Financial Ties Between the US Veterans Affairs Department and a Company Lead by the VA's Former Secretary

Reporting from cool and cloudy Los Angeles, about a story reported locally with wider implications....

Early this week, the Los Angeles Times examined the financial ties between former US Veterans Affairs (VA) Secretary Anthony J. Principi and a company that does medical exams on veterans under contract with the VA.

In 1996, Principi, then a partner in a San Diego law firm, chaired a congressional task force on veterans issues. According to the Times, "his panel recommended having a standardized, comprehensive physical exam for outgoing military personnel." In 1998, QTC Management Inc. began doing disability exams for the VA. Its work was criticized as being overly expensive at the time. In 1999, Principi joined the company as CEO. In 2000, Principi was nominated to be VA secretary. During his confirmation hearings, he said he had "terminated all relationships with QTC and waived any and all future rights and benefits that could flow from [his] relationship with that organization."

After he became VA Secretary, Principi formed a task force to assess the processing of veteran's claims. According to the Times, "the panel lauded QTC's performance and recommended that the medical exam program continue or expand. Principi said he had nothing to do with that review or the recommendation. The head of the panel later was appointed top deputy to Principi. The favorable Principi task force report was cited as justification for language inserted into the2003 VA budget authorizing continuation and expansion of the program."

"The VA awarded a new contract to QTC after giving rival contactors 30 days to submit proposals. No other bids were submitted. Some competitors said they learned of the new contract only after it was awarded." Later, "the VA has made multiple amendments to two successive QTC contracts, increasing the number of approved sites for the exams and thereby adding to the contract's value."

After Principi left his position at the VA, he returned to QTC, becoming chairman of its board.

Yesterday, the Los Angeles Times also reported that Democratic members of the House Veterans Affairs Committee have called for an investigation of these financial arrangements, and the head of the American Federation of Government Employees union called Principi's actions, "conflict of interest in its most extreme form." Today, the Times reported that Rep. Harvey Waxman (D - California) is seeking all documents relating to communications between the VA and QTC.

Although it may be too early to be definitive about all the details of this case, this is a reminder that conflicts of interest in health care may not be limited to physicians getting hand-outs from pharmaceutical and device companies. Conflicts may affect leaders of all sorts of health care organizations as well as physicians, and the effects of such conflicts may be proportional to the influence of such leaders.