the purple boxes. And you We had the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 acquisition planning and evaluation, we have actuarial analysis, we do independent cost estimates, we make sure that there are subject matter experts on any of our IT requirements that we would levy onto our contracts, the financial, and also transition in integration. And those little work groups will also transition into the transition work group, oversight groups, once we have the contract award. What we tried to do was to broaden our procurement requirements team, and we included our regional offices and the senior executives that are running those organizations, the Tricare General Counsel and the program requirements people, to make sure that we had a broad view on any kind of changes that we would make within the contracts. MAJ GEN SMITH: MS. STORCK: I have a question. Yes, sir. The policy decision MAJ GEN SMITH: turnaround time, because I've heard a couple times about they're waiting for some guidance or policies to come from you guys. So if you've got ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 the contractor waiting, what's basically a turnaround time, because it seems like you have a lot of little councils and meetings leading up, and that could mean that a contractor is sitting there waiting for guidance for a couple of years; is that possible or what? MS. STORCK: This is for solicitation for the next generation of contracts, not for our current contracts. If there are changes that need to be made to our current contracts, that needs to go to our contracting officer, who would then evaluate the merits of any change, and it's not part of this process. This is for the next This is an generation of contracts at this point. internal departmental requirements-building group. MAJ GEN SMITH: Will the next generation still be based on some feedback that you're getting from the current? I mean you build to the future based upon what you're hearing from your customers in the current. MS. STORCK: Yes. And if they're saying MAJ GEN SMITH: ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 there's no answers to some things coming out -MS. STORCK: Right. -- wouldn't that be MAJ GEN SMITH: built into the process? MS. STORCK: Yes; we do have industry -For example, right opportunities for industry. now we have a draft -- head of draft RFP on the street, and that's an opportunity for industry to come in and make their comments to us, and we're in the review process today. Before we went to the draft RFP, we had a very comprehensive forum for industry to come in one-on-one and discuss their views, and all of those are considered in part of the deliberative process. RADM MATECZUN: MS. STORCK: Jean, I have a question. Yes, sir. This seems to me to be a You have an RADM MATECZUN: little bit unique in the Department. Assistant Secretary, who's also the head of an agency and also the Senior Acquisition Official. Is there any place else in the Department where ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 that model is used? MS. STORCK: I'm not aware of too many more models, where we have the Assistant Secretary that's also double-hatted as a director of a field activity, but I'm sure there are some. aware of any myself. I am not Healthcare in this particular instance, our structure is unique, as you know, our entire leadership structure. guess is that we are unique in that sense. So my I'm not aware of any other organizations as structured as we are. GEN ADAMS: Since we're asking questions, and everybody knows where I came from, which was TMA at one point, so we're talking about our unique structure. Is there any functional benefit or any reason why we have the contracting work in Aurora versus closer to D.C., closer to in terms of the policy, as well as the acquisition process, outside of the historical lineage that goes with Aurora being -- Aurora or being in Colorado? MS. STORCK: The decision regarding when ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 the DRI created the Tricare Management Activity, one of the going-in premises was that people would not be removed from their jobs. And so we had an organization, the Office of Champus, then the Tricare Support Office, and they had historically performed the acquisition functions, and we maintained that structure even though reporting chains changed. And as far as I know, we do not believe that that structure needs to be changed at this time. There are field activities, as you know, which makes communication always a challenge, whether it's our regional offices or having half of your organization elsewhere, but we use telecommunication venues in order for us to have meetings, and we do need to make extra efforts to communicate, but since we are all on the same network and the same systems, we have not had as much problems with communicating. Although, General Adams, as you know, communication is always an effort within any organization, and extra effort has to be made to make sure that, you ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 know, we maintain connections with all of our leadership. But it's a historical organization that we didn't want to remove any of the experts that were out there in the field. GEN ADAMS: From my perspective, and I don't want to get into editorial comments, you know. I think the time-distance factor is an There's issue when you start looking at agendas. a different agenda in terms of the work that's done in Aurora versus what's done in Washington, D.C., and it does take extra time and effort to work that seamlessly and efficiently. The other point, though, and recognize jobs and the politics of that, the rest of TMA as an organization has evolved and changed, but Aurora has been relatively fixed in terms of how they're organized and the work being done. And I just referenced the Tricare regional offices and what their work is now specific to the managed care support contracts. So I think from the Task Force perspective, we should be thinking in terms of the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 officers. efficiency of the organization in order to get the work done, because as General Smith says, we have heard comments from contractors in terms of how efficiently and effectively the Department is able to respond, and you know, that may be one area, and maybe not for procurement, which you're talking about right now, which is different from contract operations, so you know, I think we have to make sure we know what we're talking of. And I think there are some issues that maybe we can be looking at that would be relevant to the work and how it's being done. MS. STORCK: The Source Selection Organization is a very structured, traditional. We do a full source selection -- we appoint a source selection authority that's a senior executive, and I have to thank General Adams for having performed that onerous duty the last go around. But thank you for selecting and going through that process. So basically it's a primary contracting We have a source selection authority, ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 we have a source selection evaluation chair, and advisory council, and what we try to do is solicit membership on these various groups from the Services, the Army, Navy, and Air Force Medical Departments, the Surgeon General's Office, and also from our regional offices, who will be basically the organization that provides major oversight, and also consultants and various subject matter experts kind of to work as a team in case particular policy issues come up. a relatively structured process. We have The Next slide. slide I had presented once before just gives you kind of the magnitude of the dollars that are associated with each of our health care contracts. These are probably considered some of the largest service contracts within the Department, so we understand that there's a lot of visibility and want to ensure that we have the appropriate acquisition structure to acquire these services. Next slide. We also have a lot of acquisition activity in the Tricare Management Activity not ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 associated with purchasing health care services, but purchasing information technology and consulting services. We had an internal audit, it was a self-analysis of the way we were conducting some of the acquisition activity in support of our Military Health System IT purchases. And the independent management control audit recommended a number of actions that needed to take place. it was mostly to ensure proper funds control. In the past, we used to allow the program offices to go to any contracting office outside of TMA, and that resulted in a number of erroneous accountings, because we were dealing with multiple DFAS's, and so one of the recommendations of the independent audit was to limit the number of contracting activities and to create some sort of a central clearinghouse, so to speak, of looking at requirements and trying to assist the various program offices and writing requirements and trying to get more long-term agreements with the various contracting offices And ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 external to TMA. And so a cell was created, it was actually already in existence, but it was beefed up to take all the central documents and also to properly document and improve staff training in acquisitions and to ensure that TMA had written agreements with these contracting offices. So at this time today we have all of our inter-service support agreements are documented and in writing, and we're trying to reduce the number of contracting activities. But we still have a tremendous amount of contracting activities, they're much smaller than our health care contracts, and there are a lot of them in terms of total numbers of activities that are going on. Recently, we have elevated the support agreements, again, to try to streamline and try to implement the Department's guidance to us about use of non-DOD contracting activities. We're trying to eliminate all of our non-DOD contract -use of our non- DOD contract activities unless ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 there's some reason why our program office wants to with sufficient justification. Our Deputy Director signs all of the agreements and has to grant a waiver if we want to use them. Basically, we've tried to consolidate We use further the number of agreements we have. primarily three contracting agencies, and we want to maintain some sort of a long-term relationship so that they have an understanding of how we determine requirements, and you know, have a relationship with our program offices. have a relatively structured process in determining requirements from non-purchased care activities. And TMA has developed an overarching And we've had our Again, we strategy, an acquisition plan. processes -- we've vetted our processes through ATML have gotten their blessing on it. Generally, the requiring activities are required to get flags, senior executive level chiefs to sign off on any of the requirements that we have. Our information management, information technology requirements follow the DOD 5000 ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 instructions. We -- at this time, most of our IT procuring activities were managed by the Joint Medical Information System Program Executive Office. That office did not belong to TMA, it does not belong to TMA today, although we provide -- our CIO provides guidance to them. However, as of 1 October, 2007, this year, that entire organization will be realigned into TMA. And we are in the process now of identifying duplication, redundancies, and trying to do some sort of integration within this program office and the IMTNR organization, which is run by our CIO, it's our Information Technology Management Organization. Because the JMIS-PEO offices being realigned into TMA, we now have to look at our acquisition structure, because we now have two program executive officers, one for Tricare and one for IT, and we are going to be looking to see whether that's an appropriate acquisition structure to have and to determine whether an ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 alternative structure in terms of acquisition needs to be developed. So the integration is occurring, we're trying to do the planning of the integration today in preparation for the movement of the individuals 1 October. The transfer of the organization only -- only the civilians are transferring. All of the military members who actually run each of the program offices will remain within the Service manpower documents, and therefore, we will have to have some sort of an MOA with the Surgeons to ensure that we have the proper personnel management systems in place. an ongoing work in progress today. Once the senior executive signs off on the requirements, in terms of the IT structure, there is a very structured process that includes the three Services having a voice in the building of the requirements. And all of the IT And So that's requirements adhere to the OSDNII process. the Milestone Decision Authority for major acquisitions in the IT is actually ATNL and not ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 PNR, as it is for the Tricare program. We were asked to give you kind of a current billets -- the number of billets that are in, well, we consider to be in the acquisition field today in TMA, and we just have those numbers up there for you, and then who are trained with the transfer of the IT program office, these numbers will change, but we don't have any visibility on any of those individuals training or acquisition certification at this point. Once the individuals transfer into our organization, then we will have a better idea of what types of training they need and probably these numbers will have to be updated. Additionally, there is a view of the Department in the acquisition community that we take a broader view of the acquisition work force than we have today. The numbers that are reflected here are warranted contracting officers and the staff associated with the Tricare Management Activities contracting office, and a couple of program managers who are acquisitioned ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 34 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 -- who's in the acquisition core like myself. But these numbers need to reflect those who are involved in the IT procurement. know that some of those individuals are acquisition certified, we just need to have them in our many documents. But in addition, the Department has asked us to look at -- specifically, DPAP has asked us to look at maybe having a broader view of acquisitions and the acquisition work force. Our And we view today is that we're a program office in TMA, we do policies related to developing of the benefit, we do policies related to the operations of the Tricare program, reimbursement, we have budget people that provide financial services for the entire MHS. We did not have the view that all of those people are acquisition people even though they are involved in major procurement. So we're looking at definition that the Department is wanting us to. And again, we're going to probably We have in the have to update these numbers. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 purchased care contracts strengthened -- we have them in our current contracts, performance standards, and we use a variety of incentives in order to obtain performance through our purchased care contracts. And whether it's telephone, claims processing, accuracy of recording data, we have financial incentives for our health care dollars to ensure the maximum amount of discounts, network usage. We also have performance incentives to ensure high quality and program integrity, which is fraud and abuse, the use of electronic claims, which reduces the cost to the government, because electronic claims are cheaper to process than -or less costly to process than paper. And we also have an award fee that our Tricare regional office directors -- they're responsible for--to incentivize contractors to perform in areas that are important to us. We believe that these pay for performance incentives have worked. high. Our customer surveys are relatively And what we're doing in our next round is ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 36 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 just taking the input from our regional offices to see where can we improve our pay-for-performance initiatives, what has worked, what hasn't worked, and we've incorporated that into our draft RFP. MAJ GEN SMITH: Another question; what are you hearing are reasons why certain houses or certain people are not bidding for contracts with you, that's feedback in itself, not just the current, but the ones who don't come in, why are they saying they're not coming in? MS. STORCK: Let me see if I understand your question, why some commercial companies do not want to bid on our business? MAJ GEN SMITH: MS. STORCK: Uh-huh. Why? During our industry forum, I think probably the most that we've heard, although we encourage competition, our line of business is not a commercial product, because we are required to -- we consider the contracts to augment the capabilities of the Direct Care System. And in certain companies, that is not a standard practice, they -- we would contract for a ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 particular health company and they'd bring their benefits to the table. Like the FEHBP for example, you have a number of contractors out there who would bid for the business and then the patients choose. that's not our line of business. Our line of business is, we want a uniform benefit across wherever you are to the maximum extent possible, which means we dictate the benefit, we don't purchase the benefit. so that's not standard practice. Additionally, we have requirements, in like the claims processing area, since we are a government business, we do require identification of -- well, we require probably a little more information than maybe the private sector would, because we have transparency of data. We capture And Well, it for beneficiaries, you know, we use it for analytical purposes, so we've heard that, that we collect a lot of data from business. Another area is the fact that we do have structured benefit. In other words, it's ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 38 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 complicated. We have three, you know, Tricare Prime, Tricare Extra, Tricare Standard, we have the Direct Care System. We have within those health options, we have beneficiaries that are active duty, which has a different payment structure, we have active duty family members, who also have a different payment structure, and then we have retirees, who have another payment structure. So that becomes a matrix, and that adds to the complexity of processing a claim, to try to figure out who, you know, would be -- which individual it is, and then processing the claim appropriately, the claims appropriately. So we've heard that, that there's a complexity within our program. And I'm trying to think of what other comments were made. We don't -- again, I think the big thing is that we've -- we're big, we're complicated, our claims processing is complicated, our benefit structure is complicated. We have this relationship with an MTF where there's a ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 39 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 right of first refusal and that's complicated. Those are probably the most significant comments we've heard from industry. MAJ GEN SMITH: I would only say this as a comment, but I'd be surprised, because business is about profit margins and operating in the black, so complications is they got people they figure out. So you're saying you've not heard that the financial incentives don't provide enough margin for them to make it a profitable business? Because you did not articulate that as part of your response. MS. STORCK: No, we have -So we may have big MAJ GEN SMITH: people standing away who have processes who can be very efficient, I don't know. MS. STORCK: -- no, we have not heard that you cannot make money off of these contracts. I think it would be to the contrary. Okay. In our non-purchased care pay-for-performance, we use a variety of methods to try -- there's so many requirements, because we have a number of program ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 40 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 offices within TMA and certainly the IT community. We try to use a number of ways to incentivize and encourage superior performance. And one of our major initiatives to discourage use of the GSA schedule, which doesn't really allow for, you know, optimal use of performance incentives, is to go to ID/IQ contract vehicles. And we do have one for our information -- to support our information technology, and we're trying to do that for other support contracts that we have. And these different ID/IQ contracts will help us also maintain our organizational conflict of interest issues, because we don't want one set of contractors being able to compete on another set if they have inside information, so we're very sensitive to that. so we think that going towards some sort of an ID/IQ contract will help us better improve performance and try to get away from the GSA schedules. As you can see, about 45 percent of our IM/IT contracts are performance-based. I think And ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 41 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 some of our current initiatives for improving the process is, it takes a really long time for us to get leadership decisions since they involve major policy decisions, and so early planning with the Assistant Secretary and the Surgeons is key for us to be able to get feedback in. Also, we try to involve industry early in the process. And as I indicated earlier, we had a comprehensive industry forum where we allowed, instead of a broad forum where all the industry would come together and ask questions, we found that that forum resulted in some reluctance by some of the bidding community to ask open questions. So what we allowed early in the process was one-on-one, and we documented all of the concerns that industry had, and we considered -and we provided the comments to leadership and considered all of those comments in the deliberative process, and we think that's an improvement from our previous processes. We do try to use fixed price contracting whenever ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 42 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 possible. When we have no requirements, we think that the requirements are going to be relatively stable, which obviously in the health care environment is, you know, is a challenge, but in our administrative processes, we do have fixed price, and we use them to the maximum extent possible. We have tried to define earlier and clearer our expectations from the bidding community, from our contractors. We have written our incentives, both financial, positive and negative incentives, so that the Department is very clear on the areas that we consider to be important to us and want to get positive performance. We have tried to simplify our contract type by addressing appropriate risks and rewards. And we try to publish the requirements early in our process so that there is an opportunity for industry to come back again, for us to look at it. And in our non-purchased care area, to reduce the organizational conflict of interest ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 43 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 risk, we are going towards the ID/IQ contracts. We are also trying to minimize a number of non-DOD contracting activities and contracting vehicles per the Department's guidance. We're trying to reduce the number of agreements that we have with our non-DOD contracting activities and potentially eliminate most of them. And we also try to have a team approach on developing requirements and going through the entire procurement process and a team approach with our technical experts, our legal experts, and our financial experts, so that we have an integrated product in the end. Some of our challenges that we face in developing requirements for healthcare and even for non-healthcare is that there is a political nature to the health benefit. I guess that's kind of a perceptive glimpse of the obvious, but -- so what happens with that is that we set -- we define the requirements, you know, we go through this twoyear deliberative process, and then all of a sudden we get new laws passed or great ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 44 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 recommendations that come in that have a different view, and we almost have to start the process again, because one small change can have a ripple effect throughout the entire RFP. So it may seem very small, you know, if there's a legislative change or a benefit change. In terms of an acquisition, it's not small. And if you have gone through a two-year deliberative process, and at the last minute you're asked to make changes, however small, you have a ripple effect on the entire acquisition, and we've gone through that on multiple occasions. Even through this T-next contract, we had an RFP on the street, and the Department decided to pull the RFP and redo it. So that can have an impact on the bidding community, as well, because they've prepared their bids, you know, they put together their packages, they put together their teams, and all of a sudden the Department, you know, pulls the RFP and decides to change the requirements. The pharmacy contract, and there are things that are not, you know, we ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 45 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 don't have control over, for example, the pharmacy, we have to pull that procurement because the lawsuit where we weren't allowed to use the average wholesale price, for example. We're at the mercy of the healthcare market, that's another challenge. And so I know there's a desire to be efficient and effective, and you know, a streamline is possible, but at the end of the day, when you're going out into an acquisition, we're -- our costs are going to be reflective of what the industry is doing, and we can just do so much with controlling the market forces. Many times or often times when we're developing requirements, we have competing interests, you know, do you want to be costeffective, yes, do you want the benefit to be robust, yes, you want the benefit to be robust, you want the highest quality of care. All of those things may be competing interests in order to develop it, so you have to balance all of those needs. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 46 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 challenge. We also have emerging technology that we have to take into consideration. Healthcare is, as you know, very dynamic, and so we have to be able to write contracts that take us two years to write requirements, get it on the street, go through the procuring process, another year or so, and at the same time, the industry is changing as we speak. And we may have a contract for five or six years, and we have to write the requirements so that we can take those emerging technologies into consideration. And as you know, Defense procurement is not a simple, easy process, because we have to have visibility, we have to have competition, we have to write our requirements well, so it does take a long time, and we have to make sure we follow all the rules. The magnitude of our program is another It's just large, it's a very large service contract, we're talking billions and billions of dollars. There's a lot of interest in it, and it's -- to articulate all the requirements in a perfect manner, it does take a -- it takes a ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 47 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 lot of challenge. And we also, again, in terms of the human capital strategy, we're purchasing services in markets potentially where there are no services. And we're also in competition with the Services in terms of finding doctors and nurses, and if the military departments are procuring for providers in direct contracting effort, at the same time, we're trying to create a robust network, and you're in a market where there are no healthcare providers, we're all faced with that. And so having a human capital strategy from an MHS perspective is really needed and we don't have that right now. financial constraints. And also, obviously, We are working, as you know, in an appropriated environment, and we cross fiscal years frequently, our claims come in, where care was delivered in one year, but we're accounting for it in a separate year. So, again, you have to write the requirements so we can capture at what year we're supposed to be doing obligations, and that's another challenge. In ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 48 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 contracts. terms of way ahead, the big RFP is on the street for comment, we closed, and we're assessing the industry input. Services also had a lot of input. But overall, when we step back and look at the Tricare program, we believe we're on the right track, that beneficiary satisfaction is on an all time high. We have interest in competing on the We were fearful that, you know, we wouldn't be -- we wouldn't have a competitive environment, but that does not seem to be the case. And we're trying to be less restrictive in our government specs to allow industry to come in as much as they can within their best practices, within our benefit structure, and our desire for a uniform benefit. We don't want one program to look completely different in one region when you go to another region, because our beneficiaries travel from one region to another very frequently, especially our active duty and family members. So we want, you know, the program to look relatively ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 the same. We have a very sound acquisition source selection process, which, to us, is an indication that our bidding community thinks that the contracting process is fair. And we have that conclusion because we have much fewer protests on some of our acquisitions than we used to have in the past, which we think is a very good news story. And we think that, given all of the challenges that we have on the previous pages, that we have a very balanced and reasonable approach, given our dynamic healthcare environment. And I stand open for your questions. General Adams. First I want to say to Jean, COL BADER: GEN ADAMS: it was a good presentation, and my questions are not meant to challenge you, but just to make sure that, because of my background, that my assumptions or my knowledge is still relevant, as well as current. So I don't -- and I'm not going to give you a hard time, but I -- ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 50 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 question. MS. STORCK: GEN ADAMS: Thank you. -- there are some things that just -- processing, and I guess in the last ten minutes, you must have used the word requirements 100 times, yet at one time, the Department was talking about outcome-based approach to healthcare, and I think this gets to some of what we've heard as a Task Force, and what General Smith was talking about in terms of some of the reasons why some people out there don't compete for our business, because the impression is, we are micro managers, we're telling them what to do, how to do it, when to do it, and yes, I realize for the unique nature of our population, for internal consistency, there are some things that we do have to specify. But when it comes to the deliverable, do we have to be so steeped in telling them how to provide healthcare as a commodity? MS. STORCK: I think that's a fair We went down the route of, give us your best business practices in the past, and what we ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 51 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 found was that they did do that, but our beneficiaries ended up with different business practices everywhere they went, and it was very confusing to them. When enrollment processes, for example, you go from region to region to region and it was different, the forms were different. GEN ADAMS: In fact, you know, maybe enrollment is one that is -- we've been asked a couple of times, why doesn't the Department do a national enrollment with regional registration, so that our beneficiaries are not enrolling and disenrolling; have we looked at that? Because you're absolutely right, those things that need to be the same, we need to, you know, take ownership of. MS. STORCK: We can look at it. Our Nobody has proposed a national enrollment. preference would be, from a health community, usually the health plan doesn't enroll beneficiaries in the health plan. Generally, health -- personnel offices enroll people in the health plan. The health plan ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 52 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 is at the mercy of information of where these people are. And so in an ideal world, it would be the personnel community who would take that function on, because they know where the beneficiaries are, whether you're a retiree or active duty. The health organization has been asked to take on that function, and so we're making some improvements in the, you know, in the portability, and you know, getting data, at least in a central location, which is DEERS, and as you know, it's taken us a huge amount of effort to do that, you know, so every contractor can look to see where, you know, patients are so we can have as much portability as possible. But the health community is kind of at the mercy of the personnel community in terms of getting information of where these beneficiaries are. And we're reliant on the DEERS system to And in many provide us that information. instances, especially with our retirees, it's a self-update of, you know, where you reside. So given those constraints, we've ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 53 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 developed, you know, have our contractors doing the enrollment since the patients are there. But I think we have made some improvements in terms of, you know, making it as portable as possible. And it's almost national in the sense that we do have one repository of that information, which is in DEERS, so anybody can, you know -- which was different before, as you know, where each contractor had the enrollment data base and there was no talking at all. I answer your question? GEN ADAMS: Yes; you know, but I do So did think we could look at enrollment, because enrollment is based upon your status as a military beneficiary, and your status as a military beneficiary does not change except retirement, death, few cornerstone events. Registration or So, where you get your healthcare does change. you know, maybe we can look at that, because from some of our -- and it was the younger beneficiaries who talked to us about it, I believe in San Antonio is when we were hearing about it, ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 54 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 because they, you know, the impression is that when they enroll and disenroll, and even though they do it at their next duty station, it's extra work, but they worry about being dropped and then being picked up again. So it's a state of mind as So well as some real work that has to take place. I thought, from my perspective, I thought, well, that's a valid question. But, no doubt, you've got to register, you've got to intersect with your health plan, wherever you end up, because that's how the care is going to be delivered. MS. STORCK: Well, and that's how you get -- you're assigned your provider, and you know, so that -- some sort of interface has to occur. GEN ADAMS: MS. STORCK: Right. It can't be all done without the beneficiary. GEN ADAMS: No; the way, you know, the I mean does it local interface, you have to do. have to be, "enrollment", and enrollment is more ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 55 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 work for the contractor that we pay for because of the way that it's structured. It's also one of the ones that is less reliable because of the interface with the DEERS and the addresses and everything else that goes with it, so it does add to the cost of our contract. MS. STORCK: General Adams, we did look at that in terms of the enrollment option, and again, going back to big policy, you know, we have -- we are supposed to, at least in the prime benefit, get the beneficiaries to agree in writing that if you enroll in this HMO-like model, you're going to follow these rules, and if you don't follow these rules, then there could be financial consequences of those rules, you know, in terms of not following them, for example, point of service. GEN ADAMS: MS. STORCK: Right. So just transferring, you know, again, with retirees, it needs to be an individual election, because you have to pay for it, you know, as an enrollment fee. For active duty family members, we're trying to make it as ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 56 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 portable as possible, but we still want that interface, where you go to a sight, wherever you're going to end up, and you do agree, and this is your provider, or you know, an MTF clinic or whatever it is, and that here are the rules, and you agree to them. And so that, we think, is a very important opportunity, you know, for the beneficiaries to touch their provider, but also to understand that, you know, Tricare has rules in order for you to use the system, you know, unless, of course, you're Standard, but in terms of the enrollment option. So we did look to see whether, you know, are we still an HMO, considering most of our opportunities to managed care has been reduced, and the decision -- the policy-makers decided, yes, we still want to maintain that, we still wanted to have some sort of an enrollee capability, where we assign a PCM or a group, a group practice or whatever, you know, it didn't need to be an individual, so that they have a number to call. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 57 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 You know, you can get an ID card or something that when you go downtown, they recognize who you are, the civilian providers recognize who you are. that requirement. GEN ADAMS: You provided a great lead-in And so we want to maintain for the next question, it has to do with prime network enrolled, because I would assume the figure of the five million is both MTF-enrolled, as well as network-enrolled. Have we looked at the Prime -- and the reason I'm asking is because of the cost-differential. And, you know, we made assumptions at one time that Prime was less costly than other options, and I think our experience recently has been that Prime, indeed, network Prime has proven to be more costly than what we anticipated. I don't have the facts, but obviously, one of the reasons this Task Force is here is because of the cost to health care. So I was wondering, have we looked at utilization management for the Prime-enrolled, and looked at ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 58 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 that as a function of cost when you look at utilization management in terms of MTF care? that may be too much detail for you to answer today. But I think that is something we need to And look at as we try to sort out what are the options in terms of the Tricare benefit, and if there are any indications for different costs, either in terms of the co-payment or enrollment fees or in terms of the deductibles, that we understand as a Task Force, indeed, where the costs are attributed in terms of the different benefit. MS. STORCK: Well, General Adams, you know that we have looked at the cost and have proposed changes that we felt were appropriate to steer care back to where we thought was appropriate. These current contracts are our You know, the next generation current benefit. maintains the current benefit structure, we've made no changes. And we await any suggestions that you all have in changing either the benefit or the structure of the benefit. GEN ADAMS: So could the Department give ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 59 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 question. available. GEN ADAMS: MS. STORCK: Okay. And we are changing a us utilization management data for Prime enrolled to the MTF, as well as prime enrolled to the network? MS. STORCK: GEN ADAMS: Yes. Because there are some assumptions that if you have a co-pay, your utilization rate is less, and you know, I think that would give us some feel, I guess, in terms of the benefit. MS. STORCK: Yes, all of that data is little bit the financial structure of the contracts in this next generation to hold more accountable those things that are controllable versus the non-controllable. GEN ADAMS: And I think this is my last We talked about claims -- you talked about claims processing and the complexity of it and realizing we have to be different because we are the federal government and we are the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 60 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 different? MS. STORCK: No, we're almost identical military. But the other big federal government entity is Medicare, and I know from my civilian perspective living in Florida, one of the reasons Tricare is not taken, except for Tricare for Life, which all providers love Tricare for Life because of the second payment, but they will not take it as a primary payment is the complexity of the claims. Have we looked at our claims format and adapting it to what Medicare does? MS. STORCK: GEN ADAMS: Yes. I mean are we that except in -- and we -- as you know, there's a legislation that was passed to make us look just like Medicare -GEN ADAMS: MS. STORCK: Right. -- unless there's some reason not to, and we have looked at line by line what the differences are, and insomuch as we are different, we're making changes to make it, you ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 61 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 know, the same where we can. The majority of the differences are related, again, to our benefit and the identification of the person. Medicare does not have, you know, an active duty versus a retiree. GEN ADAMS: The fact that we have to tie the family members back to the sponsor? MS. STORCK: Right; you know, former spouses and trying all of that, the complexities are related to that piece. And the second piece of it is, the ability to actually support our financial systems, our accounting systems, for the Tricare encounter data. sector doesn't -GEN ADAMS: MS. STORCK: Doesn't handle that. -- you know, doesn't have That's not -- the private data collection, they don't require us to have a data system. I mean they don't have to have a And we have a very comprehensive data system. comprehensive data system, and Tricare encounter data, we require those fields. Again, they're not duplicate fields, they're just fields that are ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 62 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 different, that we would require to be able to identify an encounter with a patient in a data base so that, you know, our financial people can actually pay the contractors. GEN ADAMS: So those -- So there's no hope then of merging into the Medicare claim system, we're going to have to maintain our -MS. STORCK: Well, we use the same form, and so -- and when you do an electronic claims processing, for the most part it's the same. still need identification of who you are, and that's the major difference that we've found. And We we have actually a side-by-side that we've done on what the differences are. ADM SMITH: Jean, on that, could I just We don't use unique ask a technical question. identifiers for our family members, as you know; is there any reason why we don't go that way, because then that would solve the issue of all the identifications are required, because DEERS has all that information? MS. STORCK: Right. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 63 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MR. HALE: Can I interrupt with an We're running late. I administrative comment? don't want to stop questions, but I'd ask for brevity, both in terms of the Task Force and answers. Thank you. MS. STORCK: Sure; we're going actually to, you know, on the provider side, we're going to the unique. We are at the mercy of the personnel The community to give us the data in terms of it. sponsor and then their family members to be able to be tied in DEERS is very complicated. And we can certainly pursue it, but I don't see an initiative where, you know, we would have necessarily a unique identifier on its own, because it has to tie back to the sponsor, at least that's what DMDC does, so -ADM SMITH: I guess my thought was that the government could then do that -MS. STORCK: ADM SMITH: Right. -- and it wouldn't be a burden on the supplier. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 64 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 you. MS. STORCK: Okay. Jean, you know, what the MS. STORCK: Right; but we still need to know -- at the patient, who the person is in order to -- we don't make them go back to our DMDC system. ADM SMITH: I'll take it offline. Thank RADM MATECZUN: Department has is a service delivery system of hospitals, clinics, and people that deliver system, and it's got this system of contracts that we use. The system of contracts is the largest increase in cost, sort of rapidly spiraling up for many reasons. We have a lot of ways to command and control our system of direct care that we own. Given that we manage this private sector care through the Federal Acquisition Regulation, is there any way that we can accurately say that we're managing cost increases effectively? MS. STORCK: Well, as you know, the reason for the cost increases in the Tricare ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 65 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 program are multi-faceted. The changes in the demographic population, the ability of the Direct Care System to actually capture the work, the -we're at the mercy of the commercial changes in healthcare. So if the commercial -- the industry is increasing in cost, Tricare can only be at that mercy, as well. Given the -- and obviously, there's been significant benefit changes in the program. We believe that a balanced cost-sharing proposal would help mitigate some of the increases in cost. It's not going to be a solution to If we can make the Direct everything, obviously. Care System more robust and also put the appropriate financial incentives in place to reduce unnecessary utilization and focus in on quality, yes, there are opportunities for us to do that. The managed care tools that we've used in the past have been eliminated by Congress, and so it makes it a little bit more difficult for us to manage care the way we used to manage care. But that said, I think there are lots of ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 66 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 opportunities for us to have an integrated delivery system, you know, in the delivery of the care, because the patients go from one system to another, and so that hand-off between an MTF enrollee, most of our enrollees are enrolled in the Direct Care System, and its hand-off to the specialists, I think there are some opportunities there. That's not a contracting solution, that's an MHS system that needs to take that on. And so we'll try to write the requirement in the contract, but you know, shouldn't use the contracting mechanisms to be a vehicle for improving the system. It can only improve the But system in that stovepipe manner, as you said. if there's some way to make it a more integrated system, I think that we can have -- the opportunities are there. It is not going to fund the, you know, out-year budget issues, and we're not going to be able to, since we're at the mercy of the industry, you know, say we're eliminating cost increases in the future, that, you know, in ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 67 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Okay. Mr. healthcare, that's not going to happen either, but certainly opportunities exist. COL BADER: O'Bar. MR. O'BAR: Good morning. I'm Mike Any additional questions? O'Bar, the Director of the Tricare Management Activities Benefits Division, and I'm here to tell you this morning about the work being done to implement two of the medical initiatives that were defined during the recently completed Quadrennial Defense Review. One of the products that flowed out of that QDR, Quadrennial Defense Review, was a document entitled Roadmap For Medical Transformation, and that's a collection of 18 initiatives that address re-engineering certain of the Military Health Systems force readiness, business, and clinical aspects. And the Department decided that to address these initiatives and oversee their implementation, it would establish a Military Health System Office of Transformation. And ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 68 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 actually a member of your Task Force, Admiral Mateczun, was assigned as the Director of that Office of Transformation. And the Office of Transformation then proposed, and the Under Secretary of Defense for Personnel and Readiness approved, assignment of certain senior officials to have responsibility for the various initiatives. And three of those responsibility assignments came to the TMA Deputy Director, who is now General Granger, and General Granger has me heading, chairing a chartered work group to implement two of those initiatives, and those are the two that I want to talk about this morning. First, among those 18 initiatives I mentioned that are in that Roadmap, is number 15, contracting for health care services. And you could describe this as an investigation and perhaps a test of the feasibility of contracting out certain of the functions that are performed within MTF's on military installations. Continuing to perform those functions on military ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 69 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 installation, but turning their execution completely over to contractors and operating in a GOCO, if you will, government-owned contractoroperated mode. This initiative has two major tasks, we refer to them as task 15A and 15B. We're currently in the midst of executing task 15A, which is an analysis of the feasibility of conducting successful pilot projects of contracting out functions which the military services have brought forward for consideration. And we're trying to complete this analysis by the end of this fiscal year. We have two projects we're currently considering; one is a pharmacy project proposed by the Air Force, another is a pharmacy project proposed by the Navy. We don't yet have a project that the Army Well, they have one, it's under has committed to. discussion, and we have some preliminary data on, but they haven't completely committed to it. The intent here is for us to provide for leadership an assessment of the likelihood that these proposed ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 projects would be successful across a number of dimensions or measures that we are considering, such as improvements in patient satisfaction, what's the potential for that, improvements in the use of military manpower, better return on investment, perhaps recapturing, in the case of the pharmacy projects, recapturing business from retail pharmacies. Task 15B then will be undertaken if leadership decides, based upon the analysis that we provide them, that it's worth going forward and actually establishing these pilot projects, setting them up and running them on military installations, and that is, of course, a decision yet to be made because we still haven't -- we haven't completed and presented the analysis yet. If these pilot projects are actually undertaken, then the execution responsibility will be turned over to the particular military service that proposed the project in the first place. In task 15A, the analysis portion of this initiative, I've laid out here the various sub-tasks, and ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 71 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 we're quite deep into accomplishing all of these sub-tasks for the two pharmacy projects. In the yellow there are where we're a little uncertain in terms of schedule has to do with the consideration I mentioned earlier, that we still are waiting to see whether or not Army wants to come forward with a definite project. And so we're a little late on getting deep into the analysis on that project. The second initiative that this chartered work group that I chair is charged with initiating is initiative number 16, contracting for professional services. The Military Treatment Facilities actually buy a lot of military medical professionals to augment their military physicians and nurses and also their government GS physicians and nurses. And up to this point, they've gone about this, the services have pretty much individually, in their own way, each service has their own way of doing this. There are literally a couple If you look across thousand different contracts. the three Services, for the acquisition of these ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 72 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 kind of services. And there was a Department of Defense Inspector General report from about three years ago that pointed out a number of ways in which the manner in which we acquire these services now are inefficient and costly. So the intent of this initiative number 16 is to find more efficient and effective ways of contracting for these kinds of medical professional services in the Military Treatment Facilities. In addition to that DOD IG report, the Department set up a defense-wide strategy council to decide how to respond to the recommendations that the DOD IG provided. And in our efforts to address those recommendations, we've been told -the work group has been told that we should use the defense-wide strategy council's approach as a starting point, which is what we are doing. The tasks -- sub-tasks of initiative 16 and their particular status are listed on this view graph. We have set ourselves a schedule until next June, which is actually the set date on this charter ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 73 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 work group to finish up. We're quite far on right We now on putting the kind of structure in place. think that we need to do this kind of contracting in a more joint manner, a more effective manner. The approach is to first set up a strategic sourcing council. We've got the charter for that actually over in DPAP right now for a preliminary look and comment. And once we have that set up, then we're going to have the body that we need to pull the services together to make sure that the requirements are harmonized, that we're using a common contracting vehicle, and our concept right now is kind of a spiral run approach, is that we'll start off with a multiple award task order to contract a single contract that all the Services can order off of for the acquisition of these kind of services that are needed on a relatively short term basis. Let's say you need a pediatrician to fill in for the next three months. These turn out to be the most expensive type services, obviously, since you need somebody for a short time. They ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 74 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 questions? also turn out to be the most challenging in terms of credentialing. And so we figured that this is a good place to start, if we can conquer this, then spiral, too, would be to move on to an RFP for the longer term type requirements. the end of my presentation. questions for me? COL BADER: Ma'am. GEN ADAMS: They say the questions stay At one Do we have any additional And that's Do you have any the same, it's the answers that change. point, the managed care support contractors were handling this for the Services; was that looked at as an option, again, or was there just -- and I know the reason why the Services said we can do it, we can do it better, faster, cheaper, it didn't happen to be better, faster, or cheaper. Did we look at the managed care support contractors again or was that not on the table? MR. O'BAR: At this point, we haven't structured an acquisition strategy, but other than to know that it's going to be a full and open ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 75 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Thank you. (Recess) COL BADER: Thank you very much. We are great. competition, so the -GEN ADAMS: So they would be able to compete for the business? MR. O'BAR: Absolutely; we had a -- that's one of our defining principals, that it's got to be done competitively, because I'm not sure we get best price. COL BADER: Any other questions? Okay, Let's Thank Thank you very much for your time. take a 15 minute break and return at 10:15. you. MR. HALE: Can I make a proposal here that we skip the next break if we needed to get back on time, and so keep that in mind in terms of any needs you have at this break. COL BADER: Utilize your break wisely. pleased to welcome our Army representatives today. Mr. Bill Howell is the Principal Assistant for Acquisition, U.S. Army Medical Research and ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 76 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Material Command. as the U.S. Before his selection in 2005, Army Medical Research and Material Command's first Principal Assistant for Acquisition, Mr. Howell was the Command Deputy for Acquisition. Mr. Howell has graduated from Furman University in Greenville, South Carolina as a history major in 1974, and has subsequently completed two masters programs, Logistics Management from the Florida Institute of Technology and Strategic Resource Management from the Industrial College of the Armed Forces. He is a member of the Army Acquisition Corp and is Level 3 certified for project management. Colonel Earle Smith, II, is the Commander and Principal Assistant responsible for contracting, United States Army Medical Command Health Care Acquisition Activity. The Health Care Acquisition Activity, headquartered at Fort Sam Houston, Texas, provides business advice and medical contracting support to the United States Army Medical Command world-wide. Colonel Smith ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 received a Bachelor of Arts in Biology from Northeastern University in 1984. He attended Webster University Graduate School and graduated in 1997 with a Master of Arts in Procurement and Acquisition Management. Mr. Eugene Smith serves as an attorneyadvisor with the United States Army Medical Command's Office of the Staff Judge Advocate. He provides legal counsel to the United States Army Medical Command's contracting community on all aspects of contracting for medical services, from acquisition planning to contract close-out. Mr. Smith graduated in 1978 with a Bachelor of Arts Degree in Political Science, University of South Carolina, in Columbia, South Carolina. He earned his Juris Doctor Degree from the University of California at Los Angeles School of Law in Los Angeles, California in 1985. welcome you all. We're going to have a little bit of a flip flop in the briefings today. If you will all We -- all Task Force members turn to their second ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 78 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 briefing. Smith. And we will begin with Colonel Earle Thank you. COL SMITH: Good morning, all. Once again, as Colonel Bader has stated, the real basis of our briefing here is to really focus on the challenges that we've experienced within DOD contracting. The initial part of our briefing will focus on the activity itself, and the latter part will focus on the significant challenges. with that, the first slide, please. So This is our overview, our agenda of the issues that we plan on addressing. Next slide. Our mission is primarily just to provide sound contracting advice to our customers, and to be the best at it. The Army Medical Department has divided the country into different regions, and within those regions we have regional contracting offices that support each of those regions, as you can see on the map. Next slide. Several years ago, there was an Army Director within the acquisition community to transition into an organizational configure called ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 79 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Center and Satellites. The organization itself underwent a transformation whereby we have a center for health care contracting, and the primary basis for the center should do what we call master contracts. To put that even more definitively, what we said was that our center would do contracts that exceeded the threshold of $5 million. That has changed to a certain extent over the years, but for the most part, we still stick to that. And then within our satellite offices, they support the regions on a daily basis, providing what we call direct contract support. Next slide. As you can see here on the slide, it depicts primarily the types of contracts that we do. Once again, several years ago the Army contracting went through a big transformation whereby they limited the type of contracting support that we can provide to our customers. At one point we did contracting for construction, IT, other things outside of the medical aim. Well, since then, we've had to more or less get what I ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 80 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 call a left and right (off mike) for how we do that, and now our focus is just on what we consider medical contracting. I would say three-quarters of our business is on healthcare providers versus the actual services that you see here. It's significant to note that we do also OMB-76. Currently we have three actions that are ongoing, two within hospital housekeeping and one within nutritional care. Next slide. Here is a snapshot of our organization. Within that military number, we have three interns within our organization, military interns, and nine civilian interns. The billets, you can see there where the majority of our folks are what we call the intermediate level, the level two contracting certification. And we also have a significant amount of 1105, we call those purchasing agents. The bottom slide depicts our organization with respect to the people at the individual levels that we have trained. One of ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 81 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 the other things that we're focusing on within our organization is provide our personnel with the ability to gain additional certifications primarily within the program management and logistics. Next slide. Our customers are primarily within the U.S. Army Medical Command, the Army Medical Treatment Facilities. At the same time, we support the U.S. Army Dental Command, the Veterinary Command, and also our Air Force, Navy, Coast Guard, sister Services, to include the Federal Occupational Health, and a little bit of support to the VA. Next slide. Contract spending, as you can see, our total dollars has significantly increased over the years with respect to obligations. In addition to that, the bottom number is a direct reflection of the contracts that we've awarded for healthcare services, direct care medical, what we consider medical providers. GEN MYERS: COL SMITH: Question. Okay. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 82 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 one slide. fast. certified? COL SMITH: Yes, uh-huh. We can go back GEN MYERS: What percentage of your healthcare providers there -- the doctors are board-certified, of the ones that you purchase? COL SMITH: GEN MYERS: All of them are, sir. All of them are board- We skipped a slide, one too many, too I wanted to highlight a couple of things. Okay. In 2004, we We need technical help here. were directed by Doctor Winkenwerder to head up a committee that focused on minimizing duplication within the Services on contracting for healthcare providers. Part of that entailed looking at our When we -- taking a detailed look at our data. did that, that's how we got to our top ten labor categories, and these are purely based on dollars obligated versus volume. Interesting to note, if you look at the last two, anesthesiologists and advanced practical nurses, you can see that there has been a decrease with anesthesiologists and an increase within the advanced practice nurses, ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 83 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 because within that we have CRNA's, and over the years, we've seen a sharp decline, or increase in the cost of anesthesiologists, whereby the costs for CRNA's has not been as significant, and so therefore, our leadership has chosen to contract for more of those and less of the anesthesiologists. Next slide. Here's just a snapshot of the total amount of contracts that we currently have. It's interesting to note that I would say less than 50 percent of our contracts are performance-based, and that's one of the issues that we'll go into a little bit more the latter part of this briefing. As you can see, you know, two point -- 284.7 million of our dollars have been obligating on performance base within those six. Next slide. Some of the significant improvements that we've made that we felt that has significantly helped our organization and supporting our customers, we established what we call business operations within our headquarters element, whereby we have a nurse consultant and ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 84 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 also a health care administrator. And as you can see, we've highlighted some of the things that they've helped us out on. And this has what I consider brought tremendous value to the organization itself and to the customers that we support. As far as some of the innovative contracting processes that we've been able to implement, several years ago we implemented what we called iMAP. It provided us with the opportunity to minimize what I call the flash (off mike) for bringing on providers and ancillary personnel. And it became a viable tool within our tool kit of resources for contracting. What we're currently working on is a follow-on to that, and that follow-on I think will be a lot more robust, because we've had an opportunity to document our lessons learned, and therefore, incorporate those lessons into the follow-on. One of the significant things I think about that is that when we initially awarded iMAP, we did CONUS awards. Well, what we found out ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 85 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 based on discussions with a number of contractors is, that kind of put them out of their comfort level, so to speak, because now they have to provide coverage across the U.S. versus it being based regionally. So they've asked us to consider doing regional awards as we go forward with the follow- on. The other initiative that has provided significant value to our organization is a traveling nurse contracts and Locum Tenens contracts, whereby it allows us to execute on physicians and nurses for a period of less than 12 months. And at the same time, we've gone forward with providing what we call post-award customer visits to our customers, whereby we look at the top 25 percent of our contracts and have detailed discussions with our customers, more so trying to find out lessons learned and correct any kind of misunderstandings associated with the operation of that contract. That has paid big dividends overall based on the feedback that we've gotten ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 86 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 from our customers. Next slide. Best practices, we've -- unfortunately, we weren't the ones that discovered this, but we have implemented within our organization oral presentations, solicitations. That has helped us out tremendously with respect to minimizing the time that it takes for us to award contracts and also provides us with an opportunity -- or the contractors an opportunity to minimize the number of questions that they have regarding a particular solicitation. The other one that has brought tremendous dividends is us going forward with multiple award contracts, and therefore, allowing quicker processing or task orders and competition for pricing. The second bullet which was provided to us, unfortunately the organization has yet to do any type of contracts whereby they're based on provider reimbursement. Mr. Smith. MR. SMITH: members of the panel. Good morning, distinguished Colonel Smith has told you Next slide. Challenges, ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 87 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 how U.S. Army Medical Command has been providing contracted medical support for the entire Army, our sister services, the VA, and FOH, and we do so with significant challenges, five of which we will briefly discuss today. One challenge is that there is a shortage of qualified personnel in the marketplace. As a result, we've been unable to fill more than two dozen acquisition positions in medical command within the last two fiscal years. The reason for that is because currently the qualification standard is that a contracting specialist must have a bachelors degree in business courses, sorry, must have a bachelors degree plus 24 semester hours in business-related courses. One solution to this shortage would be to return to the prior standard, which would be a bachelors degree, or 24 semester hours in business- related courses. Another challenge we face is the statutory limit on the compensation for personal services. That limit is presently $400,000 a year And as you can see from this per individual. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 88 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 slide, some of the medical specialists easily exceed the $400,000 a year limitation. The impact of the compensation limitation is that it limits the use of personal services contracts who acquire these high value specialties. We just cannot use personal services contracts to get the specialists because it exceeds the $400,000 cap. What that does is, it forces us then to consider using non- personal services contracts because there is no dollar cap on the non-personal services contracts. But non-personal services contracting has four disadvantages. The first disadvantage is that it limits the providers to medical professionals that hold a license in the state in which the service is being provided. The second limitation is that it limits the Army's ability to control how the contractor provides the service, because under non- personal services contracting, we're not allowed to use direct supervision of the health care provider. The third limitation is that it creates ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 89 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 some uncertainty as to how the private provider's insurance company will respond if there's the medical malpractice issue involving the adequacy of the Army's protocol. And then, of course, the fourth challenge is, there is a temptation for not only the Department of the Army, but the other federal agencies, to treat non-personal service providers as if they were personal service providers, and that violates federal law. So, of course, one solution would be to increase the statutory limitation on personal services contracting to the fair market value, so that we would be allowed to use personal services and pay the fair market value for that specialty in the geographical location where the service will be performed. COL BADER: has a question. RADM MATECZUN: Mr. Smith, has a Excuse me, Admiral Mateczun legislative proposal suggesting that been forwarded through the Army? ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 90 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MR. SMITH: No, sir, that -- medical command considered that about a year ago, we staffed it up through the chain, and it did not make it. COL SMITH: Right, we didn't have enough supporting documentation to substantiate that, because at the time, we were trying to go forward with it, so we just didn't have enough there to provide us with that information. GEN ADAMS: Isn't the 400,000 relatively recent change, wasn't it around 225,000 within say the last three years or five years? MR. SMITH: GEN ADAMS: It was 200,000, ma'am. Two hundred thousand; so the 400 -- the other thing I think we have to realize, generally this is for a 40 hour work week with no after hours call and no GME, so when you look at compensation packages, I mean I think the -- from my old perspective, the 400,000 is fairly generous, it gives you a lot of flexibility. RADM MATECZUN: I'm hearing you say you can't buy them, though, for that much money. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 91 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 COL SMITH: Right, and we've identified certain specialties whereby they're just exceeding that amount. It's a small percentage, but at the same time, it doesn't provide us with the flexibility to contract out for those types of providers, especially in locations where the gene pool is relatively small. MR. SMITH: Another challenge has to do with blanket purchase agreements, commonly known as BPA's. And a BPA is simply a charge account The challenge for making repetitive purchases. here is that a single purchase or a call must not exceed the simplified acquisition threshold if the Army established the BPA. And currently, the simplified acquisition threshold is limited to $100,000. Now, again, from the slide, you can see that the average annual salaries of some of the medical specialties exceed even $100,000. The $100,000 limit has two obvious disadvantages; it will not allow us to use BPA calls to get anything except temporary services, because if we try to ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 92 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 acquire the services of the specialists for an entire year, that will put us over the $100,000 cap. The second disadvantage is that it encourages the contracting officer to split the requirement. And in the acquisition world, splitting the requirement is a very bad thing. The temptation, of course, would be to issue more than one call for $100,000 to pay for the services of a specialist that exceeds the $100,000 cap. One solution would be to increase the BPA call threshold to the simplified acquisition procedure threshold and allow the contracting officer to make those calls. Currently, that threshold is $5.5 million for commercial items. And most of the health care services that we buy in U.S. Army Medical Command would fall under the category of commercial items. MR. HENKE: I have a question. What's the BPA limit on a federal supply schedule contract? ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 93 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 100,000? MR. SMITH: than 100,000. MR. HENKE: MR. SMITH: Okay. But the reason this poses a Yes, sir, it is generally MR. SMITH: Sir, the BPA limit on the federal supply schedule contract is listed in each of the different federal supply schedules. MR. HENKE: Is it generally higher than problem for the services is because the federal supply schedules would not have some of the specialties that we need in the Army. They have a lot of the general medical categories, but they're missing some of the specialties. And in those cases, the Army -- when we award a BPA in the Army, we're limited to having each call or each purchase not exceed $100,000. MR. HENKE: MR. SMITH: MR. HENKE: MR. SMITH: If it's off the schedule? If it's off -Right. -- the Army's BPA, not issued against the federal supply schedule, ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 94 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 correct. MAJ GEN SMITH: Is there a law that says -- many of these doctors operate in practices where there are four and five in a group. So is there something that prevents you from saying to this group, 500,000, where you can get a group in and get them through a full year, or is it you only can go one -- it's -- a person, I understand that, but you couldn't go to a practice that has five people in a group and say the practice gets 500,000? MR. SMITH: No, sir, because the Federal Acquisition Regulation limits each single purchase. If the Army awards the BPA, the Federal So Acquisition limits each purchase to $100,000. even if we're making the purchase from that group that has five radiologists as members, that single purchase, radiology service, cannot exceed $100,000. MAJ GEN SMITH: individual five? MR. SMITH: It is irrelevant, sir, how But how about the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 95 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 one ahead. many people are in the group. MAJ GEN SMITH: MR. SMITH: the purchase. Okay. It's limited to the call or We're not allowed to purchase services that exceed $100,000, and that is our challenge. Performance-based contracting, now I'm How do I go back again, please? The challenge is that some of the medical specialties are not exempt from the DOD performance-based contracting goals. It's very difficult to establish performance-based standards when the government controls all meaningful aspects of performance in the way that we do under personal services contracts. So in Medical Command, to have some kind of performance-based standard, we traditionally measured fill rates and personnel turnover, and although those two items are important, that's really not the essence of what we're buying, we're buying quality healthcare. The existing partial exemption forces the Army to choose between using personal services ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 96 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 contracts, and therefore, not meet the 50 percent goal, or we meet the goal by using non- personal services contracting. And that puts us into the disadvantages that we discussed earlier about the use of non- personal services contracts. Since FY '05, DOD's goal has been to award 50 percent of all dollars being used to buy services and have those dollars awarded on contracts that are performance-based. So one solution would be to extend the DOD exemption to personal services for healthcare. So if we allow all DOD personal services contracts to be exempt from the 50 percent goal, that would solve this challenge. MR. HALE: Question; I don't claim to be an expert on performance-based contracting, but aren't insurance companies all going to more ratings and things that would allow you to measure the quality of the services you buy on a personal basis? I mean it would seem like performance- based contracting would be easier to do in the medical area than in some of the other areas that ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 97 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 we're trying, I guess, so it's another way of asking, isn't there a way to do this? MR. SMITH: Well, sir, not with personal services contracting, because the idea behind personal services is that -- well, let me start over. The idea behind performance-based contracting is that we tell the contractor the outcome and we leave it up to the contractor to decide how to get the job done to the standards specified in the contract. Under a personal services contract, the contractor has no discretion to decide how to provide the medical care, because we tell the contractor how to do the job, how to treat the patient. And the reason we tell the contractor how to do the job is because the government, under a personal services contract, has full legal medical liability for any bad outcomes. So it's very difficult then to have a performance-based standard in the personal services arena because the contractor basically is functioning as a government employee, doing ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 98 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 exactly what we tell them with no discretion to decide how to -MR. HALE: Well, how about -- I mean something like you maintain a certain rating in terms of medical outcomes, if I tell you to do this surgery I guess is what I hear you saying, is you instruct the physician to perform an operation, for example, but you could, couldn't you, require that they maintain a certain level of outcome in terms of the quality of that service? MR. SMITH: MR. HALE: MR. SMITH: Well, sir -It's not so easy, huh. -- that would sound like a reasonable approach to the attorneys, but from what I understand from the physicians and the medical community -MR. HALE: MR. SMITH: Okay. -- that's really not a fair standard, because a lot of times the physician has no control over the outcome, it depends on the patient's condition. The physician may do everything exactly correct and still there's a bad ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 99 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 outcome. GEN ADAMS: Except that built into our system, we do have performance-based evaluations called credentialing. So, you know, at least it could be tied into the credentialing, you know, saying we'll perform in accordance with the credentialing maintained by, you know, XYZ hospital. So, you know, I don't see where this couldn't -- I really feel -- it would give me a lot of discomfort to say we're going to waive performance-based standards. That, to me, doesn't send the right message, even though we've got to put it within context. MR. SMITH: And in the contracts, ma'am, we do require the contractor to perform up to the standard of care, that is a requirement in the contract. But DOD currently waives the performance-based requirement for some specialties, but not all. And we're asking for DOD to consider waiving the performance-based requirement for all of the specialties, because really, no there's difference between the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 100 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 specialties when we're looking at the issue of performance-based standards when it comes to personal services contracts. Another huge challenge that we face is that DOD prohibits the use of the VA federal supply schedule contract for personal services because the medical liability coverage of 10 USC 1089 is limited to DOD contracts. This challenge presents us with three limitations; first, it limits the Army's surge capability to care for the wounded warriors, because it makes the VA's contracts off limits to DOD if we want to acquire the services as personal services. Secondly, it increases the time required to procure medical services for troop deployments and demobilizations, because it takes a lot longer to award a new contract than to simply issue a task order on an existing VA contract. The third limitation is that it limits the pool of contractors that are available to perform the services. In DOD, most of the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 101 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 contractors are small business. However, on the VA schedules, they have a greater pool of contractors because their contractors are small business, as well as large businesses. One solution here would be to expand the 10 USC 1089 liability provision to apply whenever a DOD contracting officer issues a task order for personal services against the VA supply schedule contract. We think that this is a reasonable approach, because the contract really is sitting there as an empty vessel, and until the task order is awarded, which has the statement of work telling the contractor what to do and has the money to pay for it, nothing happens until the task order is issued. And the idea is that the DOD contracting officer would fully comply with all of the DOD rules and regulations for issuing personal services contracting. in making this change. So we see very little risk And this, sir, this is one area, Admiral -- it is one area where Medical Command has proposed legislation earlier this ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 102 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 month and it's working its way up the chain to perhaps get some statutory relief. MAJ GEN SMITH: Are you familiar of the FHS system in Chicago, so how are they handling that issue, the Federal Health System, the model we're putting in Chicago and the one I guess they're going to put in California and Florida, because that's a combined VA/DOD facility that went into Chicago, and they said they've worked through all these little myriads and things? RADM MATECZUN: They're still working through the details on governance for their -it's problematic. MR. SMITH: And that brings us to the end of the Army's -- the health care acquisition portion, subject to any of your questions. COL BADER: Do we have any additional questions from Task Force members? MAJ GEN SMITH: Again, this may be I'm still learning, think about the doctors -- comply to state. If they're the MTF, aren't they on Don't the rules sort of change federal property? ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 103 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 sir. correct. based on the interpretation? MR. SMITH: Sir, you're absolutely If they are performing the services on the military installation, they are on federal property. But for purposes of lawsuits, the rule is that the law of the state where the MTF is located will apply. And that is why we require by law, if it is non-personal services, the provider must be licensed in the state where the service is going to be performed. Because under a non-personal services contract, the provider is responsible for carrying medical malpractice coverage, and he cannot get coverage unless he's licensed in the state where he's performing the service. Under non-personal services, because the government is assuming the liability, we do not require the provider to be licensed in the state where the service is being performed. ADM SMITH: MR. SMITH: For personal services? For personal services, yes, ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 104 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 means. MR. HALE: A question; you earlier proposed essentially dropping the standards for the quality of the acquisition personnel, dropping the bachelors degree requirement in order to get more people. You're also asking for all kinds of new flexibility that I think would depend on their judgment. Is that a good idea, that we kind of drop the quality or standards for the people making all these additional judgments? MR. HOWELL: MR. HALE: approaches? MR. HOWELL: I'll be honest with you, we Can I add in on that? Aren't there other also have an acquisition activity which helps us on the material side and that's what I'm going to talk to when it gets my turn. MR. HALE: -- we'll wait for your briefing, is that what -MR. HOWELL: No, that's not what it We also are suffering from shortfalls, I Part of it is, of have to tell the people. course, grading. As we've seen the shortfall ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 105 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 come, people have upgraded, and so there's a flocking to other agencies in some cases. So we've seen an out-turn of people who have got promoted easier out. I would tell you, I'm not sure I like the idea of reducing the standard. different plays in this. There's But I do believe when (off mike) came forward and made that, they need to do a better job on the education piece to be able to push it forward. Incentivizing also, maybe early entry out of universities and things of that nature for dollar -MR. HALE: Will NSPS help? Not really, sir, not at MR. HOWELL: that entry level. What you really need is some recruitment bonuses, you want to know the truth, to get them in up front. MR. HALE: I'd be more in favor of recruitment bonuses than dropping that. MR. HOWELL: opinion, yes. LT GEN ROUDEBUSH: Question; healthcare That would be my personal ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 106 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 tends to be local in terms of meeting these requirements, and I understand your regional approach and the efficiencies and economies of scale. But working the issue locally, do you have contracting representatives at the MTF's working these issues locally, both in terms of fulfillment of the vacancies and working the quality of those individuals that we do bring on? COL SMITH: Yes, sir. Each of our facilities whereby we have contracts that are being performed, we have what we call COR's, contracting officer representatives, that, for the most part, act as a liaison between the customer and the contracting officer. LT GEN ROUDEBUSH: Okay. And as sort of a different facet of that, are you working with the TROS for resource sharing, resource support kind of activities, initiatives, to incentivize the managed care support contractors to help place individuals in certain capabilities and specialties within the facilities? COL SMITH: No, sir. We are taking ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 107 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 advantage of the clinical support agreements, and that has allowed us to minimize what we consider the flash -- for putting providers on the ground. But that's one resource that we've been able to take advantage of, but that's about the limit of that. LT GEN ROUDEBUSH: Okay. Just as a note, some of the opportunities for resource sharing and resource support with the managed care support contractors have not been as available or effective as they have been in the past, and this is one area where you begin to cross boundaries between the managed care support contracting and the service contracting that does offer advantages for getting capabilities into facilities that -GEN ADAMS: And it's not in the current contract, and it's not in the draft RFP that's out in the street either. It was in, you know, the first generation, but we haven't seen it since. RADM MATECZUN: a question. Colonel Smith, I've got From your perspective, are the Services competing for nurses and doctors, ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 108 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 providers? COL SMITH: say they are. Yes, sir, they are, I would We have a number of discussions amongst my brothers within the Air Force and the Navy, and time and time again we see that we're competing for the same requirements across the board, even within the same geographic location. And one of the -- I guess a significant outcome from that is, we've seen pricing increase because of that. RADM MATECZUN: Just a follow-on question, is there any way we can do it better so that we're not driving the price up against each other as Services? COL SMITH: Yeah, I guess the big one would be just the consolidation of those requirements within a consolidated organization or an organization that had the ability to vet the requirements, therefore, eliminating the competition. COL BADER: from the Task Force? Any additional questions Okay. Next we will hear ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 109 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 from Mr. Bill Howell, the Principal Assistant for Acquisition, U.S. Army Medical Research and Material Command. I would like to ask that we just take a five minute in-place break while we load his briefing. Thank you. (Pause) MR. HOWELL: I'm going to change the I know scope a little bit of where we're headed. from -- I came in a little bit in the discussion before and most of the discussion has been on our fixed facility health care services contracting, I'm going to go to material. And actually, my focus is more toward how do we support the deployed force and the material in which we procure and manufacture and such, vice the fixed facilities, how do I get material into Walter Reed or something on that issue. Though there is some touching points in that that I'll go to, I can certainly hopefully answer some questions if we slop over into that. But my real focus, quite truthfully, is going to be how do we support the deployed force. So if we ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 110 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 can flip the slide to number two, you'll see that our key domain areas really are, first of all, our research and development piece, i.e., our science and technology, which comes up with the good ideas and help to matriculate those into an actual candidate item. We have information technology, which is underneath all of this, that we have to do both from a research standpoint as to how we maintain our data all the way out to the log systems that actually provide the piece of material. And then that material acquisition logistics piece, which is actually how do we buy it, how do we field it, how do we get it in the hands of a provider. about that. So we'll talk a little bit The end goal being, of course, to protect, project, and sustain the war fighter. Next slide. We're caught up, good. So I'm going to talk a little bit about our research, development, testing and evaluation, RDT&E portion of our portfolio, then I'll go into our acquisition, and then I'll talk a little bit ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 111 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 intertwined in that about what are some of our current ongoing improvements to try and either reduce time, reduce cost, or get the better product out in the field. We can flip. So our areas in which we do research and development in, and this is actually from a six -for those who are in the services, 61 through 65 pots of money, those are different levels of research dollars. We have five main areas in But I have to scope Ninety-nine percent which we do our research in. that in the very beginning. of what we put in the hands of a provider or we put on a soldier that is a medical product is really bought off the shelf. So we use the -- leverage the commercial marketplace by far larger than anything else. That area, though, unfortunately, that we get stuck doing research on is those areas where there's very little commercial marketplace or you have to have -- stoke it a bit to be able to get the commercial industry interested in it. And as you see here in some of these, we ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 112 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 have a large portfolio on infectious diseases, we're talking largely malaria, dingy (?) and things of those nature, third world diseases which you will not find a great deal of work in that. The greatest advent in this has been the Gates Foundation that has provided a good deal of dollars recently, looking largely at children in Africa and Asia. We've been able to pony up, because some of our areas in which we're doing research will coincide. Their end zone, though, is a vaccine for children, our end zone is a vaccine for adults, which equates to a traveler's market. So there is some nuance differences there in how we would have to do our clinical trials in the development plan, but we are leveraging a good bit that piece. those. And you see where we're coming out of Hopefully vaccines, we're looking at diagnostics, in some cases we're trying to make sure the vector, i.e., a mosquito in most cases or a sand fly, does not get -- so how do we do insect protection and things of that nature. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 113 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 -- care has largely been focused toward up front on the battlefield. As you all know, you don't make much money before you get a guy in the hospital in the commercial market. Ambulance catchers do not -- is not a real profitable market. Unfortunately, that's the market in which we find ourselves. So we do a decent amount of research in that, a great deal in hemostasis, so we're looking at, you know, bandages, how do we stop bleeding. We're also looking at fluids and resuscitation products and things of that nature. And on top of that, we also look then at how do we reduce our footprint, because in many cases, the devices that we use can be quite large in some instances. So how do we restructure those to make them smaller and more rugged so you can use them in an austere environment vice in your community hospital. Military operational medicine is really looking at how do we make the soldier a better performer out there in the environment which he's ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 114 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 in; he's cold, he's wet, he's at high altitude, and he's dehydrated, whichever, how do we make him perform better in those particular areas. think the chem bio defense side is pretty self-explanatory. If you run into a chemical or a And I biological defense weapon, how do we, first of all, put a vaccine in you, if possible, so that you won't fall sick, and if for some reason you do, what are the treatment routines behind that. Flip. To do that, unfortunately, you all may be aware, to be able to put a new product, I think Tufts University has the standards in which they maintain for the commercial marketplace, it runs close to a billion dollars from the beginning of a good idea to an approved item. We don't get anywhere near that amount of money, so to be able to do what we do, we team all over the place, often with academia often with industry, often with other partners in the federal government. We have a good deal of relationship with NIH, they provide us a great deal of funding ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 115 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 actually for what are co- pieces, largely because the NIH has always funded basic science, but they don't do very good in product development, it's not a part of their core competency. It has been a part of our core competency for quite a while. So when they have a product that is moving forward, out of what is known as a tech base, they've come to us often to help develop that product into -- through the advanced development, and it matches in our particular portfolio. We've also worked very hard with, as you can see, in some of the slides, those are acronyms, the (off mike) force, which is a stand-up group that says how do we get stuff into the field for the battle today that can be moved within a 12 month -Month time period and we've done some teaming in that. The first -- the improved first aid kit is a very good example that we put on soldiers about two years ago. Involved in that was also the caidasin ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 116 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 (?) bandages and things of that nature that would stop the bleeding. where we've teamed. So those have been initiatives And in some cases they have paid for it, the procurement of it, but we provided them what to do and in some cases, helped them in a contracting piece to get to the right providers. Flip. This looks like a standard, I'm going to bore you a little bit, and this goes into somewhat of our improvement, so I apologize up front. This looks -- at the very top, it's the DOD 5000, sort of means of how you matriculate a product from a good idea all the way through acquisition. That's a large acquisition, not contracting, I should say up front, in milestones A, B, and C. If you come down to the next level, that is what the commercial marketplace uses. They talk about discovery, clinical, when they're doing work on animals and during the different phases through, until you finally get a launch period where you're putting it out on the marketplace. Flip. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 117 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 What we have done is, we've married these two, and we've come up with a unique decision process and acquisition milestone process that is different, but basically molds the two, so that we try and make sure we keep the regulatory guidance in check there, but we also have scoped it to make it look like something is pertinent if you're developing a medical product versus developing a truck or a tank or whatever. In that, we have scoped that. about six months worth of effort. We did We went to about three or four different commercial entities, and we had a commercial entity actually help us in that, and what we found is that there are different milestones. For example, you see on the left, candidate selection, that is a huge decision point and that's well before any of the other pieces that you would say, i.e., what are you going to take into your final human, excuse me, final animal models, and you're going to do in a good manufacturing process. Those are real dollars for ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 118 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 us in our budget, so we need to make a hard decision there before. The other piece of this is, it allows us to get back to looking at things more frequently in some cases than the DOD 5000, because milestones between a B and a C, for example, would encompass phase twos and phase threes, that could be five years, six years in the development of a product. That's way too long to be letting somebody run something and not have a critical mass come back together and decide are you on track or not, and if something else happened in the marketplace, or has the regulatory environment changed and things of that nature. So this has brought the decision points we think much closer together. Flip. In that, the other thing that we've done is, we've taken our tech base and we've taken our acquisition, our logs, and we've put them in a gang together instead of having separated entities. So from the very beginning, as soon as you start to have a candidate, all of them are ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 119 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 working together. And what we have found is, we are a scientific-based organization for years and years and years, and we poo-pooed the business side of it, and the regulatory got sort of a passing grade, but probably didn't have as much structure and importance in how we develop things. Well, as we sat down and started to go through these decision meetings and decisions, what we found is, probably 60 percent to 70 percent of our problems have been business problems, not science problems. What kind of contractual arrangement do we have with who we're working with? Did we really do a good source selection to start off with, or did we go to, well, the only guy we usually worked with, which was GSK, so how do we, you know, we'll go back to them because they've always worked well with us. So we found that we really have to go back and start early on and infuse these kind of specialties into the process. And we're only in our 18th month of this at this point, so I can't ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 120 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 tell you that it's a whopping success. But we believe, at least in the rationale that we're going through, we've seen some winners in this. It also gets us to where we've killed four projects in a year, which is probably more than we've killed in five years prior to it, because the regulatory pathway, for example, on one of them, we just couldn't figure out how the hell we were going to get there in the dollars that we had. The other side of it is, we had problems with a particular malaria drug on the access side of the house. The hills cards (?) say that if you're going to do a trial on a particular country, you have to be able to ensure that they have access to buy that product when it becomes available. Going to Kenya, where it was, the public health system probably could not afford the drug that we're after. We actually had to kill the product, for a temporary standpoint at least, and go look at where else could we do that particular ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 121 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 clinical trial, and I have to tell you at this moment, we ain't found it. Flip. It also has looked at where do we make decisions in our process. Prior to this point, everything came to the Commanding General, you know, like all of you Commanding Generals sitting around the table know how easy it is to get on your schedule, believe me, ours was just as difficult. languish. And so we ended up having decisions So we went back and said, okay, what are some of those decisions that we can downsize and what sort of committees need to be put together to do that, and this was our effort there, okay. On top of that, which is a business process change, we've got some other things we did. Certainly, in the contractual vehicles, we have a whole slew of different vehicles that we use, I should tell you up front, depending upon where you are and the maturity and what you're really after. Broad area announcements for fairly early on, to be able to sense what is out there in ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 122 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 the marketplace, which we do not know, are very good means to be able to let people give proposals to us, and you see that when we add the TBI and the PTSD dollars, we got 300 million just about a month ago on a supplemental, they're all going out on broad area announcements because that is the way for us to be able to get that information quickest. We have different assistant agreements and grants that we use, mostly with universities, where your outcome for the particular effort may just be a paper, or it may be just knowledge instead of give me a widget, and those work a little bit easier, and they also give some easiness to the party that we're working with because their accounting system is behind and do not have to be as stringent as a standard contract does, so there's more incentive for them to play. The license technical transfer agreements and licensing agreements, we have found that those are extremely important to us. Government, in general, thinks that the S&T needs ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 123 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 to be licensed out, obviously, that's the reason why we do research, is to license it out to the commercial entities. To do that, though, the commercial entities often want exclusive licenses, because in the medical world, the last thing you want to do is help spend a whole bunch of money and get an item through the FDA and then turn around and have a generic or somebody else be able to play on you immediately to it. Now, in our area, it's probably not so tough or not such a hard thing because the market is so small. Once we get in there, we don't believe there's going to be a great deal of generics in some of these areas because there's just not enough market to be able to withstand two or three. But what they still want to do is, they want exclusive licenses, and what we've learned the hard way is, in many cases the constructs of the vaccines or the drugs we come up with, they can use in some other platform. And then we lose dollars, and in some cases we lose the direction ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 124 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 of it, because they'll go so far and then they'll start to turn left on us and use it for another product. And if we have -- if we're doing a cooperative agreement, which is what we do normally because we don't have enough dollars to bring it all the way to licensure ourselves and so we do it cooperatively, sometimes that train, to get back to what our indication is, gets very difficult. So there's good and bad in that in the But sense of our cooperative research agreements. what we found is, we've got to do our licensing agreements a whole lot better than we have in the past, and we need to nail them on milestones toward the production in the location that we want, and we need to make sure that we have any information or patents that are generated during that process. We need to be able to have access to, so that if, in fact, they decide to go do a malaria vaccine for children and do not pursue FDA approved for adults, we get all that information ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 125 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 back and we can provide it to somebody else if necessary. That has not happened in the past. On the other side of it, the human use protocols, any time you're doing clinical trials, you're putting a human into some form of danger. And before you do that, you go through a slew of institutional review boards and a second level by DOD requirements, a second level review board that we have to run. That has been a very time-consuming piece, and we have found in many cases our commercial partners would rather not work with us because it takes so long. So we've been doing some effort to try and reduce at least our second review portion. The first portion, the institutional review board, is standard across the industry, it doesn't matter if they're doing it with us or whoever. But our second review, we've done some very hard work in trying to figure out how can we expedite that. I know we've reduced it about two to three months at this point, largely based upon ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 126 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 the standards of the IRB that we're working with. If they have a pet -- yeah. DR. GALVIN: Question; why do you need a second one if the IRB's have already spoken? MR. HOWELL: There's a DOD requirement for that, because if you go back to World War II and other times of how we may have used prisoners and other people as subjects, this is another way to try and make sure that we don't fall into a trap, quite truthfully. So I mean could that necessarily be changed legislatively? I don't think anybody would have any objections on our end, but I have to tell you, we're not pushing that. What we think is the better way is to be able to get our review process down to a turnaround time of 30 to 45, 60 days, something of that nature, which today it's probably gotten twice that. Another piece in which we're improving upon is our information management, the merits, as you see there. When you turn data over -- in the end, we do not have the license for any particular ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 127 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 product, a commercial entity owns that license, which means we have to turn in all our data, pre-clinical and clinical data that we've generated from the work on that, to a commercial entity. The FDA, about five years ago, came forward with standards in which one does that electronically. We're in the process of reaching It's a fairly those particular standards. expensive venue, and it's been a very expensive venue for the industry in general of trying to get to these electronic validated systems, but we're in the process of doing that. And the final piece there is activity based costing, everybody has gone to that. Our initial play, we were about 18 to two years into it; now our first place was just trying to distinguish what was reimbursable work we're doing versus corps dollars versus congressional dollars, quite truthfully, to be able to put a handle on that and how we manage them. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 128 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 The next thing we need to do is start to look at, okay, by project, how much are we spending, and trying to see where are the good projects and where are the bad projects and how they manage their money. Flip. Now let's move out of the development of new items from ourselves and how we're doing and how do we now actually buy it and field it. On the left side of this, you'll see that, from our institutional Army, i.e., we have two organizations that are institutional based, the U.S. Army Medical Material Agency and the Medical Material Center in Europe, who provide basically support to the deployed force, yet they're an institutional organization. They do that through the list of different capabilities that you see there, basically and by and large, the USAMA, Medical Material Agency, gets people out the door. They buy all the material and put them into the sets. If you're going to deploy a hospital or you're going to deploy a full surgical team, they ensure ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 129 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 that before they disappear, they've got all the material they need, and I'll walk through a little bit how they do that. On the other side, the center in Europe is really that supply chain manager that gets you, once you're into theater, how do you maintain yourself, between that and the TLAMM and I'll explain that in a bit. basically support you. The offshoot of this, you'll see here, one of the improvements we made about four years ago in the process is, we didn't leave logs by themselves. We actually put a clinical They're the ones who engineering group, so that when you have substitutes or you can't get a hold of an item or you have multiple x-ray machines, and which one is the best for the mission that you're after, now we put a team together that has both clinicians, as well as logisticians, biomedical engineers, so that we can make that determination up front so we're buying the right machine. What we found a long time ago, if you ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 130 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 left doctors by themselves, we'll all be driving Cadillacs when, in fact, we need something potentially different, or we'll have three pet scans sitting at Walter Reed or something of that nature. So we've done this, we're reeked over five or six years a great deal of savings, I don't show the numbers, in trying to right size what it is. That is good for the go to war side of the Army, we use that capability, as well as the picture is shown here in our fixed facilities, in our technology assessment and requirements -To kick a person out the door, you see there's all sorts of different little programs that do that. The truth of the matter is, we don't have enough money, and it would be wasteful if we sat there and bought everything and gave it to the guy out at Fort Bragg and say, okay, 28th combat support -- you're full, go. You have rotating items in there that need to be bought constantly. If you give it to If them, they do not have the budget to do that. you look at the actual age and the turnover of ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 131 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 technology in some instances, it doesn't -- it isn't smart to give a guy something and then five years later, when he actually deploys, three years later, he doesn't have the latest thing. So we have all sorts of different little packages, depending upon the commodity and what it is, that we then manage. We do give them, of course, enough core to be able to maintain their skills. It's a little greater than a training set, but in most cases, you'll be augmented when you deploy by material that we have in different areas, or through, if you flip a side, I think we'll -- I'll talk a little bit about contracts and the rest. MAJ GEN SMITH: Guard and Reserve? MR. HOWELL: Same thing; they're stored What do you do with your -- they have a small set that they have actually in their armories. back. First of all, I should go The Guard, of course, is the combat arms, so what you're going to see is buried within their -- ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 132 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 is. MAJ GEN SMITH: Yeah, but the Army -- the Reserve carries mostly medical. MR. HOWELL: The Reserve does, yes, sir, National Guard does that's what I'm getting to. not have a great deal of medical within it, when you look at our TONE structure. The National Guard is where most of it We maintain in many cases their sets out at Sierra Army Depot, and we will push that to them upon deployment. We also have for deployed units, in the sense of APS, Army Preposition Stocks, in theaters, or different areas within the world to be able to push to them, as well. We do not want the Reserves, quite truthfully, the last thing we want to do is give the Reserves a lot of material, because it will die right in front of them, no one will maintain it, we learned that the hard way. So we maintain that material for them, or we have it on contract to ship to them as their deployment times come. And I'll explain a little bit in our IT as to how we can turn that around quicker. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 133 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 This particular slide talks to, once you're into theater, how do we do that, we have something you'll see called a theater lead agent material management group, a TLAMM that is under DOA's auspices, but it is made up of the services organizations. So for Europe, it is our organization that does that; for the Korean Peninsula, it's the 16th Medlog battalion; and for -- out in Southwest Asia, you see the organization there. They really depend upon prime vendor, for the most part, to be able to fill their orders. Eighty to 85 percent of their orders are prime vendor orders, and as you probably are aware of, that came into being quite a while ago, both med surge and pharm to be able to do that, which is a quick turnaround for us. They do have local procurement capabilities, largely that's maintenance and supply sort of items. And then we do pull from the depots depending upon the particular item and you see where they're going anywhere in the world. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 134 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Flip. To do that, I'm going to go -- this is, I think, sir, a little bit to your question. Prime vendor, again, probably supports about 80 to 85. So what we've done is, we've taken all our requirements for the war time and we've tried to match them against prime vendors, just like you've done in the fixed facilities. So we're using, hopefully, the same material when we go to war, for the most part, as you're going to see normally within your fixed facilities. We add that from DSUP their electronic catalog that's usually the smaller devices and mid range devices, not your capital equipment in many cases, but those things that would help flush out. turnarounds, as well. Those are quick Then the other thing we've added is a whole bunch of continuity contracts for those things that do not move often. So you've got some war stopper funds for medical chemical defense items, your marked kits or whatever that you would take with you, and ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 135 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 those things that a vendor can manage and he can turn them over selling them in his commercial market, but he maintains a certain amount for us to surge as we need. You couple that with our electronic means through our SAP enterprise-wide process that we've built. You can now build units from scratch, depending on the size -- combat support hospital with in 60 days; you can do smaller units within 25 to 30 days. So if a reserve unit is going to deploy, as long as we have the dollars up front to be able to support that, then we can flip a switch within 60 days, by the time he hits his mobilization station, we can have his medical stuff there. And that's based upon all these contractual pieces. MAJ GEN SMITH: But unfortunately, we're hearing too many stories that they don't even see the equipment until they get in theater, and I've heard complaints of some of the Reserve Chiefs about not being able to train on the equipment because they don't see the equipment until they ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 136 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 get -- the MOB stations necessarily don't always have that equipment in place. And now that you've got a policy of one year in and out, and you put in training time on some of this equipment, that's a cycle that I think we're going to have to address. MR. HOWELL: Yes, sir. What we do maintain is, there's -- pardon me, I don't remember the number, I believe it's three training sites specifically for reserves in which we put all this material that they're supposed to cycle through if they need specific training. And if we've included any new material in that time period, we should be informing them ahead of time. Does that all work? the time line, no. I guarantee you, Sometime those time lines get real tough to get out the door, and can they get down there and do that, no. So do they end up doing a lot of training or discovery when they get there in the field, yeah. And I have to tell you, I'm not -- unless you can give us more warning and more time period in that, I think that's always ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 137 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 going to be so much of a catch catch can. The hope is, of course, in most instances we're using material in the field that is ubiquitous or at least similar to what they're using in their peace time practice. And by keeping that up-to-date and not buying so much material up front to where it becomes out of date in time, we keep a little bit closer to that. But there's still, I will tell you, there's still a hold there. The other thing that we've done, a couple more things and I'll quit here, real quick, we've increased our test capacity. In many cases, if you put an item on an evacuation platform, an air evacuation platform, there's a specific testing that you have to do. We had through put that was fairly small, we could only do six items a year, we've doubled that after the second year of the war, because what we found is, many of the things that we would put in the packages, we were now getting patients coming home that were a little bit more critical than we had originally and they needed more devices to be able to sustain ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 138 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 them -- jump to mind real quick, so we've worked through that. And we've also increased our MIL standard testing, which means we're going to take an item into an austere environment, how do we test it to make sure it can work at high temperatures or with sand and dust and things of that nature. And then our information systems behind that, we've been doing a great deal of work. acronym, I'm sorry, but taking the last one, TEWLS, that's the theater enterprise-wide logistic system, that has been in the process of being developed as we speak now, which will allow us to be able to connect the front end all the way back to DOA or DSUP, to be able to move those digits a hell of a lot quicker, and therefore, have the response a whole lot quicker. do it, yeah. Questions? Thank you very much. Do we I think that should The COL BADER: have any questions from members of the Task Force? LT GEN ROUDEBUSH: And the attempt of ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 139 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 that? MR. HOWELL: Yes. TEWLS is ultimately to get the DIMLS? MR. HOWELL: absolutely correct. Yes, sir. In fact, you're What we're hoping to do is, we've had our release one of that particular system which supported the assembly management. We're hoping to be able to train -- we're in sustainment of that now, we're hoping to transition that within the next two, three months, over to DIMLS, and then by '09, have the rest of it transitioned over. MAJ GEN SMITH: The budget for Medical Intelligence, a separate budget? MR. HOWELL: Medical Intelligence? Medical Intelligence. MAJ GEN SMITH: MR. HOWELL: Yes, sir. A separate budget? That MAJ GEN SMITH: MR. HOWELL: comes from DIA. Intelligence -MAJ GEN SMITH: Yes, sir, absolutely. It's an Armed Forces Medical A separate R&D and all ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 140 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MAJ GEN SMITH: But yet many of those processes do need to dovetail together. MR. HOWELL: What we do have is -- and actually it turns out that the Armed Forces Medical Intelligence Command is co-located at Fort Detrick with us, so we have a great deal of intelligence communications in the sense of what's happening over there, which feeds largely our chem bio program, as to what are some of the risks that we would see, and therefore, what do we need to start to develop against that. It does not do -- it does a little bit about capacity in different countries, and so when we go in, what can we expect that we could use as host nation support and things of that nature. MR. HALE: Step back for me for a minute, what has been an interesting briefing, and answer a broad question we've heard repeatedly that we've done a lot better in terms of treating casualties coming out of Iraq than we did in earlier wars. Are we in the asymmetric part of that curve or can we continue to -- ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 141 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MR. HOWELL: Well, yes, I think we can. I don't have the slides with me, but if you look at it, we've reduced the killed in actions from about a 20 percent rate, which has been constant for hundreds of years, down to about 12 to 14 percent. Largely, that's based upon being able to stop the bleeding, between the use of tourniquets, the use of Chitosan, the use of factor seven, we believe we're allowing the guys to be clotting sooner on the battlefield and getting them into the hospitals or into the surgical teams. The downside of that is, our actual died of wounds rate has actually gone up about a half to a full percent, because we're getting kids who, unfortunately, have a higher casualty score, and I've lost the terminology, than we've ever had before. So some are dying on the table that never Where we would have gotten to the table before. believe we can still improve on that particular rate is non-compressible wounds. We're using factor seven, which is a blood coagulant, but I think what we're also ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 142 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 seeing is, if we change our protocol, the standard protocol, if you have someone come in is, you give him a whole lot of packed red blood cells first, and then after you get to a certain level, you start to give him plasma or platelets thereafter. We've seen in the research -- we have a research team physically in the theater. We've seen that if you change that ratio, to where you start to give him plasma and platelets earlier than the normal protocols, that we're actually getting increased survivability, as well. So there's some work still that I think we can do in that, but no one ever wants to say we're there. And one last thing, sir, if I can. bandage, even the bandage we're using, the Chitosan bandage, was not the best bandage that could be used. We saw that a fibrinogen bandage The did better, but we couldn't get it manufactured. So we're working with Johnson and Johnson, who has a project. If we can get them to the point that they can get it manufacturable, where it doesn't cost $1,200 a bandage, but it's more down in the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 143 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 range of $400 a bandage, then we'll have an increase there. I'm sorry, yes, sir. To that point, in LT GEN ROUDEBUSH: theater there's a couple of things, there's a joint theater trauma registry, which actually captures a good bit of both the clinical input and output types of wounding patterns, injuries, that sort of thing. The clinical methodology is utilized to treat those effective, not effective, or less effective. And that's captured -- the Army has the Institute of Surgical Research, which both of these are now very joint, because of the fact that we do a great deal of battlefield damage surgery at Balat for example, in the theater hospital, as well as Cashius as well as the Navy Shock Trauma Platoon. MR. HOWELL: Right. That is captured LT GEN ROUDEBUSH: jointly, pulled in, as a lessons learned, and actually is shared with our civilian counterparts. The Orthopedic Trauma Association, for example is ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 144 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 a key player in sharing that information and providing both support and a platform for disseminating some of that information. So it is captured in a way that is very joint in nature and is utilized in the services in their doctoral application of this, some common activity, some doctoral separate activities, so -MR. HOWELL: Right; I would add to that also, the other thing we're doing is through autopsies and marrying up what happened to the incident and what does equipment look like. providing information back to the material developer so that body armor itself can start to look at different areas. What we've seen, We're unfortunately, with IED's is, they've gotten smarter and they focus them to where now we're getting more blast that actually goes toward the head versus the body, for example. So hopefully that will start to drive the uniform manufacturers and the armor manufacturers and things of that nature to start to look at what are the changes, so that without ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 145 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 having to get to a medical solution hopefully. Yes, sir. MAJ GEN SMITH: Are there lessons learned in streamlining the acquisition contracting for supporting the war fighter or deployed force that can be applied to level five health care environment? MR. HOWELL: I have to tell you, I think I most of it is driven the other way around. think the more that we do that is common to the commercial marketplace, the better off we are in the war fight, because we only represent about five percent of the buying power within the industry, and so to think that the industry is going to match our requirements in the battlefield is probably not the right assumption. So I really do believe that we need to make sure we tailor whatever our requirements are up front and we try to look for commercial solutions to that instead of the other way around. MAJ GEN SMITH: Why are war fighter requirements handled separately from benefit ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 146 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 mission requirements, different organizations or what? MR. HOWELL: Sir, I hate to say this, but I'm not sure I understand your question. MAJ GEN SMITH: make sure I got it right. Let me see -- let me We're doing some research and research has asked me this question. MR. HOWELL: I'll wait outside and you can grab me when we take a break outside. MAJ GEN SMITH: Okay. One question; one of LT GEN ROUDEBUSH: the proposals within the Department is to look at doing R&D more collectively, more jointly. MR. HOWELL: Joint, yes, sir. How do you view that, LT GEN ROUDEBUSH: and how do you propose to expand what you're doing to perhaps better meet the other Service requirements in a way that's both timely and cost effective? MR. HOWELL: We are in the process of We have studying that, as you probably know, sir. been tasked by HA to put a group together to be ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 147 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 able to do that and we're in the process of doing that. We've had a few meetings, and quite frankly, I think it's a little early to say what that structure and how that would actually look like. But certainly from a functioning standpoint, there is no doubt that there are some synergies that we should be able to gain from each other. I don't believe there's a great deal of duplication, quite truthfully, because we already have a committee, the (off mike) Committee, and a means to be able to look at what each other is doing. So I don't think there's a great deal of duplication so that everybody is working is malaria or everybody is working on this, that, and the other. But what we don't have is sort of consertive synergy of effort and prioritization between the services, which I think would be important. As we all work separately, I'm not quite sure that we -- what is the true number one priority for the Service, I'm not sure we get at that, to be point honest, because we have our ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 148 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 different little nuances that we go to. Then you also have the trouble, and this is a bureaucratic answer, I'm sorry, but you have the trouble that within your own Service, there's very little medical research done in the sense of medical dollars, it's all held by the Armed Forces Research activity. The structure in the Services of how we do research is very different. So, therefore, in our case, almost all the medical research is done in our hands, in the case of the Navy and the Air Force, it's done in some cases by other entities outside of the medical structure that the requirements are passed to, so I'm not quite sure the nuances of how that's all going to come about. LT GEN ROUDEBUSH: Yeah, I would There is characterize it a little differently. not much medical research that's done within the Army in some regards that's particularly applicable to the doctrinal or the operational requirements in the Air Force. MR. HOWELL: Yes, sir. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 149 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 LT GEN ROUDEBUSH: So you're right, there is work being done elsewhere to meet those needs, and I think that's going to be the challenge of this group, is how to come together to be able to meet those singular and collective needs in a way that we can leverage each other's work better. MR. HOWELL: COL BADER: Yes, sir, I agree. Any other comments or Okay, great. As questions from the Task Force? Mr. Howell had mentioned earlier, we're going to roll right into the Navy briefings. So if we can just have, you know, a minute to stretch in place while Ms. Freeman loads the Navy briefs, we'll Thank you. roll right into them. (Recess) COL BADER: Good morning. We will now First, welcome our Navy representatives today. Mr. Andy Muenzfeld is the Director, Health Care Services Support, Naval Medical Logistics Command. His office is responsible for analyzing health care service, delivery shortfalls within Navy ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 150 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 treatment facilities, designing alternative delivery strategies, developing contract specifications, and working with the assigned contracting officers to develop, implement, and manage the resulting contracts for healthcare services. Mr. Muenzfeld recently authored The Guide to Personal Services Contracting for Health Care Services, for use by contract administrators across Navy medicine. He serves as an adjunct instructor on health care contracting issues for the Navy Medicine, Manpower, Personnel, Training, and Education Command, and has spoken extensively on the topic at Navy and industry conferences. Mr. Muenzfeld holds a Bachelor of Science from the United States Merchant Marine Academy and a Masters of Science from Central Michigan University. Mrs. Terry Horst is the Director of Acquisition Management Directorate at Naval Medical Logistics Command, Frederick, Maryland. As Director of Acquisition, Mrs. Horst is ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 151 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 responsible for the day-to-day management of the Navy Medlog Coms Procurement Directorate, as well as providing oversight to BUMED Acquisition personnel. She provides advice and procurement guidance in the Navy MEDLOG Commanding Officer and Executive Officer on regulations, policies, and operational issues. She works to advance procurement strategies that encourage initiative, excuse me, innovative, high quality, efficient contracting vehicles. She is the head acquisition program for the Tri-Services DOD drug testing program, which purchases supplies and equipment for the testing facilities. She holds a Bachelor of Social Science degree in Marketing Management from Indiana University of Pennsylvania. welcome you. Thank you. Good morning, Terry and I would We MR. MUENZFELD: distinguished panel members. like to thank you for the opportunity to come here and talk to you about Navy Medicine's contracting program. We're here to talk to you about the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 152 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 contracts put into place on behalf of the Bureau of Medicine and Surgery by Naval Medical Logistics Command. Naval Medical Logistics Command is the focal point for medical logistics functions for Navy Medicine, providing support to both fixed facilities and the operational forces. The Command consists of a group of program offices essentially, whose end products flow through Terry's acquisition management directorate to be purchased and then sent out to the field and to the operational forces. In 1987, Navy Medicine made a decision to consolidate all health care services contracting in one location, at Naval Medical Logistics Command. At that time, Navy Medicine sought to increase access to primary care. Specialty care seemed to be in abundance, but we had a problem with feeding into that specialty care system, so we entered into a series of contracts called the Emergency Medicine and Ambulatory Care contracts, as well as some stand alone primary care clinics called Navcare in the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 153 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Navy, Primus, in the Air Force and the Army. The office combined between my technical shop, Terry's acquisition shop, and our legal department. We incorporate lessons learned and manage the overall quality and consistency of health care services contracting across Navy Medicine. Terry serves as the Chief Procurement Official within Navy Medicine. And I'd like to turn it over now to her to describe how that organization is staffed and organized. MS. HORST: Good morning, everybody. Currently, the BUMED Acquisition Organization is made up of Navy Medicine West, East, National Capital Area, and the Navy Medicine Support, and this is currently how we're organized right now, and this is how our acquisition authority is organized in the same manner. As you can see by the chart, the way we have our acquisition authority right now is, we have a lead agent in each one of these regions. In the west, Naval Medical Center San Diego would be the lead agent, and in the east, Portsmouth ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 154 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 would be the lead agent, and in the national capital region, Bethesda would be the lead agent, and under the Support Command, Navy Medical Logistics Command is the lead agent. Now, it's important to note that other than Navy Medical Logistics Command, everybody has authority up to the SAP limitations. So there are limitations on what the other lead agencies can do because of their SAP limitations. Now, even though we all fall under the Bureau of Medicine, we get our SAP authority from NASAP they are considered the head of the contracting -- they're our head contracting activity, and they give us all of our authority, and that's where the authority flows down from, and that's who makes the decisions of who gets what authority. And right now, we just put the figures up here of what the main offices do in each region. And as you can see, each one of these offices are very busy with the amount of FTE's that each one of them have. Currently, we are working together as a ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 155 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 group, looking at how to consolidate authorities even further. What we're finding out, that as we consolidate the authorities, we're looking at can we consolidate authorities further under San Diego and can we buy more say under San Diego by consolidating the authorities further under San Diego and Portsmouth and Bethesda and Navy Medical Logistics Command. It is working out. The next slide represents our contracting specialties. As you can see, there's a wide variety of specialties that we currently buy. Our main concentration is medical health But we care and medical supplies and equipment. also buy for the DOD drug testing and equipment. That came to us actually in 1991. It was a program looking for a place to go and it was having a lot of problems. Since that program has The been with us, we have been very successful. time it came to us, we were paying about $1.35 for a drug test; currently we're paying about three cents for that same drug test. So over the course of, you know, the last ten -- years, we've been ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 156 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 able to save millions of dollars in the drug testing program. story. IM/IT came to us not too long ago, and we support MIMIC through their program. Other It's been a very good success health care initiatives, meaning GWOT dental health initiatives, PDHRA, we also support that along with the personal service drug program. What has happened through the years, as people have come to us and tried us, and using the health care support department, where they can go up to Andy's shop and get help with their statements of work, and then they can just walk down the steps and meet with a contracting officer and get help on acquisition strategies, and they can just go to our place and they can -- it's a one stop shop, and they feel like they can go there and they can get help with everything. And they want help on not just figuring out how to spend the money and how to get the money obligated, but they really want someone to walk in through the door. So we sit down with ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 157 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 them and we try to figure out how they can get that health care and how to get that provider walking in the door to get their needs actually met. So we get a lot of customers coming back and asking us to keep coming and to meet their needs as we move into the future. Our staff consists of In the 48 in the procurement shop right now. technical staff, we have 15; and our legal staff consists of two. We broke it out a little further on the slide for you. One of the exciting things with everybody being located at Navy Medical Logistics Command is that we're able to cross over; in other words, when the drug program is very busy, then maybe somebody will help out with the drug items, and when personal services is very busy at the end of the year, the drug people step over and help the personal services. The technical staff, you know, they'll help out sometimes with some of the contracting officer type things. And the legal staff will work extra hours to help out when something needs ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 158 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 done and needs awarded. So we team up, we come up with acquisition strategies, we work together to get the job done and meet the customers needs. The DAWIA certifications, you can see there that we have 11 level one, 12 level two, 12 level three certified. contracting. That's all certified in That We're 100 percent compliant. doesn't add up to 48. We have seven people that are currently working on their level certification. 1101's. We have about six people that are What we did within our acquisition code, we're the same as the other Services have been telling you. There is a shortage of 1102's. And about three years ago, we were down to about 17 people in our acquisition shop. And we devised a plan on how we were going to build up that shop, and part of our plan was to start looking for interns. So we went to the colleges, we started recruiting ourself, we came up with internal training plans, and we developed courses right within our -- in our code, where they could learn how to use SPF's, use the procurement system, ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 159 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 while they were actually doing procurements. So we brought them into training rooms, we taught them how to do SPF's, we gave them real requirements to do at the same time, so they actually were doing requirements and making contract awards while they were learning how to punch the buttons at the same time. So we tried to do innovative ideas so they could learn. So those people now are 11 and 12's, and they're the senior people teaching the new interns that were coming in, so it's been a real success story and something that we want to continue as we move on to the future. MR. HALE: And have they all been college graduates that you recruited as interns? MS. HORST: college graduates. Yes, sir, they're all And what we did is, we found that there were a number of people who maybe was one class shy of being a college graduate, and for some reason he just didn't finish, and we were interviewing a number of people like that, and you know, some of them you didn't really get the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 160 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 us. feeling they wanted to go back. But there were a few that maybe there was a certain circumstance of why they didn't finish. So what I did is, I created an intern program for 1101's, which you did not have to have a four year degree, and I hired them as 1101's, with the understanding that within the next two years, they would get their degree. They got their degree, we moved them over to 1102, and they're fully functional 1102's now. So that program has worked very well for So it's two programs that have worked great for us and have been very good success stories. So right now we're four vacancies short, and that is only because we're trying to hire some supervisors, and we are trying to use those positions for supervisors. And I just made a selection yesterday for one of them, waiting for another list to make the other selections, so we're in pretty good shape that way. LT GEN ROUDEBUSH: How are you connected, if you are, to line of the Navy contracting activities? Do you run in parallel, ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 161 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 are you intermixed, is that a completely separate process? MS. HORST: process as them. Well, we follow the same However, whenever we had our last PP (?) map, NASAP (?) came down and did our PP map, and they asked us to write up a best practice on how we hired the people, because I think they said like 20 percent short on -LT GEN ROUDEBUSH: So you run in parallel, but you're not interrelated? MS. HORST: Yes; they use different personnel shops, but they follow the same rules. LT GEN ROUDEBUSH: MS. HORST: Okay. They've having the same And what exact problems as we are in challenges. we're finding is that there's only so many 1102's, and everyone keeps stealing them back and forth from each other. So rather than keep playing that game, what we decided to do was go look for new ones and train them ourself and get new blood going. The next slide represents some of our ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 162 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 customers, and it goes along with a wide variety of activities that I was explaining that we're actually involved in, meaning the DOD drug program and IM/IT. Our customers represent all the different programs that we're involved in. Today we're going to talk more about the MTF's and about the BUMED MTF's and we'll concentrate more on that. But every day we get more customers coming to us asking us if we would take them on as additional customers. Just recently, in the past six months, the Navy Medical Research Command came to us and wanted to know whether we would start doing research contracts for them because of our reputation and our ability to get the job done and our ability to work with customers. MR. MUENZFELD: The next few slides are going to concentrate on some of what we buy and how that's changed over the past few years. You can see just since FY '04, we've had tremendous increases. The total spend has gone up, but the largest part of the increase is related to health ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 163 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 care services contracts. And you can see the growth in the number of individual providers. This is the -- these FTE numbers, this is the full range of providers, from physicians down to nursing assistants. GEN ADAMS: Ma'am. Can I ask -- we heard earlier from Colonel Smith about his shop, and he's buying about a billion dollars worth of FTE's and people a year. Are your -- are these then in addition to what the Army is doing; is there some order? MR. MUENZFELD: GEN ADAMS: Correct. So this is additional? Correct, yeah. About We're MR. MUENZFELD: this year -- FY '07 numbers will be larger. going to talk a little bit later in the briefing about late year funding. So we don't have complete numbers for FY '07 yet, but you can see we were just about at 350 million for healthcare services in FY '06. GEN ADAMS: And these dollars come directly from the Service dollars as opposed to ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 164 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 coming out of TMA Health Affairs, so it's money that's been passed down to the Service? MR. MUENZFELD: Correct, it comes from the Surgeon General through the -GEN ADAMS: Yeah, it's overall DHP dollars, but it's DHP dollars that are being spent by the Services? MR. MUENZFELD: At the MTF level. It may look like a relatively large number of contracts we have in place to provide those numbers of FTE's, but about 400 to 500 of those contracts are actually what we call individual set aside contracts, where we've contracted directly with a particular physician or nurse anesthetist, something like that. The total value of the contracts is the five-year value of the health care service contracts, about $2 billion. The next slide breaks us down a little bit so you can see where most of the money is being spent, and we've provided some information about how much that's increased over the past few years. Physicians are our largest expenditure, ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 165 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 RN's next. RN's have had the largest increase. Now, these increases are not -- they're driven by a number of things. This could be we bought more, we bought a more expensive mix, just the cost of providing these services just has gone up, and that's the case in many of them. going to talk a little bit more about the marketplace limitations a bit later on. We go to the next slide. I decided to We're break the physicians down a little more since that's what we're spending most of our money on. And for a long time, most of our money was spent on radiologists, but just recently we're spending more on family practitioners. I think that some of the key numbers on this slide are actually down toward the bottom. Psychiatrists are our seventh But if largest spend category for physicians. you'll notice, there's been a very large percentage increase for psychiatrists, and as well for clinical psychologists, and this is all due to the war. This goes back to the post-deployment health reassessment program. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 166 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 And we're finding it increasingly difficult to find these providers in the marketplace. We have pretty deep concerns about our ability to spend effectively, and actually we won't have trouble spending the money, the $300 million for the new psychological health program; what we fear is that the best our companies can do will be far short of 100 percent fill of all the positions that are really needed, so that's a concern we have. I threw in pharmacist numbers. I know that the panel has looked at pharmacy in the past and I thought you might be interested to see what we're spending on pharmacists. I hope it's not a sore subject, I'd like to go back to personal services for a moment. DOD has special statutory authority under 10 USC 1091. We do establish an employer/employee relationship with these individual workers. And this is now the preferred way of buying health care within Navy Medicine. If we went back to the early '90's, most of what ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 167 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 we were doing was on a personal services basis. We had large gaps in our healthcare delivery systems, thus, the Navcare clinics and buying entire emergency departments. As we've evolved over time, those big holes have been filled, and now we have just little small holes that we need to fill. And in order to have a good working relationship and to intermingle those contract providers with the active duty and civil service staff, personal service makes a lot more sense. The government supervisor manages the quality, productivity, and costs of those personal services workers directly, on a prospective basis. We don't have to build pay-for-performance measures into our programs and ask a third party to determine whether or not the provider is doing a good job, a supervisor can do that on a day-to-day basis. Of course, assuming that supervision, we assume the liability then under 10 USC 1089. We do, in some of our contracts, though, ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 168 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 try to incentivize our workers. Within the DOW community, they have very objective quantitative measures for productivity. And we're able to draw on that and essentially incentivize our contract workers to higher levels of productivity, and in exchange, get time off. We can then use that time that they're off to install other workers and just have an overall much more productive dental clinic. can make better use of the spaces we have. We We do still have some non-personal service contracts. Generally we still have some emergency departments that are still not -- we don't have any active duty personnel manning them, so we have total contractor staff. So we do build in monetary incentives for those contracts for timely patient care, quality, and for improved customer satisfaction. MS. HORST: Under strategic sourcing, we've had to look at our numbers with MBMED and make good business decisions on how best to meet the services and the commodities that we've had to ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 169 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 purchase. And in making those decisions, we made the decision that multiple award task orders and single award task orders would best meet those needs for us. And what we have done is, we've taken those and we've made multiple award task orders in a regional way on the east coast and the west coast, and we're also looking at making single award task order contracts more on a national basis. And the ones that we have in place right now, they total about $1.1 billion over the next five years on the east coast, and about $711 million over the next five years on the west coast. And for medical supplies and equipment, we're also doing the same thing, just so you know, we're also looking at putting requirement type contracts in place, and we're also looking at putting those type of contracts in place, too. Now, this is all leading up to where we're going next. Right now we're building a portal, a web portal, a medical web portal that ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 170 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 will be hung on our web, where we can go onto that web and we can place delivery orders against that, not only us, but other DOD activities. And where this becomes very important is, because of what you heard earlier, and we're going to touch on it a little bit later, because of the proper use of non-DOD instruction that has come out, it's very difficult or more difficult to go on and use GSA contracts, you have to do determinations to get the right approvals. So our strategic goal is to develop more DOD contracts that we can order from and that other services can order from, and not only just develop them, but put them in a place that everybody can reach them, that people can go onto each other's web pages, easily get to them, go onto each other's portals and place orders against them, so that we'll have DOD vehicles that we can all reach and we can share. And that would be the most easiest thing for all of us to do, and we can reach each other and use each other's sources. MR. HALE: Are you having trouble -- we ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 171 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 that. heard from the Army earlier about the $100,000 BPA limit; is that a problem for you? MS. HORST: No, we haven't run into I'm going to go back and check to see what I don't know if they were looking at for that. they're writing them against schedules and that's where the limitation was. We have done BPA's and we have been writing orders against those BPA's and we have not run into that. ADM SMITH: that they referred to? MS. HORST: issue for us, too. The statutory cap is also an We have gotten around that in What about the statutory cap various ways, you know, we've either done non-personal services for those type of contracts, you know, we've tried to be inventive in trying to get around some of those situations. Many of those are the exception, and so we do the things we can do, and then we try to figure out innovative ways to meet the needs of the other items. MR. MUENZFELD: One of the things we've ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 172 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 done in that regard is, with radiologists in particular, we haven't had much trouble, we're hiring a lot of radiologists on an individual basis right at the pay cap. If we can market to those individuals that that pay is enough, and that the work environment is such where they're avoiding the paperwork that they would see in the private sector, yes, they can make more money in the private sector, but they also are going to work longer hours, they're going to have bigger headaches with insurance companies and so on and so forth. So if we can make that case, we've been fairly successful in finding radiologists still willing to work at the pay cap. For those other sub-specialties, we just don't buy that many of them, so it's not as big a problem for us. I think probably the Army has more purchases in those areas. GEN ADAMS: And isn't it true that there is a market among former military physicians, those who have left the military who want to come ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 173 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 back? MR. MUENZFELD: GEN ADAMS: Absolutely. I mean -- and the reality, when I was in Hawaii, that was a significant draw, because they wanted to stay in Hawaii, and even for a radiologist, $200,000 five years ago for someone who's retired from the military was pretty good. So I want to say it's almost a cottage industry in some ways. MR. MUENZFELD: Yes; I think we do have many, many former active duty physicians who come back and seek employment under a contract. MS. HORST: And that's another reason why a personal service contract is attractive, because they don't have to pay the malpractice insurance, and military understand that. Under the last point here on the locum tenens physician contract, Mr. O'Bar, I heard him go over that earlier, the three Services are working over that right -- on that right now under the QDR 16, so I won't go into that again. Under the next slide, on the business ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 174 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 process improvements, what I just touched upon right now on the multi- functional acquisition portal for DOD, again, this is where we're trying to go right now. We're trying to -- we're in the We will have our portal up We will have a process of doing this. and running October or November. contract posted to our portal. actively using it within NMLC. We will be Hopefully we'll be pushing it out to the Navy by the beginning of the calendar year, FY '08, we'll be getting the Navy to use it that year, and we'll be pushing it out to DOD for them to be able to utilize after that. But the idea is to have an almost like schedule-like DOD schedule for other services to come in and place orders against that, and there will be no need to do determinations to use a schedule that's not a DOD schedule. And some other exciting things that we're doing at NMLC is, we're working very hard on doing data management. When we have briefings like this, one of the first things we do is, we try to grab all our information and come up with ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 175 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 numbers to show everybody what's been going on in healthcare services. Well, we have pretty good numbers in the Navy that we can pull, but we think we can do a better job. One of the things that we do from an external, and we already have this set up, if you go on our web site right now and you put in the (off mike) that you've worked at before, you've been associated with, if you punch that in under workload tracker, all the workload under that (off mike) will come down, it'll tell you the status of all the requirements and where they are in the acquisition system. So if you're working somewhere, you'll always know where all of your requirements are at all times. We want to be open about where That saves a lot of time, because everything is. instead of somebody having to call up and say, where's my requirement, it puts everything out there for everyone to know exactly what's going on. And it helps for the comptrollers, too, so they know where the money is being spent and where ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 176 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 it's at also. Internally, we use it as a management tool, because not only are the things that are on the web open for managers, there's other columns that the managers can use also. We also use it for data calls that we get, and we get data calls all the time, we can use that information for that also. The next step that we found doing, Andy's group in seven has kept a health care data base for a number of years. I think he has information, very good information, all the way back to 2003. Our next step is to marry up these two data systems together. Once we do that, we'll have information from the time the requirement is generated to the time the contract is closed, and we'll have all that information at our fingertips for whatever information is asked of us. And we're very close So it's going to having that completed right now. to be exciting and it'll be great information for all of us to have in order to make the best ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 177 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 decisions. Our web page, if you've been on it recently, there's a lot of information on our web page, we have different information on there. There's ISA handbooks, there's help for, if you're doing technical evaluations, that will help you through. There's all kind of guides and tool kits The ISO 9001 to help people, so we use that also. certification, we actually got our certification back in 1999. We're very process oriented. All of our processes are flowed, all the processes is in code two, code seven, all of our processes are flowed. Somebody new comes in, they sit down with the flow, they can go through and it tells them exactly what their next step is. We were the first military organization, DOD military organization to be ISO certified. And with sigma we're relooking at all of that again and we're relooking at each one of those things. MR. MUENZFELD: We consider the directorate of which I'm head to be one of our ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 178 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 best practices. I think that the leadership in Navy Medicine in the late '80's had a lot of foresight in consolidating all of this activity in one place and having an office that was charged with gathering lessons learned and coming up with quality contracting vehicles. And we can look right across Navy Medicine and we can be assured that all our contracts meet at least that minimum set of standards, and we can keep track of new requirements that come down the road. Of course, right now there's a lot of attention being given to security, to credentialing issues, and all those things we can build in the very latest thinking into all contracts across Navy Medicine very conveniently. By having everybody in one place, as Terry talked about earlier, we get a very close collaboration among the front end acquisition planning, the procurement folks, the legal staff, we can all work very, very closely together. I think we're the only service that has our own COR training that's designed and is ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 179 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 specific to healthcare services contracting. If you take a contracting officer's representative course, in most places you go and you get the standard course. We've designed one that is specific to medical services, and we give our COR's specific information about how to administer these contracts. Terry has talked about the things that we have on the web and we're very proud of that. And we want to have information out there so people know how to make decisions, they know what things to look for. Data management, Terry has already alluded to, another area that we're extremely proud of and looking forward to really expanding on. We think that good data management is truly the key to managing this as a program, not just looking at it as a procurement function, but looking at healthcare services. I mean one can see the large amount of money being spent on this and its importance in providing healthcare to our beneficiaries, so we ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 180 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 want to make the best decisions we can. also proud of our long term tri-Service collaboration. And this has been a slow process, We're and we're still working it in, I think we're getting better as we go along. We go back to the late '90's, when there was this procurement re-engineering work group, and it was really that work group that led to the conclusion that the three Services ought to each have these multiple award task order contracts against which each of the Services could then order. And we've made some use of that, it hasn't been as widespread as it could be, but a lot of that is about work load, because you've heard already about the dirth of contracting officers, well, nobody is staffed for more contracting with more contracting officers than it takes to do their own work. So when one Service goes to another to ask to use their contract, you do kind of run into a bit of a snag in that way, but there has been some overlap. We also worked very closely ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 181 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 together during the resource sharing agreement conversions, during 2003 into 2004. We participated on a tri-Service basis on the DOD wide strategy council for direct health care services that was commissioned by Doctor Winkenwerder in 2004. And you've already heard today about the locum tenens project and how we're working together, I think for the first time really on a true collaboration, one contract that will fit all three services for health care. Market conditions, that's our biggest challenge. It's not our own rules or regulations, it's not our staffing levels, none of those things compare to the problems we have with market conditions. And I would slightly disagree with the Army, that we're in competition for the same people among the three Services; who we're in competition with is the private sector. My personal opinion is that the war has drawn down the national inventory of many, many labor categories beyond what we could have envisioned a number of years ago. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 182 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 There's some startling statistics. We, in Navy, buy a lot of healthcare in California, we have some major facilities there. When you look at what's happening in California with the nurse to patient ratios that went into place in 2004, that's had a big impact. The prison system, the medical system within the prisons, it was placed under federal receivership. They are spending money hand over Just this May, the fist to make that better. Legislative Analysis Office in California published a report that says the state is down 4,700 RN's, that's currently, and there's no end in sight to that statistic. Other things that don't help us very much are security regulations I mentioned earlier. Because of those security regulations, you know, in the private sector, they depend an awful lot in the RN sector, for example, on foreign trained nurses, that's something we can't do. They're using that to fill the gaps in their shortfall; we can't do that because of our inability, based on ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 183 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 the security regulations, to allow access to those folks to our IT systems and to our privacy data. So that's been a hindrance. We just don't have -- we're even trying to select from a smaller labor pool. Late year funding is another challenge, especially during the war, we've had particular problems with this. The global war on terrorism deployment backfill money comes very late in the year. The post-deployment health reassessment money comes very late in the year. It's one-year money, it has to be obligated, we have to attempt to start services within the year that the money is designated. When one doesn't receive the money until April, May, June, July, it's very difficult to put contracts into place and have providers walk through the door, especially in a tight labor market, have all that happen by the 30th of September. You know, our work gets put into a compressed time frame, we can't do it as well as we would like. The vendors who are supporting us ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 184 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 also can't do their work as well as we would like them to do. They don't have the time to go out and do effective market research so that they can give us good pricing, and then we don't give them enough time to do adequate recruitment, but we expect them to jump, you know, create miracles essentially and give us highly qualified and skilled people on short notice. MS. HORST: Some of the procurement regulations that make things a little bit more difficult, again, I brought up once was the proper use of the non-DOD contracts. You know, we can use non-DOD contracts, but we have to get the approval levels. That just takes more time. You have to write up the determinations, you have to get the proper approvals. Anything over $78.5 million has to be approved at the Deputy Secretary, in our case, of the Navy. very low dollar threshold, you know. So that's a You can go get the approval, but it just takes a little bit more time to get that approval, and that would have to also be for the Army and the Air Force, ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 185 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 everybody would have to go get that approval. For management in oversight process for the acquisition of services, for MOPAS, again, that, too, has to have approval levels. over $250 million has to have approval. Anything Again, you have to go to the Deputy Secretary of the Navy for the approval level. takes more time. And when you don't get the funding, again, until late in the year, sometimes not until July, August, or September, it's one more step of what needs to be done, it makes things a little bit more compressed, a little more difficult to do. And sometimes we're faced with going and getting the right approvals and doing the right thing or just trying to get the job done, and it's a difficult situation to be put in. And since It can be done, it just Services account for the majority of the DOD spending, the MOPAS comes into play over and over again, more and more. The last point on the background checks, as Andy was saying, this has ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 186 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 become more and more given the security issues that we're facing. And everybody needs to get a personal security investigation in order to perform on our IT systems. So in order for somebody to even perform or be in one of our federal facilities, they have to get one of these accesses, and they have to get a security investigation, and we have to make sure that's completed also. As for statutory and regulatory changes, the only change that we came up with was if there was some way that DHP funding could be carried over two years. Again, a lot of the funding that we have, like the GWOT funding, it is two years, but many times we're asked to spend it right away. So this is a contracting officer's kind of request, so you know, you kind of take it for what it's worth. MR. HALE: MS. HORST: -- doing it. Yeah; so you just take it, as a contracting officer, a type of request, yes, but that's what we came up with that. And it goes ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 187 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 back to what we've all been alluding to. When you're in, and you get the money late, you know, when you don't do good acquisition planning, you're not always making the best acquisition decisions, you're not always making the best cost technical trade-offs, and you're not always spending the money in the best way for everybody, so -MR. MUENZFELD: In conclusion, we believe that the way to improve the efficiency and effectiveness of healthcare services contracting is to focus in on standardizing and improving the program management function and not worry so much about the procurement function. We'll get a handle on that once we have a better handle on what the program looks like and how best to execute it. We really endorse the continuation of seeking the things that were recommended by the DOD-wide Strategy Council, and they're shown here, the Strategic Sourcing Council and the Acquisition Technical Support Center. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 188 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Those are the two entities that were recommended that would improve the program management function, a high level body who would look across the system to see what we're buying and how we're buying it, and then an office to manage the actual procurements, the data, the training, on a more day-to-day basis. And then from that, we can flow to the many highly qualified procurement officials that we already have within DOD. MS. HORST: And to go along with that, if everybody would work towards putting a web portal type system right where they are to pose the type of MATO' that they currently have or tweak the type of awards they're making on the MATO's and the SATO' that they currently have, to be posted out on their web portal so that other agencies could come in and order against them, we have the vehicles in place right now, and with the program management that Andy's talking about, we could use that program management and we could use each other's vehicles right now. The vehicles are ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 189 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 out there, we just have to get access to them. Thank you. COL BADER: Thank you. We'll now open Does for questions from the Task Force members. anybody have any questions? MR. HALE: Okay. I have one. We heard from TMA that they were moving toward a central supply system, that's not the right word, but an FSS type ordering arrangement; I assume -- you're looking at me askance. Did I misunderstand that? I thought I heard them say that, or is that news to you? Did I understand correctly? MR. MUENZFELD: I'm sorry, I just -- I wasn't here and I didn't hear that comment from them. MR. HALE: I thought it was TMA that Okay. It sounded I mean you said they were; they did not? like a reasonable thing to do, though. suggested it several times. I think we heard it from the Army, as well, a central ordering FSS type ordering arrangement? MR. MUENZFELD: Well, we have talked ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 190 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 about -- within the QDR structure, we have talked about a DOD schedule, much like the schedule that the VA has hung on the GSA web site. MR. HALE: Right. A DOD schedule for MR. MUENZFELD: personal services. I think all three Services are in agreement that such a contracting vehicle would really help us, would be very efficient. We could have a large number of vendors available on that schedule so we wouldn't be consolidating and putting all the risk for health care services in the hands of just a few companies. And it would include all the clauses that are specific to DOD, which is one of the problems with using the GSA schedule as it currently exists, because they have different authorities and they don't include all the clauses that we need to operate our contracts. MS. HORST: I guess the one thing I was proposing is that we collectively, the three services, have done most of the work now, and it's ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 191 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 out there right now for us to use, and with the war, we can go out and use this right now, all we need is some type of web-based portal or something for us to go out and order against, and it's not that hard to obtain, and we're moving in that direction right now, that we wouldn't have to renegotiate all these contracts and wait for that, it's there now, and that's kind of what I was suggesting. COL BADER: Thank you. Okay. Do we have any At this time, other additional questions? we will take a break for lunch, and please return at 1:30 for Lieutenant Colonel Joe Mirrow, representing the Air Force Medical Service Commodity Council. Thank you. (Recess) COL BADER: returning after lunch. Welcome back. Thank you for Our next speaker is Lieutenant Colonel Joe Mirrow, he's the Director of the Air Force Medical Service Commodity Council. He oversees the operation of several strategic acquisition programs, including the $1.9 ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 192 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 billion clinical support services program, and the $96 million medical administration support services program. Lieutenant Colonel Mirrow is a member of the Joint Medical Strategic Sourcing Panel and provides medical acquisition expertise to DOD to improve the way the service purchase both the clinical and non-clinical support services. In 1989, Lieutenant Colonel Mirrow earned his Bachelor of Science degree in Biomedical Engineering from the University of Michigan Anne Arbor. In 1997, he earned a Master of Science degree in Biomedical Engineering, Medical Informatics, from the University of North Carolina, Chapel Hill, under an affit (?) scholarship. We welcome you, Joe. Thank you, ma'am, and As LT COL MIRROW: thank you all for inviting me to speak today. you will see, the Air Force is using strategic sourcing along with our line contracting counterparts to improve service and reduce variation in the way that medical services are ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 193 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 procured across the Air Force. The purpose of this briefing is to discuss the acquisition of clinical services and how it works in the Air Force Medical Service. And while the Air Force Medical Service is relatively new to strategic acquisition, we already have several best practices that have been built into our programs up front, and so we'll be talking about those and the challenges and the way ahead in strategic sourcing. My briefing is going to be a little bit different because in order to talk about how we do business in the Air Force, I need to talk to the panel a little bit about commodity councils and what they are. In 2004, the Air Force contracting Chief of Acquisition Transformation started commodity councils, which were a business process looking at industry and how businesses were leveraging their spend to increase their ability to get quality products, quality contractors, and quality suppliers to do their work. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 194 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 The IT Commodity Council was the first in the Air Force to start levering the way that the Air Force spent its IT dollar. And the IT Council does both hardware and network operations now strategically across the Air Force. There are now ten commodity councils across the Air Force, and everything from security forces, to IT, to medical, and even furnishings. And so a commodity council is really a programmatic approach to the way we look at spend, we do things in spirals, we try to improve those spirals as we develop them. And the Commodity Council put the hands of the -- put the acquisition into the hands of the user. I am a medical -- I'm not an acquisition officer, I'm a Medical Service Corps officer, but I work directly with the line of the Air Force counterparts, and those commodity councils have specific language in the AFFARS, and this link in my briefing is actually a link to the AFFARS, where that specific language is located. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 195 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 We leverage our buys to get the best practices, and we really work with industry to look at industry practices and to try to make sure that we do things the best way that industry has. I frequently talk to industry and ask them, you know, what does the Air Force do that really bothers you, what does the Air Force do that costs us money, what risks do you assume that need to be better managed, and industry, in an environment where there's no RFP on the street will tell you where your risks are, and so we spend a lot of time talking with industry to make sure that we can put those risks aside. All of our commodity councils are similarly modeled, where you have the user surrounded by the acquisition experts. Commodity councils put together acquisition program strategies centrally, thus, the centralized strategy and de-centralized execution. The de-centralized execution allows for local contracting resources, the ones that are local to the base, or in our case, the MTF, to use ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 196 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 as well. the strategy to easily buy those goods and services and manage them at the local level. They integrate them, they make sure that the prices are right for the market that they're in, and they can take care of local legal considerations, as well. We leverage buys, we get the best prices we can from vendors, and we use technology to enable that buying, so that we can help our de-centralized procurement better do their job. One of the things that we also do is a lot of business intelligence and market research. This is part of our market research, this report that I have here is part of the market research we've done on the Joint Strategic Sourcing Council for temporary medical staffing. external market research. We do our own internal market research, And we look at trends in the industry, And this is we look at the number and type of positions that are going into locum tenens, we look at the use nation-wide of temporary nursing services versus traveling nursing services, and the ancillary ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 197 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 support. services market, as well. Our mission within the Air Force Medical Service Commodity Council is on this slide here. One of our goals is, and we're going to get to it on the next slide, is to reduce the variation and services contracts by increasing standardization. And as an example of that, we have for our clinical services, we have a set of preapproved position descriptions that are available Air Force wide, so when you want to buy a physician, a family practice physician, the hospital does not have to come up with their own position description and put that together, they can actually pull down a position description off of our web site, put it together with the money, and order a physician just the same way that they order a computer. We provide that life cycle management And we -- too often our buyers are But we want focused on getting just money spent. to make sure that that life cycle management is there so that we can make sure that our vendors ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 198 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 are providing quality physicians, quality nurses, and that they're providing them on time and on cost. So our vision is to really look to see how we can best leverage everyone's capabilities to provide health care services and acquisition. We're looking to commodotize our Air Force band and find the best way to acquire those goods and services, whether it be through the VA, the Army, the Navy, or through our own internal contracts. Our strategic objectives are to really provide those centralized strategies or centralized contracts and increase the dollars spent on centrally procured services. We want to leverage that because we can reduce the amount of overhead costs that our contractors have because they no longer have to compete against the 400 different contractors that are on the federal supply schedule, they are just the suppliers to the Air Force, they know how all of our bases do business, they know how all of our security and credentialing processes work, and so it helps them ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 199 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 reduce their cost, which, in turn, reduce ours. Those contract volumes and overhead costs really reduce the total cost, because contractors can share their risk. You might be losing money in one place on buying MRI technicians, as we are over at Andrews. Contractor is right at the cost for the MRI technicians over there, but they are making that up in other places across the country because they've got $10 or $15 million of Air Force spend. Reducing the variability and complexity in health care professional services contracts really has two parts to it; one is that we want to standardize the requirements, and the second is that we want to be able to, when we move people around from base to base, ensure that they know the process are the same wherever they go so that they can order the services easily. And then the last goal is to improve the responsiveness of the acquisition cycle. And one of the things that we did with our commercial vendors is, we asked them, you know, how long does ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 200 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 it take in a permanent placement model to put a physician or a nurse at a medical treatment facility, and the typical answer has always been, well, DOD gives us 30 days, but you know, really, with credentialing, it takes about 90 days to get a qualified physician somewhere. So we can build that into our requirements process and our hospitals can anticipate that. We realize now that that cycle is too long when we have short deployments of 90 days, and that's why we're focused on putting together a joint temporary medical staffing requirement, to meet those short term needs. As opposed to my colleagues who show you the number of people at different places, these are actually the people at the place. We have about seven people at the Commodity Council, $2 billion worth of programs, and continuing on with more, including this temporary medical staffing. I just talked to the VA during the break, and they've got about $200 million to spend that they can throw at this, as well. But on the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 201 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 left hand side, you'll see the folks there in the white are the medical staff, and they really do program management. It's the line of the Air So no Force that executes the strategies for us. medical resources are spent on actual contracting; those services are provided to us from the line of the Air Force. Up in the upper right hand corner are our stakeholders, and we meet with them on a monthly basis. The stakeholders not only approve the strategies, but they help develop the strategies and give us all of our input on what we should be buying and how we should be buying it, and you'll see an example of that as we get into the briefing a little bit later into our best practices. We also have lots of other advisors, including the Army and Navy, the VA. Small business is a very important advisor to our panel. MAJ GEN SMITH: If I'm understanding, you're saying you basically do it with under ten people? ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 202 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Well -MAJ GEN SMITH: Yet we're seeing other LT COL MIRROW: That's correct, sir. briefings that need almost 200. LT COL MIRROW: -- well, we leverage 130 contracting officers throughout the Air Force that are not medical, but provide those services to the base, because to them, this strategy is just an order, it's not a new contract, it's easy to do, we have ordering guides out there. And at Nellis Air Force Base, we did one order for $175 million for all clinical services at the base, and we did it in about, you know, 30 days, including getting all the responses and having an industry day, where our vendors came in and interviewed all their current folks there. So our office is focused on centralized strategy, and the Air Force picks up the de- centralized execution. Does that answer your question? MAJ GEN SMITH: LT COL MIRROW: Uh-huh. This is our process, and this process was actually developed before any of ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 203 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 our strategies were laid into place. Once the stakeholders approve what we are going to buy, and that's based on looking at historical spend, looking at future spend, what's in the POM, and upcoming spend, then we put together an acquisition plan consistent with FAR Part Seven. We go into what's called an acquisition strategy panel, where that is approved by a commodity strategy official. Again, getting back to the AFARS, the commodity strategy official approves acquisition strategies, and we have two of them, one is always medical and one is always line. the commodity strategy official approves the acquisition strategy. Then we go into acquisition execution, and we don't necessarily have to use those three contracting people to do the acquisition execution. It could be any other acquisition And organization, it could be Army, it could be Navy, but so far it's been Air Force during that. Once we start and award a contract, we start filling those positions, doing sustainment ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 204 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 and administration of the contracts, and really do analysis of those contracts and feed that back into our next strategies or how to change our current contracts. The panel had asked for what we have on staff in terms of the APDP, acquisition professional development program, qualified personnel. We actually have a level three, level two, and level one package submitted to SAF/AQX, which approves waivers for Air Force specialty codes that are not specifically acquisitioned, developed, coded. And so we have that in now, but we are all in training to get the requisite training, and we are 70 percent there. At Wright Patterson, there's a lot of acquisition resources around us, and we're able to get the training at Wright Patterson. The Air Force District of Washington, which is our current contracting activity, has two level three and one level two contracting officer. Our commodity strategy We use the officials are designated by program. Air Force PEO for combat mission support, that's ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 205 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 AFPEOCM, and they are responsible for all of the services in the Air Force if the program size is over $100 million. And then Air Force Surgeon General Office of Modernization, General Theresa Casey, is also a co-CSO required. Our customers are generally Air Force Medical Treatment Facilities, but we also service some DOD facilities that are co- located with Air Force Medical Treatment Facilities. The reason for that is that our pricing is actually geographically based, and so out at McGuire, we do have folks that are Air Force contract procured, but are working with the Army. We conduct the spend review for our stakeholders, and do the future and current spend analysis, and provide those surveillance tools for our folks in the field, we're going to talk about that. And we facilitate that local contracting When the local contracting ordering process. officers call our office, we're able to help them through the steps to do the order de- centrally. The MAJCOM's, our major commands, are ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 206 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 the stakeholders, and they prioritize which spirals we're going to do and review and approve the strategies. And the line and senior leadership, again, are the final approval for the strategies and acquisition plans. We don't spend as much as the Army and Navy, although in FY '07, we're on track to spend about $84 million so far, and we just mentioned some of the spend for psychological services that is just coming down now, so that's going to be a bit more. In FY '06, we spent about $48 million. Comparing that to the POM, what we thought we were going to spend on the same services, we realized about a $9 million cost avoidance. Comparing what we thought we were going to spend on a family practice physician to what we are spending, again, leveraging that spend and making our contractors compete for that spend. We spend about $9 million on technicians, and $7 million on nursing. The Army slides show about $54 million on nurses alone, so they spend significantly more than us. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 207 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 The next slide shows our top ten labor categories. Again, these are just labor categories, it's not all lumped together with the different types of assistants and technicians. But we spend a lot on family practice physicians and flight medicine physicians, as well. Our best practices, again, getting back to how we do this, we've leveraged a lot of our line resources in the Air Force to do that contracting for the Air Force Medical Service. It's high dollar, it's low effort, and all of our spirals so far have been 100 percent small business, so they get at their bases the 100 percent small business credit for doing this high dollar, low effort work. So it's in their best interest to help the medics execute their spirals. One of our other best practices is, we do extensive market research, and really do riskbased strategies. And we really do work with industry to look at the risks that they have and to try to best mitigate those risks either in the contract or in managing their pricing or in the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 208 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 way that we manage the contract. We get a lot of industry feedback on both the contract itself, we get a lot of industry feedback before we ever go out for contract, and we focus that on small business. And we do risk- based small business market research, where we're looking at the size, the relative size of a small business, compared to the Air Force spend, and the relative geographic distribution of small business, as well. We're unique in that we have a contract tracking and reporting system that was built by our office that looks at all the terms and conditions of our contract and allows our facilities to really get down to the nitty gritty in ensuring that our contractors are performing 100 percent to our contract. When this first started, I was talking to a commander who said, you know, hitting them in past performance, hitting your contractors in past performance is not a tool that will work, but when you only have six contractors, and they have all the spend ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 209 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 across the Air Force, and you tell them that they're not performing up to standard and they're going to get a lower past performance rating than any of the other contractors, it makes them perform, and the result is that we have very high filled rates and we have very good relationships with our contract providers, contractors. Now, there's a difference between our contractors, who provide the service, and the healthcare workers that they actually provide to our military treatment facilities. But with our contractors, the people who recruit, quality, and retain the healthcare workers, and with our healthcare workers themselves, we have an excellent relationship with them. Another one of our best practices is, because we do look at the way that we spend dollars, and we use the contract tracking and reporting system down to the provider level, we are able to go back through our Air Force toolset and look at things such as provider productivity. And this is just a chart that shows -- ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 210 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 this is from a couple of months ago which shows a provider on the left who is a contractor, she started out, and you can see that there's a ramp up in the way that a provider can start providing the relative value units to the Air Force and be productive. And so what we've seen is, as we move contract providers in, is that they will start slow and then quickly become very productive in order to meet the demands of the military treatment facilities. This is another best practice that we have, and it was a result of input from our stakeholders. And what our stakeholder said is, we, in this process, whatever strategy you do, we want to keep the money in the hospital baseline, we want to make sure that the hospital is the one that's actually doing the buying. And so we set up this process, and I won't really go into it here, but it goes from the medical expense performance reporting system, MEPRS, all the way through our contracting system ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 211 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 and back around to DFAS, and what that gives you is, cost accounting at the provider level, at the clinic level, so we know how much procedures cost for contracted physicians. So if I spent the money at the Air Force level and gave providers to a particular facility without giving them the money, the cost accounting would not be correct, because the money would never have come to the facility. So again, it's improved ordering, it's improved feedback. We have monthly meetings and lots of training, we go to lots of conferences, and continuously improve our strategies to meet the needs of the Air Force Medical Service. We are very excited to be part of the Joint Standardization Team, and we are integrating the Air Force contracting tracking systems with the Army's and Navy's to get total spend across the enterprise. And that is something that's a difficult task, and fortunately, Andy is taking the lead on that while we look at strategies, but it's going to be exciting and it's going to give ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 212 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 us lots of dividends later as we start looking at leveraging all of that spend. For temporary medical staffing, as I mentioned, we do internal and external market research. We've had a lot of input from industry, 48 responses as of yesterday when I left. We have stakeholders from each one of the Services who are giving us feedback on the acquisition strategy. We are working the credentialing issues for speed and flexibility very hard across all three Services, because we realize that we're going to need -- if we're going to bring somebody in temporarily and credentialing is the long pole in the tent, that we've got to make sure that the credentialing process is there for us and is able to very quickly put these people into practice at our facilities. We're documenting the practice, and the goal is to reduce time, improve credentialing, and leverage those resources across all three services and the VA to get this temporary staffing capability ready. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 213 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Our challenges are many, but we're working on all of them. We are working on mandatory use of acquisition strategies. Right now, our strategy we think is the best, my office thinks it's the best, but there's lots of ways that the Air Force hospitals can buy things. In order to facilitate the contracting community, however, they would like to have one way of doing business for the Air Force Medical Service, and so we're working on policy to either make this the preferred or mandatory way to buy services. We kind of use the if you build it, they will come model, and it seems to be working, but the acquisition community would like to do business one way. We need to look at fees for non-Air Force strategies because they decrease buying power. The federal supply schedules, in addition, if we went to GSA to do our buys, they would have a two percent fee, plus there's a one percent industrial funding fee built into those strategies, as well, and so those decrease buying ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 214 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 power, when you're spending $50 million, that adds up very quickly. Mr. Muenzfeld mentioned before limitations on single year appropriations. come up that it's very difficult to attract quality folks to come work in our facilities when you can only promise them one year's worth of work subject to availability of funds. mention that here. And so I'll It's There's not anything this panel can do about it, but it's always an issue. Title 3, Section 102 has already been brought up by the different services, cap salaries for personal services and reduces that pool for hard to find specialties. Overseas strategies are And the Federal very difficult to work through. Tort Claims Act versus the Military Claims Act, the Federal Tort Claims Act is what gives the ability for the contracted physicians under the personal services the same protection as our military providers. Overseas, the Federal Tort Claims Act does not hold; that same protection would be provided under the Military Claims Act, ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 215 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 however, that has not been challenged, and so there's some risk there, and Air Force Legal is concerned about that. The other problem, of course, is Post Nation Logistic Support. It's fairly easy if we can get Post Nation support to recruit physicians and nurses from the United States to go over and work in our facilities overseas. It's a lot more of a challenge for contractors to find qualified medical staffing overseas, foreign nationals to work in our facilities. And so that is also a big challenge for us now as we work some of the overseas requirements. The VA Sharing Statute and Economy Act, we would like to use the VA a lot more than we do. There are fees, as I mentioned, and authority problems with using those, and I'll mention this at the end, about improving the VA Sharing Statute. VA sharing, under the VA Sharing Statute, the definition of sharing is not clearly defined. And in order to use the VA more, we ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 216 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 would like to see some changes in that. Both laws require justification for the military to send money outside of DOD. And if Congress wants us to share more with the VA, we should improve that process for sending money outside of DOD to the VA so that we can leverage that spend with the VA. The way ahead, number one, is to take the AFARS language and move it up to the DFARS, and we already have Mr. Stuart Hazlett, who is the former Air Force Acquisition Transformation, is now at DOD, and he is working on implementing that DFARS language for commodity councils at the DOD level; he's at DPAP. Legislative initiatives, again, looking at 388111, and we're going -- if we choose to use a VA strategy as part of the strategic sourcing for temporary staffing, then we will propose the legislative initiative through the Strategic Sourcing Council as part of the QDR initiatives, and we'll propose that up through there. 10 USC 1091, that's personal services, already been discussed. ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 217 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 There's one line in there that says that the authority for salary caps rests in Title 3, 102. The suggestion there is just to eliminate that and that would give us the ability to hire people at a higher salary. The last thing is that the Air Force has recognized that spending this time up front, even though it's slower, really has improved the way that we have done business. And we'd like to better define TMA's roles and the Service's role, because as mentioned before, you know, there's other ways to buy these services, through CSA's, through RSA's, through personal services, and all of them have advantages and disadvantages, but DOD should choose a strategy and pick a strategy that will work for DOD. Right now we have strategies that work for the Services and strategies that work at the contract level, and we can do this better by looking at acquisition strategies of DOD in general. We like to better involve the stakeholders, those people who are asking for the dollars and the decision-making, and run all of ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 218 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 the acquisition strategies through the stakeholders, as we do now. Integrate small business better into our acquisition strategies, it's a big part of what we do, and the small business community is very responsive and able to provide for a lot of our needs. And finally, integrate that feedback from industry into our strategies so we can better reduce risk, improve the way that we do business, and really make sure that we are doing things in the best way possible according to the way industries do business now. have. COL BADER: Great, thank you very much. And that's all I Do we have any questions or comments from the Task Force members? All right. I have one. We heard I think MR. HALE: from both the other Services about a desire for a shared federal supply system type ordering process. I didn't hear you mention that; is that something you would like to see happen? ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 219 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 LT COL MIRROW: the requirement is. Well, it depends on what I'll give you the answer If it was for that, you know, it would depend. clinical services, using a shared federal supply services would help, because right now there's no authority for the VA to have a federal supply service that uses personal services and DOD to use those, so it would help. Just talking to the VA here in the room, they don't use personal services, and they probably should as a way to get filled some of their requirements, as well. So if we can share that authority for personal services, then a federal supply schedule would probably be a great way to leverage our spend and to involve all of those small businesses in filling our requirements. MR. HALE: COL BADER: Okay. Thank you. General Smith. MAJ GEN SMITH: Just curiosity, I was just so surprised that you spend as comparatively low compared to the other two services, and yet it seems to me the Air Force has bases all over the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 220 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 world and you have need for clinical personnel and technicians and stuff all over the world. You're doing that good in recruiting, in retention, and maintaining your civilian force? LT COL MIRROW: I don't know. General Roudebush isn't here right now, but -GEN ADAMS: No, I think what you're looking at is the difference in the types of facilities that the Air Force runs, small hospitals and clinics, and the number of civilians in the work force, in the Air Force, is the lowest of all three Services. The Army is the highest, between 55 and 60 percent, the Navy is, what, 30 to 40, and the Air Force, last night I heard was less than ten percent. So they've got the uniformed members. LT COL MIRROW: We also do buy -- we don't have the high dollar spend of specialized services. A lot of the Army and Navy facilities are very large, they're contracting clinical specialists, advanced practice nurse practitioners, CRNA's, those are a very high ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 221 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 dollar spend, and so when we can get away with -our largest spend is in technicians, supporting the Air Force physicians that we have and being able to make better use of their skills. don't spend a lot on physicians, specialty physicians especially, which are the high dollar areas. COL BADER: Thank you. Any other So we questions or comments from the Task Force members? Okay. Thank you very much for your thorough And I now call this meeting of the Task briefing. Force in the Future of Military Health Care adjourned. Thank you. (Whereupon, at 2:16 p.m., the PROCEEDINGS were adjourned.) * * * * * ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190