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VA rejects system private hospitals use to save millions on shipping, Tampa company says

By Howard Altman
Published: December 18, 2017 Updated: December 18, 2017 at 09:24 PM
Rob Barrow, left, and William Sands Jr. with Tampa-based logistics firm Capture have questioned why the VA declines to take advantage of a freight system that saves private hospitals millions. Barrow has filed federal complaints over the matter. [OCTAVIO JONES | Times]

TAMPA — If you could pay $19.19 to ship a package instead of $227.32, wouldn’t you go for the cheaper rate?

That’s the question raised by Rob Barrow and Will Sands, Marine combat veterans and businessmen from Tampa who say the Department of Veterans of Affairs is spending tens of millions of dollars more than it needs to on shipping costs each year.

The $19.19 rate is one of about three-dozen examples of savings projections the men have come up with as they try to sell the VA on a freight management system in wide use among private hospitals. They say they’ve run pilot programs with the VA that demonstrated cost savings of more than 45 percent.

Still, VA officials say "there doesn’t appear to be a single substantive piece of evidence" that the system can save the VA money.

So Barrow, a retired disabled lieutenant colonel who owns the Tampa logistics company Capture, has filed two complaints with the agency’s Office of Inspector General. Their target is the loosely regulated, one-in-five packages shipped by the VA that are not part of the agency’s prime vending contract — some half-million packages every year.

Adding to Barrow’s concern is that he’s a service-disabled veteran, so companies like his are often given priority in federal contracting. Capture has benefited from this provision in the past with VA freight contracts.

The flap comes as VA Secretary David Shulkin seeks to create a medical-surgical supply chain that would save $150 million. That money, Shulkin told Congress last year, would be redirected to "priority veteran programs."

In his complaints to the VA inspector general, Barrow said Capture could save VA health care centers $20 million a year and the agency overall — including claims processing centers and administrative offices — $100 million a year.

The system Capture offers is called OptiFreight, developed by heath care giant Cardinal Health as a way to help hospitals manage how they send and receive packages. Cardinal Health says some 2,000 hospitals ship nearly 19 million packages a year this way, saving a combined $200 million every year.

The system works by both offering a bulk shipping discount through FedEx and managing each item shipped to VA at the point of purchase to ensure the user is getting the best rate possible.

Capture has an agreement with Cardinal Health to provide OptiFreight services to the VA and has conducted the pilot programs at six VA health care centers, including the James A. Haley Medical Center in Tampa. The company has two contracts with the VA — one in the Washington, D.C., area that serves three centers and another in Milwaukee that serves one.

In one example, Capture examined a package a VA medical center in Los Angeles paid $227.32 to ship that would have cost $19.19 under the OptiFreight program. In another example, a VA medical center in Lexington, Ky., paid $113 for a shipment that would have cost $29.66 under OptiFreight.

During a two-week period in November 2015 at five VA medical centers, including Haley, the system saved more than $5,200 — 45 percent on the cost of shipping 224 packages.

The Tampa Bay Times shared these results with the VA, along with recommendations from a hospital industry expert and a Cardinal Health official saying the program has the potential to save VA money.

"I would recommend this because it provides visibility into freight costs and its ability to reduce freight costs," said Mike Schiller, senior director of Supply Chain of the Association for Healthcare Resource & Materials Management, a subsidiary of the American Hospital Association.

A decade ago, Schiller instituted the OptiFreight program at the Chicago hospital where he worked and said it saved money and gave hospital officials a better view of how and what they were shipping.

Added David J. Hoffman with OptiFreight Logistics: "VA doesn’t have to pay for anything. Just allow us to manage this portion of the business. This is a great opportunity to help veterans and help the VA."

Still, VA officials remain skeptical.

"VA is always looking for ways to utilize resources more efficiently to provide better care for Veterans and better value for taxpayers," VA spokesman Curt Cashour said in an email to the Times. "But it doesn’t benefit anyone when people make unsupported claims without providing any evidence — as is the case here."

Cashour referred to the examples and support provided by Capture as "unsupported claims or decade-old hearsay/anecdotes."

Haley ran a one-time demonstration trial with Capture in December 2015, he said, but the "anticipated savings and benefits didn’t materialize, so the trial was discontinued."

Barrow and Sands dispute that, saying the Haley pilot, which actually began July 31, 2015, showed a savings of nearly 50 percent, more than $2,500 on 65 shipments.

Cashour said it’s "impossible to compare anything" using Capture’s Haley data "because it uses list prices and Capture’s own representation of its negotiated prices, which may or may not include its fees."

Those savings figures, however, are inclusive of the fees, Barrow said.

Haley officials referred all questions to Cashour.

In his complaints to the VA’s inspector general, Barrow questioned whether the agency is interested in saving money.

The VA, he wrote, has a "complete and total lack of interest in doing any additional work that can save taxpayer money and improve the services .?.?. "

Contact Howard Altman at [email protected] or (813) 225-3112. Follow @haltman.