Beyond the payback period, savings of up to $2 to $2.5 million annually have been projected.

Additionally, "Teleradiology"-as part of the MDIS program-is an important element of the DoD Coordinated Care strategy to recapture workload in DoD facilities. Providing radiology support to remote military health care settings can be accomplished in a more timely and resource-efficient manner through the use of electronically transmitted images from remote, under-served sites, to supporting regional facilities acting as "hubs." The hub facilities have the capacity to provide expert medical imaging support to underserved or expensive-to-serve remote military locations.

Question. It would appear this technology will have widespread application throughout the military medical community. The Army is the procuring activity but are all the military services involved with installation of this capability in their medical facilities?

Answer. The MDIS contract allows for delivery orders to be written for all three military departments as well as the Veterans affairs. The contract calls for open system architecture based on the American College of Radiology/National Electrical Manufacturers Association (ACR/NEMA) standards. This provides a solid foundation for interoperability.

The MDIS program is in its beginning stages with active collaboration at the working level among the military departments and the Veterans affairs. An ad-hoc MDIS program office has been formed to administer the effort under the senior executive control of the Army Assistant Surgeon General for Medical Research and Development. All three military departments have implementations underway or in the planning stages. The early actions have been with Army and Air Force activities, but the Navy has also been actively involved in the MDIS program.

PERSONNEL ISSUES

Question. As the requirement for military personnel is decreasing, are you able to screen your personnel to ensure they are not being forced out if they are in shortage specialties?

Several weeks ago, I was at Walter Reed, and a young cardiovascular technician was commenting that he was advised to take the separation bonus and get out. I understand he had just finished a one-year school and is in an area that is habitually short of qualified people. I do not understand this. I believe it involved a new retention control point for his specialty.

I don't know if you can comment on this now, but I would like your assurance that we are not just letting anyone go regardless of our investment in their training and our remaining requirements. Answer. Absolutely, we are not simply shrinking the force, but are reducing and reshaping it to meet the requirements of our new, smaller force structure. Therefore, we are not offering the voluntary separation incentives to qualified members in critical and shortage inventories. Retention incentives, such as the selective reenlistment bonus and aviation retention bonuses, continue to be our most effective and efficient tools for meeting the retention goals in these critical skills.

In the example cited, Cardiac Specialist, MOS 91N, is not a shortage or critical skill. Because of overstrengths in this specialty, the Army is currently offering the VSI/SSB incentives to Sergeants (Pay Grade E-5) in this specialty who have completed more than 9 years of service. In addition, the Army has tightened retention management standards for all soldiers and is offering the VSI/ SSB incentives to those members who will be separated if they are not promoted before reaching the retention control point of 8 years for Specialist (Pay Grade E-4) and 13 years for Sergeant. On average, soldiers are normally promoted to Sergeant at about 4.5 years and to Staff Sergeant (Pay Grade E-6) at about 8.5 years.

[CLERK'S NOTE.-End of questions submitted by Mr. Hefner.] Mr. MURTHA. Mr. Miller.

STATESIDE HEALTH CARE DURING OPERATION DESERT STORM

Mr. MILLER. Thank you, Mr. Chairman. This morning when we had some people in to talk about health care, some to complain, some to praise, but one of the individuals, Colonel Johnson of the Association of the United States Army, mentioned in his statement that during Desert Shield, medical units from all of the services were deployed to the Persian Gulf, leaving many military installations with limited health care providers to attend to family members still resident on and around these installations.

We were told that the Reserves were moved in and there was not a problem with the medical care. Can you give us a little background as to what went on or why this would be in his statement?

Dr. MENDEZ. Yes, sir. Indeed, the Reserves were moved into the hospitals within the continental United States. As a matter of fact, I recollect specifically a letter from Mr. Murtha at that time expressing his preoccupation with the care of the dependents and the rest of the folks entitled to care.

In some specialties there were small periods of time in which there may have been problems in some places. But, indeed, there was a very good Reserve input that not only deployed for Desert Storm but also supported our patients here at home. This is my impression.

I would like also to ask the impression of my colleagues if they have different impressions, specifically about Reserve utilization as there may be slight differences in the experience of each service.

General LEDFORD. We did something never done before. We were the first group of surgeons asked by Congress and the Chiefs and DOD to carry on health care by everybody at home while we were deployed. We couldn't have done that had we not called up the Reserves and had we not, for example, in the Army they had some 1,700 volunteers.

Because we had a total force, the three services were able, in general, to take care of everybody at home. Was it perfect? Did it go off without a hitch? Absolutely not. We deployed people out of Fort Bragg within a day after Saddam Hussein came across the line. For a few days at Fort Bragg and places like that, Fort Manning and Fort Campbell, for the first few days we didn't have the Reserves on board, so we moved doctors and nurses around within the system.

The Army moved people from Fitzsimmons to Fort Bragg and as the Reserves and volunteers came in, we ended up with actually more nurses on board, and about the same number of doctors as we had when we started out. Once we got things sorted out, we did it, I think, rather well and quickly-once we got things sorted out, I think we were able to give good care to people at home. We went to great pains to do that. It was the first in history sir.

Mr. MILLER. One of the reasons for this question was that when members of this Committee were in the Persian Gulf area one of the big concerns of the serviceman there was take care of my family back home.

General LEDFORD. The Chief of Staff of the Army said I want to send those soldiers overseas and I don't want them to worry about family members, I don't want to see any lines outside the obstetric clinic at Fort Bragg. We did our best to make sure that didn't happen.

Admiral HAGEN. At that time, I was the Commander of the National Naval Medical Center. We were told on Thursday night to move the USNS COMFORT out Tuesday.

We had to deploy from that one hospital 880 people, 150 nurses. We had 350 patients in the hospital that night, but we did it very well. We changed the focus of the hospital toward out-patient care during the period of time of transition until we could get our act stabilized. At the beginning we didn't realize how many people would be recalled from the naval hospital and then Portsmouth, as we moved out to support the fleet hospital program.

But we ended up bringing in the Reserves very quickly, particularly in the teaching hospitals. We brought in professors from Johns Hopkins University, different universities and brought them on board to teach our young residents and interns, and when we brought the rest of the Reserves on, we built up to a system that was stronger than before.

We had difficulty with the recall at the beginning. It was sudden and there were lessons learned from this. We recalled over 10,000 people in the Naval Medical Reserves, of which 7,000 stayed in the United States and 3,000 went overseas.

We have gone out with a major effort to learn lessons from this experience. You might be interested in knowing this because the Reserves are a very important part of our operation we sent out 9,000 questionnaires to Navy Medical Reserves.

You would be pleased to know that 69 percent of the people that we questioned through surveys said they want to stay in the Navy Selected Reserves, another seven percent wanted to come on active duty, five percent wanted to go to the Army or Air Force Reserves. This is fine because we are family and we shared reserves. We are very pleased at that outcome because I think it indicates that the Reserves are an essential part, they are merged with us now and part of our family and helping us rebuild the future.

I think there were times at the beginning when people had difficulty getting in. During that period of time people stayed away from us as much as they could in order not to stress us. They were trying to help us prepare for retention of casualties. So some didn't come in. We are very pleased with the way the patients responded to this, as well.

Mr. MURTHA. What was the percentage of doctors that stayed in? Admiral HAGEN. I have the complete data broken down by doctors, nurses, corpsmen and whatever.

[CLERK'S NOTE.-The Department was unable to provide a response in time to be printed in this hearing volume.]

General SLOAN. In the interest of brevity, I will just note that the Air Force's experience by and large mirrored the Army and the Navy in the United States. I had some firsthand experience having been in the United States European Command surge at the time and had overall responsibility for all medical care in the European theater.

We had some temporary shortages-days to weeks, not weeks to months. There were a couple of selected clinical services that were closed down for a little bit longer than that, but basically it was a very gratifying experience. The patients cooperated, as Admiral Hagen has said, and that eased our problem overseas to a significant degree. We couldn't have done it without the Reserves and the Guard.

DRUG COSTS

Mr. MILLER. I think this is very good for the record, because, as I say, that is what our military was thinking about, they were thinking of their families and it is good that you people are planning ahead and that we have enough of the active duty people to move in if we had another international problem. So I thank each of you. One other question that I had; Mr. Secretary, in your prepared statement you talk about managing medical supplies, the pharmacy program also, and you say last year's hearings produced evidence that CHAMPUS out-patient drug costs are rapidly escalating, raising serious concern as to what efforts DOD has initiated to bring those costs under control.

For fiscal year 1988, DOD reported the CHAMPUS out-patient drug cost totaled about $50 million. For fiscal year 1990, such costs totaled almost $74 million. Thus, it was showing a growth of almost 40 percent over this period, two years. I am wondering, when we are talking about drug costs, was the drug cost higher or were you using more prescription drugs, and is that why the higher amount is reflected?

Dr. MENDEZ. Sir, if I may for a moment divide that question into a couple of answers.

First of all, it is the local issue. Namely the re-look at formularies to see if common formularies can be used in overlapping catchment areas. In hospitals, the staff reviews their ability to use generic drugs in terms of decreasing costs; specific departments review the utilization of medications, making sure that the staff is familiar with the costs involved in one antibiotic versus another, always considering patient sensitivities. That type of thing goes on locally.

Outside of the local issue, we have issues of how we buy and how we manage stocks. We are teasing apart these issues with the three services: what happens at the depot, what are the buys, what is the storage, how much do we gain through electronic purchase what relationship would exist with a vendor if we did not carry large in

ventories, namely could our inventory be carried by the drug manufacturer rather than by us, and what would be the difference in cost.

We are addressing all of those issues in order to be able to look at the matter of decreasing our costs.

Mr. MILLER. But it hasn't really answered the question as far as the volume of out-patient drugs.

Dr. MENDEZ. Let me submit that to you. I was giving you generically what we are doing. I will submit that with specific volumes and specific analysis of numbers, if that is all right.

Mr. MILLER. I would appreciate that.

[The information follows:]

CHAMPUS drug costs have been increasing at a rate above that of combined CHAMPUS costs. There are several apparent reasons, some of which are difficult to quantify.

Prescription drug costs, as measured by the Consumer Price Index, have been increasing at an annual rate of from 8 percent to 10 percent since 1988, for a net increase through 1991 of 31.4 percent.

It also is probable that the mix of types of prescriptions on claims submitted to CHAMPUS tends to be the higher priced drugs because many beneficiaries do not bother to seek reimbursement for the occasional low-cost prescriptions obtained from civilian pharmacies.

The CHAMPUS eligible population also has had an increased dependency on civilian pharmacies for a variety of reasons. Early in the fiscal year 1988 to 1991 period, the Veterans Administration sharply cut back on its pharmacy services, causing the many retirees with dual VA-Military Health Services System eligibility to be dependent on Military Treatment Facility (MTF) pharmacies or civilian pharmacies under CHAMPUS. The impact of the VA change on MTFs in areas with VA pharmacies was especially noticeable, and many MTF pharmacies were not able to meet the demand. This contributed to increased drug claims under CHAMPUS, the degree of which is not measurable with precision.

During this period, the number of CHAMPUS drug claims generally increased at a higher rate than the increase in CHAMPUS drug costs. CHAMPUS drug claims and costs by fiscal year for the period, with the annual percentage changes from the prior year, are as follows:

As listed in the table, the number of claims more than doubled over this period, while costs increased 80.1 percent. The most dramatic increase was for dependents of active duty members for whom claims and costs increased 145 percent. In summary, at least 39 percent of the CHAMPUS drug cost increase was probably due to drug price inflation. The remainder is increased dependency on civilian pharmacies, resulting in more beneficiaries filing more drug claims under CHAMPUS. In the civilian sector, drug use per person also has been increasing over this period.

Mr. MILLER. We are interested in that in more ways than one, medical costs are rising not only in the military, but also for social security, medicare and medicaid and if we had prescription drugs across the front increase 50 percent in two years, I would think the individual physician's costs would increase maybe 100 percent, be