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House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Veterans' Affairs,
Washington, DC.

    The subcommittee met, pursuant to call, at 9:30 a.m. in room 334, Cannon House Office Building, Honorable Terry Everett (chairman of the subcommittee) presiding.
    Present: Representatives Everett, Brown and Peterson.

    Mr. EVERETT. Good morning.
    This Oversight and Investigations Subcommittee hearing will examine the Management of the Federal Employees' Compensation Act Program at the Department of Veterans Affairs. Management of the Workmans' Compensation Program at the VA has been a topic of OIG audits.
    The purpose of these audits by the IG's office was to identify opportunities for the VA to reduce the cost of its workers' compensation program. The subcommittee wants to know what the VA is doing to contain the cost of this program, balancing effective management, and the concerns for the health and safety of the employees at the VA.
    Our witnesses will be Deputy Director of Workers' Compensation Programs at the Department of Labor, the VA's Inspector General, and senior VA officials. This is another hearing about accountability within the VA.
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    The VA has a history of stating that management will be held accountable, but not following through and actually demanding and enforcing accountability. I might add that we saw that in the DOE recommendations some years ago. Only recently has VA started working on privatizing the energy sources which, according to DOE, would have saved $63 million dollars a year.
    While this hearing is about accountability at the VA, it is also about recognition. The subcommittee has invited two VA health care network directors who, while working with the OIG, have implemented procedures that have saved money and developed some of the best practices in managing FECA claims, and they will tell us about that later today.
    I am honored to recognize our ranking Democrat, Ms. Brown, for any opening remarks that she may have.

    Ms. BROWN. Good morning, Mr. Chairman. And good morning. I want to thank you for calling this important hearing to review ways of reducing the cost of VA's workers' compensation program.
    Mr. Chairman, I ask unanimous consent that a statement by Mr. Evans be made part of the record.
    Mr. EVERETT. Without objection.
    [The statement of Hon. Lane Evans appears on p. 25.]

    Ms. BROWN. Since 1916, the Federal Employees Compensation Act, known as FECA, has been providing federal employees with workers' compensation coverage for injuries and disease they sustain on their job.
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    Although not always appreciated until work-related injuries and illness strike, the right of workers' compensation benefits under FECA is one of the most important employment benefits federal employees have.
    For federal employers, FECA is costly. In fiscal year 2000, VA estimated a need for more than $141 million to pay the workers' compensation claims of its health care employees, an estimated increase of nearly $4 million from fiscal year 1999.
    When the Inspector General's Office recently reviewed the VA management of its workers' compensation program, they concluded that the Department was at risk for program abuse, fraud and unnecessary cost.
    The IG focused on the fact that nearly 80 percent of the VA's workers' compensation payments go to claimants who have been on the rolls for over 5 years.
    The IG's report did not note that such a payment distribution was common with the Federal Government, but instead recommended that VA concentrate most of its workers' compensation efforts on those long-term cases.
    The IG said that VA needed to more effectively identify employees who could be brought back to work or should be removed from the rolls.
    Working with several VA health care regions that we will hear from in our second panel, the IG's office has even developed a system and handbook to detect employee fraud through a series of fraud indicators.
    Now, Mr. Chairman, the Department of Labor—the agency with responsibility for administering the workers' compensation program throughout the entire Federal Government—says that VA would get a greater bang for its administrative buck if it concentrated its resources on the front end of a workers' compensation claim.
    Labor believes that VA should place its emphasis on: employee health and safety, timely claims processing, and early rehabilitation assistance.
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    Mr. Chairman, by having both the VA and Labor at the same table in Panel 1, this subcommittee will benefit from a constructive debate on how VA can reduce the high cost of its workers' compensation program.
    It is critical to me, Mr. Chairman, that any means of reducing an agency high workers' compensation cost is never at the expense of the employees' right to receive the medical, compensation and rehabilitation benefits in which they are entitled.
    One consoling fact, Mr. Chairman, even if we are not able to strike the ideal balance of reducing costs and employee protections today by holding this hearing, you at least have facilitated a new level of communication between key players and an important federal program.
    Let the debate begin.
    [The prepared statement of Congresswoman Brown appears on p. 26.]

    Mr. EVERETT. I thank the gentlewoman for her statement.
    I would like to welcome all witnesses testifying today. And I will ask all witnesses to strictly limit their oral testimony to 5 minutes. Complete statements will be entered into the record. And I would ask all members to limit their questions.
    I do that because we're kind of in an unusual day over on the floor, and I do expect us, in at least an hour and a half, to be interrupted by a number of votes. I ask that we hold all our questions until the entire panel has testified.
    I know would like to welcome and recognize Mr. Shelby Hallmark, Deputy Director of Workers' Compensation Programs at the Department of Labor; Honorable Richard Griffin, Inspector General of the VA; Michael Sullivan, Assistant Inspector General for Auditing; Ronald Cowles, Deputy Assistant Secretary for Human Resources Management; Dr. Fran Murphy, Veterans' Health Administration; and John Hancock, Director of the Occupational Health and Safety staff at the VA.
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    Please, if you will begin your testimony.

    Mr. HALLMARK. Thank you, Mr. Chairman, and Congresswoman Brown.
    First I'd like to thank the committee.
    Mr. EVERETT. Excuse me, sir. If you would pull that mic just a little closer to you.
    Mr. HALLMARK. I'm sorry.
    Mr. EVERETT. They used to say we have to eat these mics.
    Mr. HALLMARK. All right. I'd like to first thank the committee for inviting me to testify this morning and for addressing itself to this issue. Managing the FECA program is a complex undertaking that requires a very coordinated interactive effort on the part of all of the individuals who are involved: the injured worker; the employing agency, in this case VA; medical providers; and OWCP, the entity that manages the program for the Department of Labor.
    It is an interesting and challenging task, and, as I say, I thank the committee for addressing itself to this issue.
    For several years, OWCP has been pursuing a strategic plan that calls for improved program results measured in terms of faster return to work, improved customer satisfaction and reduced cost to the federal agencies.
    Like most GPRA goals, these outcomes are challenging and can be accomplished not just through OWCP or Department of Labor's efforts, but through a combined effort, especially in coordination with the federal agencies and with the employee representative unions who are interested as well.
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    We are making measurable progress with regard to our goals. And my written testimony addresses a number of the initiatives and the savings that we are accomplishing now and will be in the future.
    I would just like to point to a couple of areas now this morning. Some of the areas of this program are primarily under Department of Labor's aegis. And as Congresswoman Brown indicated, we believe we are the best positioned to lead in these areas, such as in reviewing older cases for continuing eligibility and for the appropriate application of rehabilitation services.
    And we are working on those. We have, for the first time this year, a fully staffed periodic roll management program which we began several years ago, but which has never received full staffing.
    It does now, in 1999, and we expect to save hundreds of millions of dollars in avoided benefit costs as a result of this very successful program. We have also instituted a number of medical cost containment initiatives which will redound to the benefit of all of the programs in all of the agencies in the Government.
    But the measure we feel is the most indicative of success in this program is a measure of lost production days for new cases as they occur. This is, as Congresswoman Brown indicated, where we believe that the agencies can best address their resources to properly processing cases and saving money in the long term.
    We have made some progress on that. We have achieved a 6 percent reduction of lost days with respect to new cases over the last couple of years, but that is not nearly enough. To really accomplish this goal in an effective way, we need to work very closely with the federal agencies, and we cannot accomplish it alone.
    Here are some of the things that we are asking the agencies like VA to do in the future to accomplish this very important public policy goal. First and foremost, to speed up the submission of claim forms.
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    It is critical that we get the information about an injury having occurred and about the status of the individual's pay loss as quickly as possible so that we can pay benefits that are due, initiate any interventions that are necessary, and work with the agency to get that person back to work.
    Claims that linger, claims that are delayed, claims where problems occur early are the ones that become the old cases and that become the high cost cases eventually. We need to get off on the right foot on these cases.
    All of the federal agencies, right now, need to improve their performance in this area, and VA is among that group. OWCP has said that we will initiate early intervention—very early intervention—with our nurses, who have been very successful in getting people back to work, if agencies will get up to 75 percent timely with respect to their initial submissions.
    So far, only one agency has been able to do that. We look for all of them to do so.
    Second, we think that agencies should focus on light duty or other available return to work activities, and the VA is doing that.
    Third, we want to communicate better with our injured workers, and we want the agencies to provide that information to their employees. We provided an Internet agency query system that gives much more information about that.
    The VA is working with us. We know that they are interested in these issues. We have had more intense interaction over the past year, and we expect that to be accelerated in the future. Since they are one of our big customers, we must do that if we are going to succeed.
    Several VA hospitals are already performing very effectively against the timeliness goals and against the loss production day goal that I just mentioned. That indicates that the other hospitals can do as well, and the VA can, in fact, make major progress.
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    We thank you very much for the opportunity to speak here this morning. I would be glad to answer your questions and, I appreciate the opportunity to engage in this discussion about how we can do this better.
    [The prepared statement of Mr. Hallmark appears on p. 33.]

    Mr. EVERETT. Thank you, Mr. Hallmark.
    Mr. Griffin.

    Mr. GRIFFIN. Thank you, Mr. Chairman.
    Mr. Chairman and members of the subcommittee, I am pleased to be here today to comment on opportunities for improving management of the Department of Veterans Affairs' Federal Employees Compensation Act Program, also known as the Workers' Compensation Program.
    While VA management has made improvements in the administration of the workers' compensation program, recent OIG audits and investigations have found that the department is still significantly at risk for program fraud, abuse and unnecessary costs.
    In our view, enhanced management and oversight of this program is essential as the Department is a significant federal employer and annually incurs substantial costs associated with claims resulting from injuries sustained in the performance of duty.
    The Department's fiscal year 1998 payment for workers' compensation costs totaled about $140.8 million dollars. These costs are based upon actual payments made by the Department of Labor in charge back year 1996, for the period July 1, 1995 to June 30, 1996.
    In order to address the Department's risk in the workers' compensation program area, we have applied a three step approach: the comprehensive national audit, a joint OIG and Veterans' Health Administration investigative and fraud detection effort, and a development of a protocol package and handbook for use by VA managers for enhanced program oversight and fraud detection.
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    Our efforts have shown that there are opportunities for the Department to reduce program fraud and abuse with more effective review and oversight of workers' compensation claims.
    Our 1998 audit found that improvements have been made by VA in returning injured workers back to work, and that overall program costs have been reduced for the past 3 years by a total of 6 percent . However, we found a lack of effective case management at some VA facilities.
     This places the Department at risk for program abuse, fraud and unnecessary costs. Our sample of active cases found that better case management could be achieved in 20 percent of the cases reviewed.
    Based on the sample results, we estimate that $17.8 million in compensation costs could have been potentially avoided by VA in charge back year 1996 by returning employees back to work or removing employees from the workers' compensation rolls.
    We also estimate a future cost avoidance of about $247 million dollars in reduced compensation costs for projected lifetime benefits for claimants over the next 18 years. Our review also identified 26 potential fraud cases, which were referred to our Office of Investigations.
    Based on the sample results, we estimate that, in 1996, there were over 500 fraudulent cases totalling about $9 million dollars. Our audit identified a number of best practices that some VHA facilities have established to reduce costs by returning injured workers back to work or otherwise removing them from the rolls.
    Key best practices we identified at some facilities included providing consistent resources to the program, maintaining and reviewing open workers' compensation cases to identify and prioritize actions necessary to reduce cost, ensuring that current medical evidence was continually received so that employees could be returned to duty as soon as possible, establishing confidential hotlines for reporting workers' compensation abuse or fraud, reviewing and identifying injured workers on the workers' compensation rolls that are not current or former VA employees, developing local policies and practices that emphasize safety and training programs, offering light duty to employees, collecting and using continuation of pay cost information as a management tool, and providing all VHA facilities with access to the workers' compensation management information system.
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    The OIG continues to work with the Department to reduce workers' compensation abuse and fraud. An OIG effort is now underway to provide VHA with assistance in establishing veterans integrated service network level case management review and oversight methodologies that can be used to identify potential fraud and reduce costs.
     We believe that this effort will provide the Department with a good starting point for completing the Department-wide review of open workers' compensation cases. This effort will provide the Department with a fraud targeting methodology and case review protocol package that can enhance case management efforts and identify opportunities to return employees back to work or otherwise remove them from the workers' compensation rolls.
    Mr. Chairman, this concludes my oral testimony. I would be pleased to answer any questions after we have completed the opening remarks.
    [The prepared statement of Mr. Griffin appears on p. 40.]

    Mr. EVERETT. Thank you very much, Mr. Griffin.
    Mr. Cowles.

    Mr. COWLES. Good morning.
    Mr. Chairman and members of the subcommittee——
    Mr. COWLES. Cowles.
    Mr. COWLES. Cowles, absolutely.
    Mr. EVERETT. Oh, okay, I'm sorry. Please proceed.
    Mr. COWLES. I am pleased to appear here. I am going to summarize from our full statement, which you have indicated will be introduced in the record. I would like to introduce, to my immediate left, Dr. Frances Murphy, VHA's Chief Consultant for Occupational and Environmental Health.
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    And then to her left, John Hancock, Director of VA's Office of Occupational Safety and Health.
    I wish to begin my testimony this morning by expressing the Department's commitment to reducing workers' compensation costs and promoting the health and wellness of the employees.
    We believe that the establishment of appropriate work place safety and injury prevention programs, employee safety education programs and quality employee health services, and the management of employee injuries and claims are all important components of the spectrum of workers' compensation and occupational health and safety programs which VA provides.
    It has actually been over the last 5 years that VA has, in fact, a more focused and strategic approach to addressing each of these areas that I have mentioned. In fact, in charge back year 1995, we saw charge back costs drop for the first time in the history of VA's workers' compensation program.
    There have been a number of innovative ideas that have been provided to people that work in this area throughout our health care and benefits delivery systems.
    We have a wonderful workers' compensation management information system which has been developed in cooperation with the Department of Labor, which provides current information to workers' compensation case managers, provides statistical analyses of injuries and illness trends, and provides a communication link between those case managers and VA headquarters professionals.
    We developed a training program to address the concerns about assuring that our case managers have the latest information and tools available to manage claims aggressively while remaining within the scope of workers' compensation laws and regs.
    The VA's designated safety agency and health officials has issued an information letter on best practices so that our workers' compensation professionals and health care practitioners in our field can learn from what the best in business have benefitted in the management of this important area.
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    With respect to timeliness of claims, we have a great way to go to improve where we want to be. We would love to be at that 75 percent rate. We are very excited about an initiative that we have undertaken with DOL to have an electronic transfer of injury and illness claims that will go directly into DOL's database.
    We believe this will do a great deal in improving our timeliness of initial claim filing.
    Veterans' Health Administration, in a leadership role, has established the Occupational Environmental Health Strategic Group, and they have implemented a rather unique accident and injury tracking system.
    They have established manager performance measures in occupational health and safety, and have done a lot to promote, educate, and do research in areas that are related to occupational health and safety.
    An Automated Safety Incident Surveillance and Tracking System, called ASIST, has helped us computerize our accident report reporting and will also give us a leg up on understanding where and how and under what circumstances our employees are being injured on the job.
    In 1997, VHA established occupational safety and health performance measures for their top managers. As a result, VA's lost time case rate per 100 employees has steadily fallen each year. In 1997, in fact, the lost time claims rate fell below the overall health care industry LTCR 3.7.
    VA has begun implementing the IG audit recommendations. We were anxious to benefit from their expertise as auditors, and, in fact, had invited them to review the program. And we are implementing a number of the recommendations that came as a result of that study and were mentioned by Mr. Griffin.
    In conclusion, Mr. Chairman, although we have made considerable progress in enhancing employee safety and health programs and improving the management of workers' compensation cases, we recognize that the VA can and should do more.
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    Ideally, the foremost way to reduce workers' compensation costs is to prevent injuries and illnesses. In that regard, we are working to enhance our hazard identification and mishap prevention efforts.
    We look forward to working with the parties here and with your committee in addressing this very important area and, in fact, becoming leaders in the Government-wide program.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Cowles appears on p. 47.]

    Mr. EVERETT. Thank you very much. As usual, both our staffs have prepared many more questions than we are going to be able to ask you in 5 minutes, so we will submit some questions for the record and ask you to respond in 15 days.
    Let me begin with you, Mr. Griffin. Did the IG's office look at private sector models for best practices to contain workers' compensation costs?
    Mr. GRIFFIN. Not as part of this recent effort, no, Mr. Chairman.
    Mr. EVERETT. The projected savings to the workers' compensation program, $17.8 million this year and $247 million lifetime savings, are quite considerable. How did you arrive at these figures?
    Mr. GRIFFIN. Well, the $17.8 million was a figure that was derived from a statistical sample that was part of our audit process.
    And in the Inspector General community, when attributing a dollar value to savings, a person who is, for example, 60 years old who is on workers' compensation and who is removed from the rolls who, for the sake of discussion, was making $20,000 a year, the savings for that individual would be projected until age 70.
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    So that if it is $20,000 a year and they are 60 years old, that would reflect a $200,000 lifetime savings for the program; 70 is a fairly conservative age for life expectancy, but that is the accepted standard in the community and that is the number that we use.
    Mr. EVERETT. In other words, the savings could actually be greater?
    Mr. GRIFFIN. That is correct.
    Mr. EVERETT. Mr. Hallmark, which VA hospitals have a 75 percent timely filing rate?
    Mr. HALLMARK. I do not have that data immediately with me. We post the actual timeliness rates for each hospital on our Internet Web site hopefully as spur for a little competition. The hospitals I was speaking of that are doing well are in the, I believe, 50 to 60 range.
    I do not know whether there are any at the 75 percent range, but it is over a wide—there is a wide variance.
    Mr. EVERETT. Which federal agencies also have a 75 percent timely——
    Mr. HALLMARK. Only one, TVA, Tennessee Valley Authority. They are a very small organization. They do not have anywhere near the size of a management problem that most of the agencies like VA do.
    Mr. EVERETT. VA is developing procedures for a one time review of its open cases. The Labor Department is also reviewing cases 5 years or older. The VA and DOL, are you duplicating work? And are you talking past each other on this, or are you trying to use a common data bank that you can——
    Mr. HALLMARK. Well, right, I understand the question.
    As I said in my remarks, it is important and, in fact, imperative—that we not duplicate work and that we not trip over each other in this regard. We understand and agree with the IG's recommendation that the agency review and understand the status of all its cases.
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    The problem is our resources are limited. We have, as I said, a periodic roll management team that addresses itself directly to these older cases. It has a very carefully trained staff which addresses them in a sensitive and well-established way.
    We have been doing this since 1992. While we think that agencies should know about these cases and should have an understanding as to how they could react to them, for example, if they have a specific light duty or other kind of job that they could offer for an individual, they need to be able to react when our team brings that case to them.
    Or, if they have information that an IG or someone else has uncovered with respect to a possible fraud situation, surely they should make it known to us. But we need to initiate the process of looking at that individual's medical condition to determine whether continuing eligibility is there, whether there is an avenue of rehabilitation that can be proceeded with.
    An agency coming to us with a long list of here are claims that are old can become counterproductive, because we then have to stop what we are doing to look at their request.
    So it needs to be a well coordinated effort, and we are working to accomplish that.
    Mr. EVERETT. Thank you very much.
    Mr. Cowles, would you tell me which VA hospitals have a 75 percent timely filing rate?
    Mr. COWLES. Bay Pines has a 90 percent filing rate, so I think this may be the best hospital that we have. I do not have information on the other one. This one came to mind because it has such a spectacular record, but we will furnish that information——
    Mr. EVERETT. Thank you very much.
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    Mr. COWLES (continuing). For the record, Mr. Chairman.
    Mr. EVERETT. What private sector models has VA investigated for examples of best practices?
    Mr. COWLES. Mr. Hancock.
    Mr. HANCOCK. Well, we have not actually approached the private sector quite so aggressively because there is such a difference in the way we handle claims. Certainly the management practices are significantly parallel, but we do have some differences in the way that the workers' compensation program elements are structured for the Federal Government.
    But we will more aggressively look into the private sector.
    Mr. COWLES. Mr. Chairman, I would like to make here a pitch and bring to the Chairman's attention what is and will be the 1st Annual Federal Workers' Compensation Conference and Exposition that will be held this fall.
    The VA is actually sponsoring this, and we are inviting other federal agencies. Department of Labor will be helping us. We are going to have 54 workshops there where we are going to, in fact, be sharing best practices; best practices mostly focused on Federal Government efforts.
    We believe that this will, in fact, be an event which not only VA, but the entire Federal Government, will come away from and be able to provide an implement those best practices that are leading agencies to dramatically reduce their costs.
    Mr. EVERETT. I think my time is out. Let me just comment that Murfreesboro, Tennessee has a 100 percent timely filing record.
    Mr. COWLES. Excellent. Then I am sorry, Bay Pines; you are number two. (Laughter.)
    Mr. EVERETT. And I now will recognize the ranking member of our committee, Ms. Brown.
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    Ms. BROWN. Thank you, Mr. Chairman.
    My first question will go to Mr. Hallmark. On the question about the timely filing of the complaints, how does that affect the employees' rehabilitation and employers' costs, the fact that they have filed them late?
    Mr. HALLMARK. Well, we find, in all the studies about this kind of disability case that have been done that I know of in the private sector and elsewhere, that the sooner the individual is contacted, the sooner we can start and the agency can start working on finding out whether that individual can be accommodated with a light duty or other kind of accommodated job, the better the result is going to be.
    If individuals are left hanging out, if the employer has forgotten about them, if we do not know the case exists so that we can't assign a nurse to it, then the individual becomes inured to being at home, they lose the contact with the work place, and they become, in effect, identified with their injury and their disability, as opposed to identifying themselves as a worker.
    And then it becomes very difficult to overcome that self concept and to get the person back into the mode of going to work everyday. So the critical time that we have been advised through various studies is within the first several months, certainly within the first 6 months, to get that case moving in the right direction.
    OWCP oftentimes is not aware of cases for several weeks. We do not even have a case started. There is a process within the Federal Employees' Compensation Act called continuation of pay where the federal agency, in this case VA, continues to pay the individual's salary even though they are not at work.
    After 45 days of that, then wage loss replacement comes from OWCP. There can also be a delay in that process starting if the agency does not inform us that continuation of pay is over and we need to start making payments.
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    So that can be a delay. If the individual is not being responsibly treated, the individual becomes unhappy and the situation becomes conflicted. This is obvious if you are in a situation where you were receiving your salary and then, all of a sudden, you are without any kind of income for several weeks because OWCP has not issued its first payment.
    That does not put a person in the humor of coming back to work. It puts a person into a contentious kind of posture and ends up making cases become more difficult than they should be.
    Ms. BROWN. Thank you.
    Mr. Cowles, is that correct?
    Mr. COWLES. Cowles, yes.
    Ms. BROWN. Okay, would you just walk me through the normal process of how long it takes for an initial workers' compensation claim, starting from day one when the claim is received by a first line supervisor at a local VA facility and ending up with the claims being sent to the Department of Labor?
    I know you mentioned that you were going to do an electronic transfer. How will that streamline the process?
    Mr. COWLES. Right now, the filing of a claim—it is Claim Form CA 1 and 2, the initial filing by the employee—is a paper filing. It does require the employee to indicate that they have been injured and requires the VA to acknowledge that for the supervisor and physician statement to be attached.
    The timeliness that we are talking about is 14 days to get those claim forms to the Department of Labor. So when you talked about 100 percent timeliness rate, that means that employees file claims and those forms are filled out and submitted to the Department of Labor in 14 days.
    I think as we look at our own experience, we do not meet that standard as well as we would like. We would love to be at that 75 percent rate. About 60 percent of our cases are submitted within the first 30 days. Even there, there is a lot of room for improvement.
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    The electronic transmission for us will be an opportunity for people to use technology to much more efficiently fill out the information necessary and submit it and avoid the problems that one finds in moving paper from one location to another or even in sending it to the Department of Labor.
    It clearly is going to speed up that processing time.
    Mr. HALLMARK. If I may add, our statistics show that about 20 percent of the VA claims come in in the second week, the week after the timeliness period is over. So the electronic process should move at least 15 percent from the untimely to the timely column.
    Ms. BROWN. Mr. Griffin, in your office's audit of the VA workers' compensation program management, what, if any, assessment did you make of the VA's failure to file employee claims timely? I do not think you mention it in your report.
    Mr. GRIFFIN. No, I did not mention it. It was not in our report. In the overall scheme of things, that did not strike us as being a major issue when you looked at the other issues that were on the table, and one being that, as you have already mentioned, cases that are more than 5 years old in the VA account for roughly 75 percent of the dollars spent for this program.
    So we felt like when you are prioritizing your cases and deciding which ones should we look at first, and basically this collaborative effort that we have had with VHA and, in particular, in VISN 2 and 22, we wanted to establish which cases have the greatest impact, which ones should we look at first, and which protocols can we establish which we can apply on a national basis to all of the facilities.
    But the timeliness was not something that we focused on.
    Ms. BROWN. Mr. Griffin, your report was focusing not on prevention and timely assistance, as you just said, but on abuse, fraud, and unnecessary costs spent on long-term cases. I am interested in safety and training programs.
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    Did your audit find out anything about how those programs would improve the efficiency of VA?
    Mr. GRIFFIN. Well, we identified safety and training in our list of best practices that occurs at some facilities and that would be in the best interest of the Department if it occurred at all facilities.
    The waste and fraud issues sometimes stick in your mind because some of them are so outrageous that you cannot shake them. But I think a careful reading of all of the best practices that we listed in our report will show that safety and training are included.
    Some of the things that Mr. Hallmark has spoken to, such as light duty, and not letting that person just drift away, never to be heard from again, to lose their self esteem, to think that I cannot do it, I have no value added, etc., are all important issues.
    And I think that we covered the full range of issues in our full report.
    Ms. BROWN. Of the cases filed by VA, what percentage do you think represent fraud and abuse?
    Mr. GRIFFIN. Well, based on our current look, we felt like approximately 3.6 percent of the total. I believe Mr. Hallmark's statement reflects that the national number is 3 percent. So 3.6 is fairly close to the Government-wide number; but 3.6 percent, when you have got a quarter of a million employees, is a pretty substantial number of fraud cases.
    We estimated 500 cases in charge back year 1996 were probably fraudulent.
    Ms. BROWN. Mr. Cowles, would you like to respond to that?
    Mr. COWLES. I would, and respond to your initial concern on the prevention issues on the front end.
    We have spent a good deal of our time developing, both at the national and also network level, training programs to address those areas where workers are more prone to injury. And we can provide for the record some of those programs that have been developed over the last 4 or 5 years.
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    We have actually seen our injury rates come down for the last few years, and that is exciting because that means fewer claims are being filed and those training programs are, in fact, working.
    We recognize that there will be some employees that take advantage of the system. We would agree that 500 cases is a large number. And yet, our focus is and our belief is, is that the vast majority of employees, the 220,000 or 230,000 employees that are not in that number not only respect what their rights and privileges are under this, but work with us very cooperatively when injured to seek medical attention, to get their claims filed, to come back to work and accept light duty assignments.
    That is an enormous plus for employees to know they can come back even before they have fully recovered if we can provide them employment in a light duty assignment. It improves morale, it helps us reduce our costs, and that has been a real plus with our program.
    Ms. BROWN. I personally want to commend you for putting together this conference that is coming up August the 29th through September the 1st in Orlando. You all are taking the lead on this and inviting other agencies.
    Do you want to expand on that for a little bit?
    Mr. COWLES. Absolutely. It was clear to us that we would benefit from others' experience, and that not only are we interested in being a leader in our own agency, but we felt that, if we could do something here, it would bring the whole federal community together and bring Department of Labor here to help us understand how we could work better with them to assure that the goals and objectives of the workers' compensation program were met.
    We are very excited about this. We may not be the best in timeliness claim processing, but we are the leader in this effort, and that is why it is called the 1st Annual Federal Workers' Compensation Conference.
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    Ms. BROWN. I am happy to note that it is in my district in Orlando.
    Mr. COWLES. And we would like to invite all the members of the subcommittee and their staff. We are thrilled to be in that location and are looking forward to it very much.
    Ms. BROWN. Thank you, Mr. Chairman, for the extra 5 minutes.
    Mr. HALLMARK. Congresswoman, I wonder if I could add just a quick note. We are participating, as you indicated, in the conference that VA is planning and look forward to expanding a lot of agencies' ability to address these issues.
    But just to speak very quickly to the issue of fraud, while we would not—I do not want to get into a debate with my colleague from the IG. Three percent is a number we have seen used with respect to the long term disability cases.
    My reading of the IG's report is that they are projecting their sample to the entire universe of cases, which includes mostly no lost time medical only cases. This may be somewhat of an overstatement. If we had to quibble with a number in the report, the 500 cases might be one we would quibble with.
    But, in any case, our concentration on the timeliness and the handling of early cases is not, I think, just an eleemosynary activity. We think that the long term costs, the future liability of these cases, is affected by addressing them in the front end. Even though the 80 percent is now going out to cases that are on the rolls, and we should look at those cases, if we do the new cases right, we will avoid these costs building up in the future, and we think that is very important.
    Dr. MURPHY. If I could just add to that. I think they are both right. We need to look at the full spectrum of cases. And one of the reasons that VHA started the accident and injury tracking system was that we wanted to get in at the time the accident occurred.
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    When the employee is injured, they go to the supervisor or employee health, a record is established, and the whole team starts managing that injury from the day it occurred. We think that is very important.
    So we agree with the Department of Labor, but we also think that we need to address the long term cases.
    Ms. BROWN. Just one final comment from the IG's office. After listening here this morning, I felt better about this issue. I understand the role of the IG, but do you not see that the VA has made some progress toward improving in this area?
    Mr. GRIFFIN. I think we recognize in our statement, that they have improved for the last 3 years. I will say though that I stand behind our 3.6 percent number and, if there was time, we could demonstrate how we arrived at that percentage.
    No question, this is not an adversarial thing here. We are talking about tax dollars that can be better used to treat veterans than to be used by the small percentage of people who are attempting to rip off the system.
    This is a partnership. We want to get these people back to work. In VISN 22 where we had the collaborative effort, we are talking about $12.3 million dollars a year that is going to the OWCP program—and this is a very important program.
    I am glad it is there. I might need it someday. But, the money that could be saved by returning people to work can then be applied to health care for veterans, and that is what this is all about, and that is why this is a collaborative effort.
    Ms. BROWN. I agree with you as far as anybody that is trying to misuse the system, but I do want to say that for the vast majority of the people working for us, this is a benefit. If they need it, we want to make sure that it is in place. We do not harass them.
    Mr. GRIFFIN. I agree 100 percent.
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    Ms. BROWN. Thank you, Mr. Chairman.
    Mr. EVERETT. It is just not the money. There is a human cost here, too, that you all have expressed that you understand. And, of course, we are interested in that, too. As a matter of fact, the inertia of disability that you have mentioned, Mr. Hallmark, in your report leads me to ask this question:
    Our subcommittee is hearing complaints that supervisors and managers are deliberately not filing workmans' compensation claims paperwork on time so they can sit on the cases they do not like. How does the Department of Labor view a deliberate refusal to forward claims paperwork to your Department?
    Is this an acceptable way to manage claims? Is it illegal for an agency to do that?
    Mr. HALLMARK. Well, no; obviously it is not an acceptable approach to management of anything, and it is illegal, under the FECA—it is a criminal offense to fail to timely submit these forms.
    It is a misdemeanor, and I do not believe it has ever been prosecuted; but it is, in fact, inappropriate. And when we have information about this sort of thing, we take that to the higher levels of an organization and try to make sure that it stops immediately.
    Mr. EVERETT. Mr. Griffin, did you find any evidence that people may have been sitting on claims that they did not like, or did you look at that?
    Mr. GRIFFIN. We did not find any——
    Mr. EVERETT. Did you look for——
    Mr. GRIFFIN (continuing). Indication of that. It was not something that we set out to explore at the beginning of the audit, but I believe that, with the number of people that our auditors have talked to, that we would have come upon it even though it was not on our list of things to seek out.
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    Mr. EVERETT. But the subcommittee has been getting complaints about it.
    Mr. Cowles, what is the VA doing?
    Mr. COWLES. If we were to find evidence of that, it not only would be, illegal, as it has been characterized by Department of Labor, but a dereliction of duty, and certainly something which a supervisor could be disciplined, in addition to whatever other penalties might be available.
    Mr. EVERETT. I appreciate that, but——
    Mr. COWLES. So we would——
    Mr. EVERETT (continuing). I have seen a long history of the VA not——
    Mr. COWLES. We would be very interested in——
    Mr. EVERETT (continuing). Disciplining supervisors.
    Mr. COWLES (continuing). If the subcommittee is getting that information, we would like to get it too. More common, employees will complain or union representatives will ask where in the ''blazes'' is that claim form. The supervisors had it for a week or two and it has not come out.
    And what we usually do is then go to the supervisor and find out why that claim has not been filled out and assure that, if that supervisor needs some assistance or needs information that they do not have, that they get it.
    But it would be a very, very serious matter of misconduct if a supervisor is just sitting on it because of some personal animosity or some unwillingness to admit that he has or she has injured employees.
    Mr. EVERETT. Mr. Cowles, when will the VA be able to measure savings in the workers' compensation program and then report those savings to the subcommittee?
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    Mr. COWLES. We have mentioned some of the savings in our opening statement as far as the reduction of charge back costs to the agency. We can provide additional information. This information we have provided also, prior to the hearing to the subcommittee staff, contained some graphical depictions of the reductions in cost over the last 5 years.
    Mr. EVERETT. We must recognize that the record for filing the claims on time in the VA is not good at all. Is improvement part of your Results Act performance planning?
    Mr. COWLES. Whether there is a measure in the GPRA goals and objectives, I am not sure. I would be more than happy to check on that. I know, as we are tracking it, there has been some recent incremental improvement in our timeliness. It has gone up by about 2 or 3 percent.
    We clearly are looking to want to implement that electronic filing system as soon as we can. And the training that we are——
    (See graph on next page.)


    Mr. EVERETT. When do you think that might be?
    Mr. HANCOCK. We anticipate it before the end of the fiscal year, sir.
    Mr. EVERETT. Okay.
    Mr. HANCOCK. We have some technical issues we are working on to make it——
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    Mr. HALLMARK. If I could add, the timeliness of agencies' submission of these claims is in Department of Labor's GPRA measures. We are holding ourselves responsible for this in the spirit of GPRA, which says you should go beyond your own borders.
    So that is one of the reasons why we are doing as much preaching on this score as we have been, because we think it is very critical.
    Mr. EVERETT. Well, like our ranking member, I am very pleased what I am hearing here today because it is obvious that we do recognize that there is a money situation here that could be better spent for veterans' health care.
    But also, as importantly, there is a human price being paid. So I want to thank this panel for appearing here today, and I will now call the next panel.
    I would now like to welcome and recognize Fred Malphurs, Director of Veterans Integrated Service Network 2 in Albany, NY; and Smith Jenkins, Director of Veterans Integrated Service Network 22 in Long Beach, California.
    Gentlemen, I would ask you to hold each of your statements to 5 minutes, and we will—your complete statements will be submitted for the record.
    And Mr. Jenkins, if you will, please begin.

    Mr. JENKINS. Thank you, Mr. Chairman, members of the subcommittee.
    I appreciate the opportunity to appear before you today to discuss the efforts of the Veterans Health Administration's Veterans Integrated Service Network 22 to provide management of the workmans' compensation program and reduce unnecessary cost.
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    Until approximately 6 years ago, VA headquarters paid all of the Office of Workmans' Compensation Program costs for the Department of Veterans Affairs.
    In an effort to better control and possibly reduce the continually escalating costs associated with the program, headquarters decentralized the funds and responsibility for OWCP programs to each of the separate administrations within the Department, and ultimately to the various field facilities.
    Cumulatively, the facilities in the VA Desert Pacific Healthcare Network, which is VISN 22, we have had the highest OWCP cost in the country. In charge back year 1995, our cumulative cost was approximately $13.4 million dollars.
    It was apparent that we needed to take some action to reduce these costs. And over the last 2 to 3 years, we are estimating our costs is going to go down to approximately $11.4 million dollars in fiscal year 1999, which is a reduction of about $2 million dollars, or about 14 percent reduced cost since we have actually been working on this with some significant resources and folks focusing on trying to reduce these costs.
    Two of our facilities in the Network 22 have hired registered nurses, who oversee this program and are OWCP coordinators. In the other facilities we have, the people in our human resource services have overseen the programs and are working on them.
    Some of the specific problems we found when we got into checking to see what was causing these high costs that we had, we found that when employees were remaining off duty for significant periods of time without any action being taken or people getting involved into why they were off duty, our physicians, both VA and non-VA, did not understand that we could accommodate people on light duty and wish physical limitations.
    Also, our facilities and services in some of our medical centers were not willing to provide light duty type jobs that we needed to bring people back into work.
    We also were frequently finding that some of our pre-employment physicals, when we were hiring people into work, were not complete enough and we were not finding out some preexisting medical problems when they came on work for us.
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    Several actions were taken to identify these problems. It was sensitive because the employees with work-related injuries who legitimately needed to avail themselves of this program. So even though we had some concerns over it, we wanted to make sure the program was available to people who needed it.
    There was, at no time anyone, trying to keep people from filing claims, getting the benefits they were due. So we were very cognizant that people needed it, that the program needed to be there, and we wanted to provide the help.
    Some of the things we have been doing to look at these costs and try to get them down was we started devoting more staff time, providing more people to oversee the claims. We had an aggressive OWCP case management from initial injury to final resolution.
    There is no question, we think, that up front involvement is the key to reducing these costs. You have got to get involved at the initial injury. You have got to find out what is going on. You have got to make sure the claim gets processed on time and see it through the final completion.
    If you do that, that is where the significant savings are, and also providing, I think, the employee with the proper kind of medical care they need, too.
    We also implemented a variety of light duty positions to accommodate a wide range of injuries. We established communications with our physicians to facilitate the expeditious, yet appropriate, return of employees to work.
    In off duty hours, we went in to make sure our physicians put people on light duty, got them back to work as soon as possible as opposed to just sending them home with no time to come back. We also are establishing a dedicated VA position between Network 21, which is located in the San Francisco area, and Network 22 to serve as a full time liaison with the Department of Labor to more expeditiously process review and adjudicate our claims.
    During the past year, Network 22 has worked closely with the Office of Inspector General with reviewing various aspects of the workmans' compensation program. The primary focus was to identify best practices to develop an OWCP handbook to improve our case management, and in turn reduce compensation costs.
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    We are making every effort to provide a safe and healthy work environment and offer programs on accident prevention, but occasionally accidents happen and our staff will continue to manage each case individually, establish light duty positions for employees where possible.
    This concludes my statement, Mr. Chairman. I will be glad to respond to questions.
    [The prepared statement of Mr. Jenkins appears on p. 55.]

    Mr. EVERETT. Thank you very much.
    Before we proceed, let me recognize Mr. Peterson. He is a new member of our subcommittee and a welcome member of our subcommittee, and he will make a great contribution.
    Please proceed.

    Mr. MALPHURS. Thank you, Mr. Chairman and members of the committee.
    I, too, appreciate the opportunity to appear before you to discuss the Veterans' Health Administration Network 2's efforts to reduce employee on the job injuries and to more responsibly manage our part of the program that provides benefits to employees who are injured on the job.
    Network 2 had the highest lost time incident rate of any network in the country, 5.7 percent, during the first half of fiscal year 1998. In an effort to reduce and manage the network incident rate, we established a network OWCP project manager and task group to research the problems that we were encountering and to work directly with the Department of Labor to resolve them.
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    Through these efforts, we found errors in accounting that had a total of 67 cases reported as lost time cases that were actually no lost time. Through these corrections and other efforts, we reduced our lost time rates to 3.96 by the end of fiscal year 1998.
    Among the other steps taken within Network 2 to better manage this program are to establish a policy that supervisors accompany injured employees to the employee health unit/emergency room in all cases to determine duty status; issue an employees' procedural memorandum to require the immediate reporting of the injury/illness to supervisors.
    We established a policy that requires the supervisor to immediately initiate an incident investigation and to complete form processing within 48 hours. We reestablished the weekly case reviews within each facility consisting of representation from employee health, safety, the supervisor and the union.
    Special emphasis targeting frequent multiple and questionable claims was made part of that. Minutes are provided to the Network OWCP manager so that she can monitor progress. We developed a Network 2 criminal investigator position with the full support of the New York Office of the VA Inspector General with a special agent assigned.
    An OIG audit requested by Network 2 that was conducted during fiscal year 1998 by Network 2, the Department of Labor in New York City, and their office in Jacksonville, found additional cases that were removed from the charge back report, identified potential fraud cases, and identified other potential program cost reductions.
    For Network 2, these IG efforts alone resulted in savings of over $200,000. In August, 1998, our Network OWCP manager started making weekly Department of Labor site visits to discuss such issues as discrepancies and lost times claims rate codes, status of open cases and adjudication time frames, requests for second opinion exams, requests for DOL to suspend compensation due to nonreceipt of report of wage information from claimants, and requests for loss of wage earning capacity to be determined.
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    VA and DOL need to continue striving for more efficient and effective management of OWCP cases. Timeliness on filing and adjudication claims must be met, as well as making suitable job offers, prompt termination of compensation benefits and a timely, periodic review of medical residuals.
    Through these joint efforts and the steps we have take in Network 2, we hope to further improve the functioning of the program and achieve additional cost savings that can be used for medical care for veterans.
    Mr. Chairman, this concludes my statement. I would also be pleased to respond to the committee's questions.
    [The prepared statement of Mr. Malphurs appears on p. 58.]

    Mr. EVERETT. Thank you very much. I want to thank both of you for appearing here today.
    Let me ask you both, when will your claims begin to be filed electronically in your VISN?
    Mr. Jenkins, we will start with you.
    Mr. JENKINS. We have already started filing some of our claims electronically, and it is definitely improving our processing time. We did eliminate all the mail time back and forth to San Francisco, so it is going to be a great help to us and we are going to continue to until all facilities file electronically.
    Mr. MALPHURS. I do not know the answer. I would be happy to provide it for the record though.
    Mr. EVERETT. Certainly.
    Let me ask you, did either of you investigate private sector models for examples of best practices to contain the workers' compensation costs?
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    Mr. JENKINS. No, sir; I have not.
    Mr. MALPHURS. We looked at them. I think there is not a direct comparability, but we believe many of these management practices we have tried to accommodate within our reorganization where we have one person in the network that is, in essence, case managing this across Network 2.
    She has extensive experience as a human resource specialist, and basically follows each and every case from the inception through, to, and including while it is at Department of Labor.
    Mr. EVERETT. I want to personally thank both of you for your efforts to better manage and contain costs in the workers' compensation programs not only, as I said earlier, not only to save the money, but to reduce the human cost for your employees.
    And I hope your successes will be recognized and duplicated across the entire VA. Your dedication to better management is to be commended, and I commend both of you.
    Ms. Brown.
    Ms. BROWN. Mr. Chairman, I would like to yield to Mr. Peterson.
    Mr. EVERETT. Certainly.
    Good to see you this morning.
    Mr. PETERSON. Good morning, Mr. Chairman.
    And I thank the ranking member.
    I want to welcome both of you and thank you for your constructive testimony on how best to reduce workers' compensation program costs.
    From the standpoint of the managers who actually must administer the programs in the field, is it really helpful to get a list of best practices from the central office?
    Mr. MALPHURS. I think it is—being a very firm believer in the principles of continuous quality improvement, one of which is looking at best practices, I think it is part of their job. We have a Web site in the VA that helps to identify those, management and clinical, and there is increasing wealth of information that is available through other Web sites that we have linked and available through our own Internet Website within the network to all managers.
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    Mr. JENKINS. I would agree with Mr. Malphurs. I think one of our problems is failure to communicate best practices throughout the system. And the more we can do that, the faster we can improve the situation as opposed to somebody reinventing the wheel every time we try to do something different.
    Mr. PETERSON. Do you have suggestions on how the VA could better or more effectively gather, assess and disseminate this information and what they are doing?
    Mr. JENKINS. Well, I think we are doing it fairly effectively now through the Internet. We do have some Web pages up with lessons learned on them. They are available to all of our people throughout the system.
    So we are putting these on. And we submit them into headquarters on a regular basis of all lessons learned and best practices, and they are posting them on the Internet. So they are available to our folks now.
    Mr. PETERSON. And you think that is the best way to——
    Mr. JENKINS. Right now I think it is the best way because there is very few of our people that do not have access to PCs and the Internet. It is better putting it on the internet because most of our employees do spend some time on a PC. This is better than a written document and passing it around and make sure everybody gets a copy.
    We think the Internet is the best way to go. It is much faster and much more efficient than doing it through paper.
    Mr. PETERSON. As you can tell from some of the discussions, this concern is about the VA's delays in filing employee notices of claims. What do you two think are the main reasons for such untimeliness, and how could those delays be eliminated or at least reduced?
    Mr. JENKINS. I honestly do not know what the timeliness is on my particular facilities. I am going to find that when I get back. I also did not realize it was even an issue, to be honest with you. I do not know what is causing the problem or how significant a problem it is.
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    Mr. MALPHURS. I would simply echo that and add that part of the concern of our employees in initiating the paperwork arises out of the fact that we are a 24 hour a day, seven day a week operation.
    So if an employee was injured around midnight on Friday night and simply had to go home, it might not be until Monday or Tuesday before the communication process caught up with what happened and the employee did the notification and got the supervisor involved and so on, simply because the supervisor was not there or out of touch.
    So I think other than that special consideration, I do not believe that we should have any reporting exceptions. I think if you allow for them, then you get them for sure.
    Mr. PETERSON. So neither one of you think that it is a big problem within your——
    Mr. MALPHURS. I honestly do not know, but I think if it is a big problem in Network 2, we will get it corrected.
    Mr. JENKINS. I would agree with Fred. I am not aware of it being a big problem either. If it is a problem, it has not surfaced or come up to my level.
    Mr. PETERSON. What assurances can both of you give us that your heightened interest in cost savings will not jeopardize the rights of your employees to the workers' compensation benefits that they are entitled to, we do not go too far?
    Mr. MALPHURS. We have an extensive working relationship with all of our unions. We have a network-wide Labor/Management Council and similar groups, in a couple of cases, called Partnerships at each of our facility.
    We have had a continuous dialogue on this issue, sometimes heated. The employee advocates, I think, are very effective in pointing out to managers when we are being too harsh or inconsiderate or whatever it is.
    And I would characterize that by one—as of this point in time, of being a successful collaboration. So I think those union officials, beyond other employees and management concerns for employees, are certainly, in Network 2, effective advocates to make sure that doesn't happen.
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    Mr. JENKINS. I would agree with Mr. Malphurs. We have very effective labor partnerships, too, at each one of our facilities. I think if we started having a problem, it would surface.
    I can assure you, at least on my part, if I found out that was happening or thought it was happening, we would take whatever action was appropriate to make sure that it did not. I think this is a benefit available to our employees and we should make sure it is there and available to use it if the need arises.
    In the business we are in, we are going to have some injuries and people need to have that program available to them when they are injured on the job. The only thing I can do is to assure you that we would do what was necessary to make sure that people were not denied access to the program.
    Mr. PETERSON. Thank you very much.
    And thank you, Mr. Chairman, Ms. Brown.
    Mr. EVERETT. Thank you.
    I want to thank all of our witnesses for appearing today. I am encouraged to see the VA's initial steps to contain the cost of this program. The VA and the Department of Labor should continue to work together to improve the management and cost containment of the workers' compensation program.
    The objective is to provide compensation to the right worker at the right time in the right amount. This subcommittee will continue to monitor the VA's progress in implementing the workers' compensation protocol developed by the Inspector General's office.
    The subcommittee will also request that the VA report to it, at the first opportunity, the savings for veterans and taxpayers that are realized through the VA's more efficient management.
    If you take the $17.8 million, which is said to be conservative, or a lifetime $250 million dollar savings, by following this program and improving this program, you add that to the $63 million dollars a year that this subcommittee has held hearings and will have future hearings on, and the DOE's projected savings within the VA by privatizing their energy sources, you know, gosh, it is kind of like what Everett Dirksen said, ''A few million here and a few million there.''
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    In 10 years, you are talking about a billion dollars that we can return to veterans healthcare and that can be better spent.
    Well, I appreciate you being here today. This hearing is adjourned.
    [Whereupon, at 10:40 a.m., the subcommittee was adjourned.]