Amid stubborn backlog, VA plans to outsource more disability exams

The U.S. Department of Veterans Affairs, which has struggled to eliminate a backlog of disability claims, is planning to outsource more of the medical exams that are key to determining benefits.

The effort could cost more than $1 billion per year.


The department says such a move could make it easier for veterans in remote areas to be seen, and speed up payouts. But the plan has rattled VA doctors, who say the quality of exams could suffer, leading to more disputes between veterans and the department over payouts.

The exams are often a veteran's first experience with the VA. The department has been pushing to ensure that they are done more promptly as it digs its way out of a massive backlog in offices around the country.


At one point, the Baltimore VA office was the slowest and most error-prone in the country in processing disability claims.

The VA has had success in curbing the backlog, defined as veterans waiting for more than 125 days to get their case resolved. But 20 percent of cases nationally are still overdue, and officials say demand for benefits is at an all-time high.

VA officials provided redirected resources to Baltimore to improve performance, bringing down a backlog of some 16,800 cases in early 2013 to about 1,300 today. But the error rate in Baltimore is 20 percent, still greater than the national average of 12 percent.

Beth Murphy, a senior official in the VA's benefits division, said she expects to receive as many as 1.9 million requests for disability exams next year, up from 1.5 million in 2015.

Contractors could end up performing more than 60 percent of those exams, which would be a big expansion of their role. But Murphy said the VA's own doctors remain the first choice.

A computer system will determine each day how many exams the VA's staff can handle. When the department is overwhelmed, the system will divert work to contractors.

"When you compete something out in the open market, there are efficiencies and cost savings," Murphy said.

At the same time, she said, "when you have federal employees doing a job you can't just willy-nilly replace them."


The union that represents most of the VA employees who conduct medical exams filed a grievance after learning of the outsourcing plan. The union contends that contractors could put profits ahead of veterans' needs, leading to less scrupulous exams.

Contractors are "rewarded for quick-and-dirty," said Marilyn Park, a lobbyist for the American Federation of Government Employees. VA staff, she said, would "miss less" and "give a more thorough exam, a more specialized exam."

The VA has contracted out some exams for years under a patchwork of different arrangements. A legal change that went into force this month would allow the agency to streamline the process.

Lou Celli, an official at the American Legion, said the plan is practical approach to deal with a tight budget. But he thinks the VA's own doctors generally provide better exams.

"If we could afford it, we'd love for the VA to do them all in-house," he said.

A report by the VA's inspector general in 2005 concluded that there was little difference in quality between exams performed by VA staff and those performed by contractors.


But a study conducted by private consultants soon after the VA began working with contractors in the 1990s found that the outsourced exams were much more expensive than those done by staff.

Scott Orr, an executive at Veterans Evaluation Services, one of the companies that contracts with the VA, said his company regularly turns exams around on schedule, and has a higher satisfaction among veterans the VA's own doctors.

The implementation of the new contracts, which could be worth as much as $6.8 billion over five years, has been beset with problems.

They were first announced in March, but some of the bidders protested to the Government Accountability Office, which recommended reopening the process. Last month, the VA again announced that contracts had been awarded — only for Orr's company and another firm to again lodge protests.

And within the VA there has been confusion about exactly how the new contractors will be used — which union official M.J. Burke said is a major part of the grievance.

At an employee town hall meeting this summer in Baltimore, Mark Yow, the VA's chief financial officer, and Dr. David J. Shulkin, its top doctor, described sweeping plans to outsource almost all exams, video of the event reviewed by The Baltimore Sun shows.


But since then, agency officials said in interviews that they do not plan to do that.

"The main issue is to make sure to be transparent with our employees," Burke said. "We can negotiate over the procedures if you decided to shift work."

Orr said he's frustrated by the lack of a clear policy from the VA.

"Quite honestly, it seems like there's a lot of indecision floating around out there," he said.

The VA has been contracting at least some exams since 1998. Contractors handled 29 percent of cases in 2015.

In recent years, the department has been urged to rely more on contractors.

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A panel of senators charged with helping the department cut the backlog of disability claims endorsed the idea, writing in a report last year that more extensive use of private doctors "ensures that disability exams continue to be completed in a timely manner, especially in locations where the VA may have higher demand for care and lack the facilities or resources to provide these exams quickly."

In 2014, George Turek, the chief executive officer of Veterans Evaluation Services, told a congressional panel that more outsourcing would free up the department's doctors to focus on treating patients. Turek advocated turning over all exams to contractors.

"The simple reallocation of existing assets would go a long way to resolve the backlog of both treatment cases and [benefits] claims," he said. "This can be done quickly, much more quickly than building new hospitals and clinics and then hiring and training staff."

But Burke, the union official, said the VA's own doctors have a deep understanding of the connections between military service and disabilities. Without that specialized knowledge, he said, doctors could make mistakes, ultimately slowing down the process of applying for benefits.

"I think it's just going to lead to much more frustration," she said.