Department of Veterans Affairs contracts worth up to $1.2 billion with a medical examination firm headed by former VA Secretary Anthony Principi are coming into question, the Los Angeles Times reports. Before Principi became VA secretary in 2001, he served in 1996 as chairman of a congressional task force on veterans' issues that recommended a standardized, comprehensive physical exam for outgoing military personnel. The recommendation led to exams being conducted by QTC Management beginning in 1998. Principi joined QTC as president in 1999 and then returned as chairman of the board after serving as VA secretary for four years. The firm conducts exams on soldiers before they are discharged and on veterans seeking disability assistance, the results of which "play a substantial role in VA disability benefit decisions," according to the Times. The Times reports that just after becoming VA secretary, Principi appointed a task force on the backlog of veterans claims, which delivered a report that was favorable to QTC and recommended that its program be extended or expanded. Language in the 2003 VA budget authorized extension and expansion of QTC's exam program as requested by the VA. In amendments made to two successive QTC contracts with the VA, the number of exam sites increased and performance bonuses were awarded. The amendments caused QTC's revenue to increase from $8 million in fees in 1998 to $69.1 million in 2005. According to VA records, QTC collected about $246 million in fees during Principi's four-year tenure as secretary of the department. The Congressional Budget Office projections show the contracts could be worth as much as $1.2 billion through 2008. In an e-mail response to the Times, Principi said that he recused himself "entirely from any issues or business that QTC might have had with the VA" while heading the agency. He added that he has complied with federal statutes prohibiting contact with VA after he left the department. According to the Times, QTC was sold to Massachusetts-based venture capital firm Spectrum for a reported $270 million last year.

Fee Review
According to the Times, "QTC's initial performance drew some criticism," and a review mandated by Congress by a private consulting firm found the company's fees were "much higher than expected." For example, a QTC hearing exam averaged $495.55, compared with $89.80 for an in-house VA exam. The consulting firm recommended further cost comparison studies that were never completed. VA officials said in an e-mail response to the Times that the follow-up study was not needed because QTC fees were "found to be reasonable and fair."

Comments
North Carolina attorney Hugh Cox, who represents veterans, alleges that QTC works with the VA to deny veterans' disability claims. Cox wrote in an e-mail to the Times, "Significant numbers of QTC medical examiners issue addendums to previous medical reports creating an appearance that VA officials communicate off-the-record with the QTC examiners to alter the veteran's chance of receiving benefits." Seattle psychiatrist Philip Plattner, who has worked at veterans health facilities for 23 years and launched a letter writing campaign to Congress about QTC, said the QTC and VA partnership appeared to be a "good-old-boys plan to privatize VA services, which will cost our country and our veterans dearly" (Roche, Los Angeles Times, 4/23).

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