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VA grilled on budget shortfall, urged to sell boutique hotel

Lawmakers grilled Department of Veterans Affairs leaders this week about a budget shortfall of $2.6 billion to $2.7 billion at the beleaguered agency, and some congressmen have begun to call on the VA to sell assets. (Tweet This)

Chairman of the House Committee on Veterans Affairs Jeff Miller, Republican of Florida, said at the agency's 2015 budget hearing on Thursday that he was frustrated that VA Secretary Robert McDonald did not mention the budget shortfall during previous recent hearings in which he testified.

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VA Deputy Secretary Sloan Gibson responded that the VA has made progress in improving access to care, saying that the veterans population is aging and more veterans are seeking care.

Gibson added that more veterans were filing disability claims. He also said that although many veterans have private insurance, they choose the VA for care because it saves them on average $5,000.

According to the department, President Barack Obama has asked for $168.8 billion for next year's budget, a 7.5 percent increase from 2015.

Five-star hotel in Paris

The vertical garden (Vegetal Wall) is shown in the courtyard of the Pershing Hall hotel in Paris.
Charles Platiau | Reuters
The vertical garden (Vegetal Wall) is shown in the courtyard of the Pershing Hall hotel in Paris.

Rep. Mike Coffman, Republican of Colorado, is calling on the department to sell properties it owns in order to make up for cost overruns on other VA projects in the U.S.

For example, the VA is in charge of the Pershing Hall Fund, through which it leases out property that includes a five-star hotel it owns in Paris. The building served as headquarters for U.S. General John "Blackjack" Pershing during World War I.

The VA confirmed that Congress signed legislation in 1991 that placed Pershing Hall under the VA's jurisdiction. The department confirmed that it is about 17 years into a 99-year lease with privately held LA Partners, which operates the property.

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Coffman's website claims that selling the boutique hotel could bring about $30 million back to the VA.

The VA, however, said it was up to Congress to decide what to do with the hotel. "VA does not have legal authority to sell Pershing Hall," the agency said in a statement. The department told CNBC it had received an appraisal of $4.3 million for the Pershing Hall property in 1997.

Though Congress would have to authorize the sale, Coffman's spokesman told CNBC that the department would have to approach Congress first with a plan for the sale before it could act.

Tracking the costs of care

Rep. Dan Benishek, Republican of Michigan, told CNBC that the agency's budget shortfall is a money management problem within the department.

"We've been increasing the VA budget year after year for the last 10 years, and we're not getting good answers on how they're being responsible with our funds," he said.

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Benishek is chairman of the Subcommittee on Veterans Health and formerly worked as a surgeon at a VA hospital. He said his committee was encouraging the agency to track exactly how much it costs the VA to treat patients.

"At the VA, you put billions of dollars in and there's no way to find out what it costs to see the average patient," Benishek said. "So is it costing (the) VA a lot more than the private sector or a lot less? They won't tell us."

CNBC first uncovered fraud at the Department of Veterans Affairs in 2013, culminating in a documentary, "Death & Dishonor: Crisis at the VA," which highlighted issues such as poor patient care.