Agency Delays $765 Million in U.S. Veterans Care Spending

Photographer: Andrew Harrer/Bloomberg

The department’s funding has jumped more than 40 percent to about $140 billion this year, compared with fiscal 2009, a boost to help the agency cope with a surge of new veterans returning home from the wars in Iraq and Afghanistan. Close

The department’s funding has jumped more than 40 percent to about $140 billion this... Read More

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Photographer: Andrew Harrer/Bloomberg

The department’s funding has jumped more than 40 percent to about $140 billion this year, compared with fiscal 2009, a boost to help the agency cope with a surge of new veterans returning home from the wars in Iraq and Afghanistan.

The U.S. Department of Veterans Affairs postponed purchases of cardiac monitors, radiological equipment and pain-medication pumps for patients last year. It didn’t replace old surgical tools, oxygen-delivery systems or deteriorating operating-room stretchers.

In all, the agency delayed more than $765 million it was authorized to spend, affecting veterans’ medical care in some cases, according to VA documents obtained through a Freedom of Information Act.

The department, criticized by veterans for claims backlogs and bottlenecks in mental-health care, transferred the money into a holding account. It was the biggest amount deferred in at least 10 years and more than eight times the amount shifted to the fund two years earlier, the records show.

“It makes no sense to postpone those kinds of small-ticket items, like microscopes and supplies,” said Rick Weidman, executive director of policy and government affairs for the Vietnam Veterans of America. “They don’t get funding from Congress on the theory VA will probably need a certain amount of money next year. They do it because there’s a need.”

The VA delayed the orders because it wanted to ensure it was spending efficiently and making enough awards to small businesses, said Josh Taylor, an agency spokesman. Even so, the account is under scrutiny. The House Veterans’ Affairs Committee is probing the department’s use of the account, according to a panel staff member not authorized to publicly discuss the issue.

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Small Business

The department’s funding has jumped more than 40 percent to about $140 billion this year, compared with fiscal 2009, a boost to help the agency cope with a surge of new veterans returning home from the wars in Iraq and Afghanistan.

The VA defends its use of the account. The withheld money represented less than 1 percent of its budget in the year ended Sept. 30, Taylor said. It was delayed “to ensure efficient and effective spending of resources, and achieve small-business contract goals,” he said in an e-mail.

Last year, the VA wasn’t making enough progress on meeting its department-wide target of awarding 34 percent of contract dollars to small companies, Taylor said. By the end of the fiscal year, the agency’s spending with those companies reached 35 percent, according to preliminary data from the Small Business Administration. Taylor didn’t say how many orders were deferred for this reason.

Pain Medication

Several of the documents obtained by Bloomberg showed purchases were delayed even after agency officials said veterans’ medical care had been affected.

A VA office in New York, for example, delayed $79,200 in orders for London-based Smiths Group Plc (SMIN)’s infusion pumps, used to deliver pain medication for patients, according to the records.

“We are requesting them immediately as the pain management of our patients has been and will remain negatively impacted until they are replaced,” one document stated. The memo didn’t specify the reason for the postponement.

VA buyers held off spending $128,270 to replace damaged surgical equipment. “These items are broken or unrepairable, directly affecting surgical services from providing adequate care to our veterans,” Paul Russo, director of the agency’s health-care system in Miami, said in the document.

That delay was partly “due to the VA increasing and placing a high emphasis on meeting” socio-economic goals, he said in the records.

The spending on the “necessary and beneficial equipment” was deferred only after agency officials determined care wouldn’t be at risk because veterans could be sent elsewhere for treatment, Russo said in an e-mailed statement last week.

VA officials use the holding account only “after it is determined that patient care will not be jeopardized,” Taylor said.

Spending Delays

The agency uses its so-called One VA Plus Fund to bank money that was appropriated by Congress and wasn’t spent by the end of the fiscal year, according to a department policy document. Money stored there typically must be awarded by contract for its original purpose the next fiscal year.

The account helps to manage budget targets, provide quality care and respond to fluctuations in demand, the VA’s Taylor said.

The agency’s transfers to the account appear to be in line with department regulations, said Peter Gaytan, executive director of the American Legion, who reviewed some of the documents. Still, the agency owes veterans an explanation for the spike in deferred spending, he said.

“This raises concerns,” Gaytan said in a telephone interview. “We need to ensure that VA is spending efficiently and any delay in spending VA dollars doesn’t result in the delay of health-care delivery to patients.”

Cardiac Monitors

Some of the delays were unavoidable. They included $108 million for wireless equipment and patient-tracking systems from Palo Alto, California-based Hewlett-Packard Co. (HPQ) The project was held back because Armonk, New York-based International Business Machines Corp. (IBM) protested the award.

In 1,300 pages of documents, the agency often provided no explanation for delays. This included deferred oxygen-delivery systems from San Diego-based CareFusion Corp. (CFN) and cardiac monitors from Fairfield, Connecticut-based General Electric Co. (GE)

The VA records also didn’t show why plans for new operating-room stretchers would be put off even though the old ones were outdated and “falling apart.”

Radiology equipment from Munich-based Siemens AG (SIE) was delayed for “challenges in contracting.” Other VA buyers cited “new review processes” and contracting priorities.

In 10 cases, the documents tied the delays to the department’s efforts to meet small business goals, a priority of President Barack Obama’s administration.

‘No Action’

VA buyers in Miami, for instance, put off an estimated $51,000 “critical item” for a tele-health program that helps veterans who aren’t able to visit VA hospitals. They blamed the targets for contracting with small businesses.

“As a result of this national requirement, large business orders have been returned with no action,” according to a memo.

The Obama administration has pressured agencies to award more contracts to small businesses. VA Secretary Eric Shinseki pushed his department to spend 34 percent of its procurement dollars with small companies last year. The department ultimately beat that goal, spending about 35 percent of $17.6 billion in eligible funding with small businesses last year, according to preliminary information posted on the SBA website.

The VA relies on definitions set by the SBA to determine whether a company is considered a small business. Those standards vary by industry. Companies that manufacture surgical supplies, for example, must have 500 or fewer employees to be deemed a small firm, according to the SBA.

Congressional Probe

Representative Bill Johnson, an Ohio Republican, said during a House Veterans’ Affairs hearing in September that veterans have reported delays in obtaining products such as heart stents and prosthetics. He said he was concerned that efforts to meet acquisition targets were hurting veterans.

The committee also was investigating whether the VA manipulated its spending to show it had awarded a larger share of its work to small companies, U.S. Representative Jeff Miller, a Florida Republican who chairs the panel, said last year.

“The committee is concerned that VA is moving money around to meet performance goals, rather than the priority being on meeting the needs of veterans and efficient use of taxpayer dollars,” Miller said in a November phone interview.

It wasn’t clear whether this probe was tied to the committee’s investigation of the holding account.

Jo Schuda, a VA spokeswoman, said some contracting delays occurred in the government’s fourth quarter last year after two senior VA officials were required to review procurements that weren’t being reserved for small businesses.

After the VA realized it would meet its spending targets, top contracting officials were allowed more flexibility, Schuda said in a November 2012 e-mail.

To contact the reporter on this story: Kathleen Miller in Washington at kmiller01@bloomberg.net

To contact the editor responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net

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