Veterans Health Care: Project HERO Implementation

Sidath Viranga Panangala
Specialist in Veterans Policy

In general, the Department of Veterans Affairs (VA), through the Veterans Health Administration (VHA), provides a majority of medical services to veterans within its health care system. However, in some instances, such as when a clinical service cannot be provided by a VA medical center, when a veteran is unable to access VA health care facilities due to geographic inaccessibility, or in emergencies when delays could lead to life threatening situations, VHA is authorized by law to send the veteran outside of VA's health care system to seek care. In 2006, the conference report to accompany the Military Quality of Life and Veterans Affairs Appropriations Act of 2006 (P.L. 109-114, H.Rept. 109-305) directed the VA to implement a cost-effective purchased care management program and to develop at least three pilot programs to encourage collaboration with industry and academia. In response to this requirement, VHA established a demonstration program to enhance the existing fee basis care program that was named Project HERO (Healthcare Effectiveness through Resource Optimization). 

In October 2007, VA awarded a contract to Humana Veterans Healthcare Services (HVHS) for medical/surgical, mental health, diagnostic and dialysis services, and the contract became operational in January 2008. Under Project HERO, HVHS maintains a prescreened network of health care providers who meet VA quality standards. 

In general, when a patient requires a specific service, and the local VA medical center does not have the specific medical expertise or the technologies to meet that necessity, the local VA medical center authorizes the specific service to be provided under Project HERO. Once the veteran receives care, HVHS is contractually required to return the patient's medical record to the local VA medical center, and HVHS sends the claims data to VA for reimbursement. 

VHA's contract and fee basis care expenditures are of interest to Congress for at least two reasons. First, expenditures for contract and fee basis care services are increasing, and second, concerns have been raised about the fee basis care program. Specifically, VA's Office of Inspector General (OIG) has reported that VHA has made a significant number of improper payments for fee basis care as well as in some instances has not properly justified and authorized fee basis care. Given these concerns, and the establishment of the Project HERO demonstration as a means to better manage non-VA provided care, at least two broad policy questions may be of interest to Congress: (1) Has Project HERO enhanced the existing fee basis care program? and (2) Are there lessons to be learned from the Project HERO demonstration that could be applied to standardize the fee basis care program throughout the VA health care system? 

This report first provides a brief overview of the VA health care system, followed by a overview of Project HERO. Second, it discuses the current fee basis care process, as well as the implementation of Project HERO. The report concludes with a discussion of observations on the implementation of Project HERO based on VHA and HVHS perspectives. It should be noted that although dental care services are a component of Project HERO, and are provided through Dental Federal Services (Delta Dental), this report does not discuss dental care services provided under Project HERO. This report will be updated if events warrant.


Date of Report: February 3, 2010
Number of Pages: 21
Order Number: R41065
Price: $29.95

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