59

Mr. SHays. We believe it’s what? I’m sorry?

Mr. Bain. Is clearly at a crossroad. Many important issues need
to be resolved in determining the future of the health care system
and, more importantly, the future of veterans health benefits. Deci-
sions regarding how these and other issues play out will have far-
reaching effects on veterans, taxpayers and private health provid-

ers.
We'll be happy to take your questions.
[The prepared statement of Mr. Baine follows:]

PREPARED STATEMENT OF Davio BaINe, DIRECTOR OF FEDERAL HEALTH Care
DELIVERY ISSUES, GENERAL ACCOUNTING OFFICE

Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to discuss the future direction of the Department
of Veterans Affairs (VA) health care program. VA, with a $16 billion health care
budget, faces increasing pressures to contain or reduce health care spending as part
of government wide efforts to reduce the budget deficit. It also faces increasing chal-
lenges from a rapidly changing health care marketplace. We welcome this hearing
as an important step in analyzing the challenges VA faces and exploring options for
improving the VA health care system.

ly comments this morning will focus both on actions needed immediately to im-

pipe the efficiency of VA hospitals and challenges that threaten the long-term via-

jility of the VA health care system. Finally, | will discuss some options for restruc-
turing the VA health care system to respond to those challenges.

During the past several years, we conducted a series of reviews focusing on the
relationships between the VA health care system and other public and private
health benefits programs and the effects changes in those programs could have on
the future of the VA health care system. Similarly, we conducted a series of reviews
to identify ways to improve the efficiency and effectiveness of current VA programs.
My comments this morning are based primarily on the results of those reviews."

in summary, our work clearly demonstrates that VA lags far behind the private
sector in improving the efficiency of its hospitals. Over the last 5 to 10 years we
have identified a series of management problems limiting VA’s ability to (1) improve
the operational efficiency and effectiveness of its hospitals and (2) shift more of its
inpatient care to less costly ambulatory settings. Although VA is planning a major
reorganization and other initiatives to improve its management capabilities, we re-
main concerned that some of the actions may not ge far enough.

Even if it improves the efficiency of its hospitals, VA is at a crossroad in the evo-
lution of its health care system, The average daily work load in its hospitals
dropped about 56 percent during the last 25 years, and further decreases are hikely.
At the same time, however, demand for outpatient care, nursing home care, and cer-
tain specialized services is expanding, taxing VA's ability to meet veterans’ needs.

Decisions made over the next few years about VA’s role in health care will have
significant impiications for veterans, taxpayers, and private health care providers.
For example, eligibility for VA care could be expanded or VA could be authorized
to treat more nonveterans to increase its hospital work load. Such restructurin;
would, however, involve a fundamental change in VA’s health care mission an
would increasingly place VA in direct competition with private sector hospitals for
dwindling numbers of patients. On the other hand, changes could be made so that
VA services supplement rather than unnecessarily duplicate health care coverage
under other programs. Regardless, VA would need to establish priorities for how its
limited resources would be targeted.

In the final analysis, a complete reevaluation of the VA health care system ap-
pears needed. Absent such an effort, use of VA hospitals will likely continue to de-
cline to a point where VA’s ability to provide quality care and support its secondary
missions will be jeopardized.

BACKGROUND

The VA health care system was established in 1930, primarily to provide for the
rehabilitation and continuing care of veterans injured during wartime service. VA
developed its health care system as a direct delivery system with the government
owning and operating its own health care facilities. tt grew into the nation’s largest

1A list of related GAO testimonies and reports is in appendix 1.


25

contacted to say, OK, give us some priorities only where we can do
some rescissions.

Mr. Brown. To make sure the record was clear, I was contacted
after it was done but at the same time, I have to be honest with
you. I don’t have any cuts to offer. I really don’t.

One other point that I would like to make about this. If you go
into many of our outpatient clinics and ambulatory care centers,
they were built in the 1940’s, 1950’s and 1960's, are very, very
small and now they are trying to accommodate a demand that is
five and six times what they were built to do and that’s primarily
because whether you like it or not, we are moving away from inpa-
tient care to outpatient care and now we are bulging at the seams
and not able to accommodate them. That is why this package is so
very, very important. It is the right thing to do.

Mr. GREEN. Thank you, Mr. Secretary.

Thank you, Mr. Chairman.

Mr. SHays. Thank you. -

Mr. Secretary, we are doing pretty well, but we would love to go
around a few more and I think we can get you out of here by 2:30.
This is very interesting. Candidly, it is the most interesting of all
the hearings I have had so far in terms of thinking about why we
should weigh in and how we can be helpful to you and even though
there are only two Republicans now and not a member of the mi-
nority. You can handle yourself well, so you are in good company.

I would love to be real clear on something that is bothering me.
I started to get into it and you can, Dr. Kizer, you can weigh in
on this as well. I am intrigued by the questions about the benefits
and that issue and we could pursue that, but I would love to just
first finish the issue of throughout the country, we have extra bed
space, significantly extra bed space. Why is it that we don’t have
extra bed space in veterans’ facilities?

Mr. BROWN. Well, I am going to ask Dr. Kizer to respond, but
before I do, I always have to get my 2 cents in before I turn it over
to the experts.

It is very interesting, if you look across the years—let me go back
and do a little history. About 2 years ago, 3 years ago, the former
Secretary of Veterans Affairs tried to do what he referred to as a
rural health care initiative because of so-called excess capacity in
our hospitals. He wanted to open those beds up for nonveterans
and it caused such a firestorm that not only did he lose his job, but
the Congress made it known, I think, in a vote something like 90
to 3, something like that, that they were not going to have that
kind of an approach.

And the reason for that is, I don’t think most veterans are selfish
to the point that they are saying we don’t want to allow non-
veterans in our hospitals, but what they were basically saying is
this: How dare you lock the doors to me. You have created a cri-
teria, an admission criteria that locked me out. I am getting Medi-
care and I just so happen to have an income of over $20,000 and
you lock me out of the hospital, yet you are going to allow welfare
recipients in. That is the first thing that was very distasteful.

The second thing is this: Is that if you look across the board, you
will find that on an average, about 65 percent of our beds in the
private sector are full.


COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT

WILLIAM F. CLINGER, JR., Pennsylvania, Chairman
BENJAMIN A. GILMAN, New York
DAN BURTON, Indiana
CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, JR., West Virginia
STEVEN SCHIFF, New Mexico MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida EDOLPHUS TOWNS, New York
WILLIAM H. ZELIFF, JR, New Hampshire JOHN M. SPRATT, JR., South Carolina
JOHN M. MCHUGH, New York LOUISE MCINTOSH SLAUGHTER, New
STEPHEN HORN, California York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
PETER BLUTE, Massachusetts GARY A. CONDIT, California
THOMAS M. DAVIS, Virginia COLLIN C. PETERSON, Minnesota
DAVID M. MCINTOSH, Indiana KAREN L. THURMAN, Florida
JON D. FOX, Pennsylvania CAROLYN B. MALONEY, New York
RANDY TATE, Washington THOMAS M. BARRETT, Wisconsin
DICK CHRYSLER, Michigan GENE TAYLOR, Mississip|
GIL GUTKNECHT, Minnesota BARBARA-ROSE COLLINS, Michigan
MARK E. SOUDER, Indiana ELEANOR HOLMES NORTON, District of
WILLIAM J. MARTINI, New Jersey Columbia
JOE SCARBOROUGH, Florida JAMES P. MORAN, Virginia
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
MICHAEL PATRICK FLANAGAN, Illinois. = CARRIE P. MEEK, Florida
CHARLES F. BASS, New Hampshire FRANK MASCARA, Pennsylvania
STEVEN C. LATOURETTE, Ohio CHAKA FATTAH, Pennsylvania
MARSHALL “MARK” SANFORD, South

Carolina BERNARD SANDERS, Vermont
ROBERT L. EHRLICH, JR., Maryland (independent)

JAMES L. CLARKE, Sto/f Director
KEVIN SABO, General Counsel
JUDITH McCoy, Chief Clerk

Bup MYERS, Minority Staff Director

SUBCOMMITTEE ON HUMAN RESOURCES AND INTERGOVERNMENTAL RELATIONS
CHRISTOPHER SHAYS, Connecticut, Chairman

MARK E. SHOUDER, Indiana EDOLPHUS TOWNS, New York
STEVEN SCHIFF, New Mexico ‘TOM LANTOS, California
CONSTANCE A. MORELLA, Maryland BERNARD SANDERS, Vermont (Ind.)
THOMAS M. DAVIS, Virgini THOMAS M. BARRETT, Wisconsin
DICK CHRYSLER, Michigan GENE GREEN, Texas
WILLIAM J. MARTINI, New Jersey CHAKA FATTAH, Pennsylvania
JOE SCARBOROUGH, Florida HENRY A. WAXMAN, California
MARSHALL “MARK” SANFORD, South

Carolina

Ex OFFICIO

WILLIAM F. CLINGER, JR., Pennsylvania CARDISS COLLINS, Mlinois
LAWRENCE HALLORAN, Staff Director
CHRISTOPHER ALLRED, Professional Staff Member
ROBERT NEWMAN, Professional Staff Member
‘THOMAS M. Costa, Clerk
CHERYL PHELPS, Minority Professional Staff

ay


68

home operating costs through copayments, If VA had offset similar percentages, its
yearly recoveries would have been between $43 million and $464 million depending
‘on which state copayment provisions were adopted.15

VA could also offset a significant portion of its nursing home and domiciliary costs
if it had the same authority states were given to operate estate recovery programs.
Estate recovery is a process through which a government agency recovers the costs
of services provided to a beneficiary by filing a legal claim against the beneficiary's
estate. We estimated that estate recovery programs recover 68 percent of the Medic-
aid nursing home benefits paid for recipients who owned homes in the six states
studied.16

‘The potential for recovering nursing home costs through estate recoveries may be
greater for veterans than for Medicaid recipients. This is because (1) home owner-
ship—the primary asset of most elderly persons—is significantly higher among el-
derly veterans than among Medicaid nursing home recipients ‘and (2) veterans living
in VA facilities generally contribute much less of their incomes toward the cost of
their care than do Medicaid recipients, allowing veterans to build bigger estates.!7

Expanding Use of Private Nursing Homes

Finally, VA does not make effective use of lower-cost community nursing homes
as an alternative to construction and operation of VA nursing homes. Since the
early 1980s, we have repeatedly urged VA to increase its use of community nursing
homes because (1) VA’s costs of supporting patients in community nursing homes
(about $106 a day in fiscal year 1994) are significantly lower than the costs of oper-
ating VA nursing homes (about $207 a day) and (2) VA could avoid the costs of con-
structing nursing homes (about $6 to 19 million for a 120-bed nursing home).

As shown in figure 2, however, VA has significantly decreased its use of commu-
nity nursing homes since 1988, with a comparable increase in care provided in more
costly VA nursing home care units.

Figure 2: Average Daily Work Load of VA-Supported Nursing Home
Care, By Source of Care (1969-94)

ES

36 Average daty wort 1d (ln thousand)

— vom
Mm VA nurang nome,

e098 Community nating nomee
Stam vatecane’ nomen

insert 2 here

15VA Health Care: Offsetting Long-Term Care Costs Adopting State Copa: i
(GAOTHRD 92-96, Aug. 12, 1992). pane 'yment Practices
Hicaid: Recoveries From Nursing Home Residents’ Estates Could Offset Progr:
(GAQTHRD 89-56, Mar. 7, 1989). . ~ ns am Coats

‘A Health Care: Potential for Offsetting Long-Term Care Costs Thi Recov
(GAO/HRD.93.68, July 27, 1993). ng Kong iTerm Care Costs Through Estate om



79

VA has reversed that now. Mark Catlett, the Assistant Secretary
for Management—the Chief Financial Officer has reversed that,
and now each individual hospital has to pay the freight for the hos-
pital employee who’s off on worker’s comp.

When we did an audit, we found a number of employees whose
doctor was saying that their original problem, assuming it to have
been valid, has now been solved, the employee is ready to come
back to work, and we weren’t bringing them back to work. It is as
simple as that.

d I am now hoping that with the price tag being shifted to the
hospital director or, in the advent of reorganization, to the VISN
director, that’s a money winner, and they'll grab those employees
and bring them back to work.

The last issue I raised in my statement I think is beyond me, but
I did commend it for the committee’s consideration, and that is the
phrase I used in there that one might question the wisdom of hav-
ing one agency of government spending another agency of govern-
ment’s money. And by that I mean the Department of Labor is the
one that adjudicates whether or not a VA employee is, in fact, dis-
abled. If Labor says he or she is, VA pays the price.

And everything I addressed to you earlier had to do with getting
rehabilitated employees back to work. The question I am now rais-
ing is the judgment call of whether that employee was disabled in
the first place, and I think the Department: of Labor is probably
incentivized to compensate people for injuries. God knows, there
are some of them who warrant it, need it and deserve it. There are
others of them, though, that I question; and I wonder if Labor is
going to be making that call whether or not Labor ought to be pay-
ing e freight. Just a question I raise.

't does seem like, in this area of incentives, it might be worth
looking into the question of whether one agency of government
ought to make the decision because of the price tag and have it en-
dure to the detriment of another agency.

Mr. Towns. We wouldn’t have any dollar figures on this, would
we, as to how much money we are really talking about? Do you
have any idea?

Mr. BAINE. I do not, sir. I can check around in our office and see
if I could find some, but I do not know.

Mr. TRODDEN. I will take just a real rough stab at this, Mr.
Towns. We had a figure, I think it was $194 million, VA alone.
Now, admittedly, VA is the second or third, depending on how you
count, largest employer in government. But if VA has got the po-
tential for $194 million——

Mr. Towns. So it exists in all the agencies?

Mr, TRODDEN. I would expect that it exists in substantial terms
throughout the Federal Government, yes, sir.

Mr. Towns. Thank you very, very much.

Mr. SHays. I would like to thank all of you for testifying.

I don’t know, Mr. Souder, if you want to join in right now.

Let me say to you that, Mr. Linz or Mr. Sullivan, you have been
very loyal participants here. If you had any comment you want to
make, any observations—sometimes those who don’t say anything
end up having the most insightful comments. Do you have any
comment that you would like to make?


15

Mr. Suays. Let me just be clear on this. If you have someone on
Medicare who is a veteran but who has income, they can come to
a veterans facility, can’t they, and just use their Medicare?

Mr. BRowN. We have an income test, it is a means test.

Mr. Suays. I know you have the income test, but if they are will-
ing to pay?

rr, BROWN. No, they cannot come.

Mr. SHays. I have always made the assumption, and I have been
here 7 years——

Mr. Brown. We tried to get legislation through in the national
health care reform initiative where we could get reimbursed back
from Medicare and, therefore, anyone who had Medicare entitle-
ment could come to the VA. Today we only treat service-connected
veterans and if your income is below about $20,000 a year, you can
get into the VA hospital. Everybody else, even if you wanted to pay
the cost yourself, you could not gain entry into our system.

Mr. SHays. This committee looks at HHS as well as the Veterans
Administration, and this gives us a wonderful opportunity to inves-
tigate the logic of that because it would strike me, and rd am going
to defer this conversation until a little later, but I am just struck
by the fact that why shouldn’t a Medicare patient who is a veteran
be able to go to a veterans facility, and that is news to me after
being here 8 years.

I knew there was the income test, I just didn’t know they were
denied the opportunity to use the facility if they were willing to pay
or Medicare was.

Gene, do you have any——.

Mr. GREEN. Thank you, Mr. Chairman. I want to follow up on
that because I know it was part of the national health care and I
thought that was one of the great parts of it because all of us have
experience with veterans who, because of the means test or the in-
come test, can’t get in because they are just barely over it, and I
would hope that if not this committee, then some other committee
would allow that maybe on a one-shot basis to where VA could pro-
vide for that extra—use those extra beds that you have for the vet-
erans, like you said, who have been locked out because of the
changes over the last 30 years.

I always recall my father telling me as a World War II vet that
he could go to the VA anytime he wanted. Of course over the late
1940's, 1950's, and 1960's, and now he is retired, he couldn’t go and
he never did, although I have an uncle who did because it was
service connected, and we made that commitment. But over the
years, Congress has withdrawn that commitment, whether it be
Vietnam veterans or earlier to that. So I would like to see how we
could respond to that for veterans.

Let me ask a Specific question and hopefully you can answer it
as quick as possible. Under the VA Direct Home Loan Program for
Native American veterans, it authorizes home loans for home pur-
chase and construction on trust lands, and as of last December
1994, only six loans have been made.

Can you tell the committee where we are at in that program and
also has the number of loans increased because I know this pro-
gram expires in September 1995?


74

then bringing somebody up short when they don’t carry them
through, T haven’t seen a lot of that. So I’m encouraged by Dr.
Kizer’s approach where he says he is going-to establish perform-
ance measures for those directors of his VISN networks, and he’s
going to hold them accountable in contract terms to those perform-
ance measures.

My only reservation to that is I've heard good things before and
I’m now hearing good things again, but at least he’s the first Chief
Medical Director, in my experience, to be signing up to the propo-
sition of performance measures for health care. I think that’s a
very, very important step.

Second, I recently took a briefing from the Chief Medical Director
with regard to some work he’s doing in the area of patient satisfac-
tion, a very impressive piece of work. I was particularly impressed
that it looks like it’s logically developed.

I was more impressed with the conclusion that it came to where
it said that, in the first go-round, some 65,000 responses from vet-
erans who had been discharged from VA facilities rated their satis-
faction, if you will, some 10 points lower than a comparable group
discharged from private-sector hospitals. The fact that they came
to that conclusion and made that statement gave them quite a bit
of credibility, in my opinion, and some power in their instrument.
So I’m encouraged that he’s moving in that direction.

He also acknowledges that patient satisfaction is one thing and
objective measures oft quality of care are another, and that both are
important even if they’re not correlated. In other words, even if a
patient is satisfied with his treatment, it may or may not mean
that quality care was delivered, and he’s going to try to do both.

So I think anything that I can do and anything that the Con-
gress can do to support Dr. Kizer in those two endeavors would be
money and effort very well spent.

Mr. Towns. All right. Let me move along. Let me just ask you
one other question here real quick.

In your testimony you said we must transcend cultural attitudes
if they resist change in favor of preserving the status quo. Nothing
can be sacrosanct. We must be willing to put aside parochial inter-
ests and work together to develop organizations and programs that
are based on quality management and sound financial principles
for the common good of the veterans we serve. A great statement,
and I agree with it.

In general, though, in terms of how has the VA responded to
your recommendations in the past, is the culture in place to ensure
your recommendations are carried out?

Mr. TRODDEN. The general reaction in the past, the first part of
your question, Mr. Towns, has been to satisfy the IG. In other
words, in the IG Act there’s a provision for resolution. If I end up
disagreeing with the manager, there’s a process by which we take
it to the Secretary and get resolution.

Sometimes I wish they would disagree with me more, because
what they tend to do is agree, agree with the problem, prescribe
a solution which is designed sometimes I think to make us all go
away happy, without any real, long-term corrective action envi-
sioned.


32

The other point I would add to what was said is that our out-
reach and education efforts have targeted both our professional
caregivers as well as the public. We have a variety of printed mate-
rials that are being provided. The hotlines are fielding about 5,000
calls a week now. But we are also conducting conferences for our
physicians and other professional caregivers to make sure they are
treating all these people as reasonably close to the same manner
as possible.

Mr. Brown. One other thing that I would like to say, we have
a standing offer on the table now that if anyone can come up with
@ suggestion that we should be doing something that we are not
doing, we want to hear about it. We are serious about that. We are
not about defending anything. We want to be as responsive as we
possibly can, so that is a suggestion that we always make. If some-
one has a better way of trying to deal with this question, we want
to hear about it. Or if we are doing something that we shouldn’t
be doing, we want to hear about that also.

Mrs. MorELLA. Thank you, Mr. Chairman, very much.

And, Mr. Chairman, I have got to add my comment that I think
these overview hearings have been terrific, a great opportunity to
get kind of a one-on-one, as close as you can be in a subcommittee,
response. Thank you.

Mr. SHAYS. We really appreciate your being here. Thank you.

Mr. Secretary, the staff for the minority, Cheryl Phelps, would
love to ask you a question if she could.

Ms. PHELPs. Thank you, Mr. Chairman. I appreciate this oppor-
tunity to speak on behalf of Democratic Members.

Mr. Secretary, and Dr. Kizer, I just have a couple of questions
related to the Veterans Integrated Services Network. I understand
that the VISN is your response to the NPR recommendation that
you restructure your delivery system.

Conceptually, how do you see that working in terms of not just
resources but coordination with other departments? What addi-
tional fiscal year 1996 funds are committed to that project and
what are the one-time costs committed to that project?

Mr. Brown. Let me just start out and then I will turn it over
to Dr. Kizer. The whole effort here is that Dr. Kizer’s vision, and
I share it, is that management would be better coordinating what
is going on in the field and allowing the people who are providing
medical care to do what they should be doing, so that is one of the
reasons why we are decentralizing our whole activity because we
think that it is going to increase creativity. It is going to allow us
to more efficiently use our funds by asking questions about all of
the hospitals in one geographical network.

Are we using all those hospitals to serve our veterans so we get.
away from emphasizing one hospital competing with another hos-
pital? Because all of them will be looked at as one unit, so I think
that that is going to work well.

Dr. Kizer. Thank you. I should make a minor correction to your
comment as a preface. This effort to restructure the Veterans
Health Administration is being pursued because we want to do a
better job in providing care for our veterans; it is not as a result
of NPR. Though the rationale and many of the underpinnings are


DEPARTMENT OF VETERANS AFFAIRS

TUESDAY, MAY 9, 1995

House oF REPRESENTATIVES,
SUBCOMMITTEE ON HUMAN RESOURCES AND
INTERGOVERNMENTAL RELATIONS,
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,
Washington, DC.

The subcommittee met, pursuant to notice, at 10:37 a.m., in room
2247, Rayburn House Office Building, Hon. Christopher Shays
(chairman of the subcommittee) presiding.

Present: Representatives Shays, Souder, Morella, Davis, Chrysler
and Towns.

Majority staff present: Lawrence J. Halloran, staff director and
counsel; Doris F. Jacobs, associate counsel; Kate Hickey and Robert
Newman, professional staff members; and Thomas M. Costa, clerk.

Minority staff present: Ron Stroman, deputy staff director;
Cheryl Phelps, minority professional staff; Liz Campbell, staff as-
sistant.

Mr. SHays. I would like to call this hearing. I’m going to ask you
to sit down to start. I'll ask you to stand up in a second.

It’s nice to welcome our witnesses and to welcome our audience
and to begin this second oversight hearing on the Veterans Admin-
istration. We are pleased to have the Veterans Administration In-
spector General, the General Accounting Office and two representa-
tives, a representative of the Paralyzed Veterans of America and
from the Disabled American Veterans. We appreciate the fact that
all of them will be here. We'll have two panels, and our first panel
is seated.

In a recent report on its restructuring plan, the VA stated that,
“If the veterans health care system is to remain available viable,
it must fundamentally change its approach to providing care. The
need for structural change is acute.”

The GAO, however, is expected to state that the veterans organi-
zation plan does not go far enough. Their plan needs clearer, more
cogent focus. It needs to put less emphasis on its hospital facilities,
in my judgment, and put more resources into developing a first-
class outpatient system. The focus needs to be on improving the
quality, not the quantity, of inpatient care and on expanding cost-
effective outpatient services.

It’s time for the VA to chart a new course as it moves toward the
next century, and our committee looks forward to playing a role in
that regard.

[The prepared statement of Hon. Christopher Shays follows:]

(39)


64

reduce its hospital inpatient work load by up to 44 percent if it treated patients
in more appropriate settings.

VA’s Under Secretary for Health recently testified that it will not be that many
years before acute care hospitals become primarily intensive care units taking care
of only the sickest and most complicated patients, having switched all other medical
care to other settings, including ambulatory care settings, hospices, and extended
care facilities.®
Needs of Special Care Populations Are Not Always Met

Although demand for VA acute hospital care is declining, the health care needs
of veterans needing specialized services are not always met because of space and
resource limits in specialized treatment programs. For example:

—Specialized VA post-traumatic stress disorder programs are operating at or
beyond capacity, and waiting lists exist particularly for inpatient treatment.

—A sufficient number of beds are not available to care for homeless veterans.
VA has only 11 beds available in the San Francisco area to meet the needs of
an estimated 2,000 to 3,300 homeless veterans.

—VA substance abuse programs are near capacity.

Increased Demand for Nursing Home Care

As the nation’s large World War II and Korean War veteran Populations age,
their health care needs are increasingly shifting from acute hospital care toward
nursing home and other long-term care services.

Old age is often accompanied by the development of chronic health problems, such
as heart disease, arthritis, and other ailments. These problems, important causes
of disability among the elderly population, often result in the need for nursing home
care or other long-term care services.

‘About, 32 percent of veterans are 65 years old or older, with the fastest growing
grup of veterans being those 85 years old or older. This older group raises concerns

cause the need for nursing home and other long-term care services increases with
the age of the beneficiary population. Over 50 percent of those over 85 years old
are in need of nursing home care compared with about 13 percent of those 65 to
69 years old.

'A has set a goal of meeting the nursing home needs of 16 percent of veterans
needing such care, Between 1969 and 1994, the average daily work load of VA-sup-
ported nursing home patients more than tripled (from 9,030 to 33,405). With the
veteran population continuing to age rapidly, ’A faces a significant challenge in try-
ing to meet increasing demand for nursing home care.

Uneven Access to Outpatient Care

Veterans’ ability to obtain needed health care services from VA frequently de-
pends on where they live and which VA facility they go to. VA spends resources pro-
viding services to high-income insured veterans, who have no service-connected dis-
abilities, while low-income uninsured veterans have needs that are not being met.
About 191,000 low-income uninsured veterans with no apparent health care options
indicated in a 1987 VA survey that they had never used VA health care, in part,
because they were not aware that they were eligible.

‘Although not the primary reason for VA being slow to shift care from hospital to
outpatient settings, the complexity of VA eligibility rules affects VA’s efficient deliv-
ery of health care to veterans.

‘Any person who served on active duty in the uniformed services for the minimum
amount of time specified by law and who was discharged, released, or retired under
other than dishonorable conditions is eligible for at least some VA health care bene-
fits. VA uses a complex priority system based on such factors as the presence and
extent of any service-connected disability, the incomes of veterans with nonservice-
connected disabilities, and the type and purpose of care needed, to determine which
veterans receive care within available resources,

In general, VA provides cost-free priority medical care to veterans who have (1)
service-connected disabilities; (2) a special status, such as being a former prisoner
of war or a World War I veteran; or (3) incomes below a specified level (mandatory
care category). If space and resources are available after caring for these veterans,
VA provides care to other veterans; that is, those veterans with nonservice-con-
nected disabilities and incomes above the specified level (discretionary care cat-
egory).

Statement of Dr. Kenneth W. Kizer, Under Secretary for Health, VA, before the Subcommit-
tee on Hospitals and Health Care, House Committee on Veterans’ Affairs, April 6, 1995.


35

Just to ensure that you do get out, I’m going to ask you to hit
the 5 minutes and we will call it quits when this green light gets
over in 5 minutes. If you could try to keep your answers a little
shorter so I could cover a lot of different territory and, if we need,
we can talk about them at greater depth later on.

l am just interested to know, first off, are the outpatient clinics
a program where you have a special line item or where do you find
outpatient clinic activity?

Mr. Brown. Do we fund that in the major or minor?

Dr. KizER. That comes out of the medical care budget and de-
pending on how the clinic is aligned—i.e., whether it is part of a
medical center or a freestanding entity—then the funding, or the
genesis of the funding request, may differ. But basically it is out
of the medical care appropriation.

Mr. Suavys. Is this the decision of each veterans hospital whether
they will have outpatient clinics or is this a regional decision or
driven out of the central office?

Dr. KizER. Historically, it was a decision that was a bit of both.
T have recently—as you may know, issued a policy directive stating
that we will be looking to increase our community-based presence
through outpatient care whenever we can, within existing re-
sources. This certainly puts the priority on outpatient care.

Mr. Suays. Dr. Kizer, I am still wrestling in my own mind to un-
derstand the whole concept of economies of scale? A hospital. We
have authorized bed space. We have appropriated bed space. When
you have a Medicare patient who is a veteran who has the re-
sources to pay their own bill with their own insurers, we are now
saying they can’t be in a facility, a veterans facility which is news
to me. I hope you are not shocked by it.

I expose my ignorance all the time by asking questions, but I
learn. But I am struck by this fact. I am wondering, is there a dis-
incentive to allow that on the part of the veterans or an incentive?
Would it be a plus, financially, or a negative?

Dr. KizeR. Well, it would be a plus if one were able to recoup any
of that. Currently, the Department does recoup about $560 million
or so in third-party payment under our medical care costs recovery
program. All of that money goes right back into the Treasury, how-
ever, it does not include any Medicare or Medicaid funds.

Obviously human nature being what it is, and other things, it
would make much more sense that the facilities would be able to
both recoup and retain a portion of that money and use it for
things that made their institution and patient care better.

Mr. SHays. It just strikes me that there could be a happy mar-
riage in this process that we could provide more resources, better
utilize the facility. Are most veterans hospitals medium to large,
are they medium to small, or is it hard to characterize them?

Dr. Kizer. We have a relatively small number that would be con-
sidered large tertiary care facilities. Probably the largest number
would be considered midsized community hospitals, of 100- to 200-
beds, although VA hospitals often have the additional psychiatric

ed component. We have some facilities that are quite small.

Mr. SHAYs. Being over 250, you start to get economies of scale.
Over 300, is there a magic number that doctors agree on?


67

insurance to purchase, additional health care services: from VA. Such a change
would not, however, significantly strengthen VA’s safety-net role because lower-in-
come uninsured veterans would likely be unable to pay for many additional health
care services even if VA were authorized to provide them.

‘Another option would be to expand eligibility to create a uniform benefit package
but narrow the scope of services included in the package. In other words, some vet-
erans would receive a narrower range of free services while others would receive ad-
ditional benefits. This approach, however, would essentially take some benefits
away from service-connected veterans with the greatest disabilities and give addi-
tional benefits to service-connected veterans with lesser disabilities and to
nonservice-connected veterans.

‘A third option for paying for eligibility expansions would be to authorize VA to
recover from Medicare the costs of services VA facilities provide to Medicare-eligible
veterans. Allowing VA to retain recoveries from Medicare without an offset against
VA's appropriation, however, would create strong incentives for VA facilities to shift
their priorities toward providing care to higher income veterans with Medicare cov-
erage. More importantly, VA facilities would essentially receive duplicate payments
for care provided to higher-income Medicare beneficiaries. Rather than improve the
efficiency of the VA system, allowing VA to keep recoveries from Medicare could
make the system less efficient by increasing resources available without a commen-
surate increase in work load. It could also significantly increase the overall costs
of the VA system.

Finally, authorizing VA recoveries from Medicare could further jeopardize the sol-
vency of the Medicare trust fund and increase overall federal health care costs re-
gardless of whether VA is allowed to keep all or a portion of the recoveries. This
is because such an action would essentially transfer funds between federal agencies
while adding administrative costs.

Expanding Care for Nonveterans

One option for increasing the work load of VA hospitals would be to expand VA’s
authority to provide care to veterans’ dependents or other nonveterans. Currently,
VA has limited authority to treat nonveterans, primarily providing such services
through sharing agreements with military facilities and its medical school affiliates.

Allowing VA facilities to treat more nonveterans could increase use of VA hos-
pitals and broaden VA’s patient mix, strengthening VA’s medical education and re-
search missions. Without better systems for determining the cost of care, however,
such an approach could result in the use of funds appropriated for veterans health
care being used to pay for care for nonveterans. For example, we recently reported
that the Albuquerque, New Mexico, VA medical center was selling lithotripsy serv-
ices to nonveterans at prices well below cost.!¢

In addition, VA would be expanding the areas in which it is in direct competition
with private sector hospitals in the surrounding communities. Essentially, every
nonveteran brought into a VA hospital is a patient taken away from a private sector
hospital. Thus, expanding the government's role in providing care to nonveterans
could further jeopardize the fiscal viability of private sector hospitals.

Recovering VA Costs for Providing Nursing Home Care

VA has a goa! of providing nursing home care to 16 percent of veterans needing
such care. VA could serve more veterans with available funds by (1) adopting the
copayment practices used by state veterans homes and (2) establishing an estate re-
covery program patterned after those operated by increasing numbers of state Med-
icaid programs,

In fiscal year 1994, VA provided nursing home care to about 31,000 veterans in
VA facilities, 29,000 in contract community facilities, and 18,000 in state veterans’
homes at a combined federal cost of over $1.5 billion.

All veterans with a medical need for nursing home care are eligible to receive VA-
supported care to the extent that space and resources are available. No veteran,
however, is currently entitled to nursing home care.

Unlike Medicaid and most state veterans homes, the VA nursing home program
has no spend-down requirements and minimal cost sharing. Only higher-income
nonservice-connected veterans contribute toward the cost of their care, making
copayments averaging $12 a day.

In’ fiscal year 1990, such copayments offset less than one-tenth of 1 percent of
VA's cost to provide nursing home care in VA and community facilities. In compari-
son, eight states that charge for care offset from 4 to 43 percent of state veterans’

“VA Health Care: Albuquerque Medical Center Not Recovering Full Costs of Lithotripsy
Services (GAO/HEHS-95-19, Dec. 28, 1994). .


45

* “Stovepipe” Mentality
I will also share my thoughts concerning the need to further ingrain the “One VA”
concept into the management culture of all VA components in an effort to improve
services and reduce costs. It is important for VA to get away from what I label as
a “stovepipe mentality” in order to more effectively address objectives and goals for
solving problems that transcend component boundaries.

Construction Management:

VA's construction program has not always provided appropriate facilities at rea-
sonable costs. During the past 5 years, my office has issued 13 audit reports identi-
fying VA construction Projects which experienced significant cost overruns, resulted
in too much capacity, and provided unneeded services. These problems resulted be-
cause construction projects were not being adequately planned, administered and
supervised by key personnel at central office and Veterans Affairs Medical Center
(VAMC) jevels.

In response to these problems, VA has reviewed its building delivery process and
organization. These reviews have identified many areas where improvements could
be made. For example, VA’s 1992 Cost and Standards Study, Phase II identified the
need for improvements in areas such as project Planning, sign, and management.
As a result, VA has initiated organizational and process changes to improve man-
agement of the construction program.

Reviews continue to disclose management and cost overrun problems, For exam-
ple, a 1993 report by the General Accounting Office found that although VA
strengthened many aspects of its construction program, VA construction costs are
still too high because (a) projects exceeded program needs, (b) less-costly alter-
natives were given inadequate consideration, and (c) certain factors that affected de-
mand for VA health care services were not considered.

Recent OIG oversight efforts determined that construction management problems
continue and that construction funds are not being managed economically and effi-
ciently. Some of the problems noted by my office include:

* Lack of continuity with respect to construction management teams for man-
aging and overseeing entire construction projects from start to finish.
rly supported construction decisions justified by erroneous and exagger-
P

ated workload projections that result in excessive space authorizations and
higher construction costs.
Lack of controls over expenditures and the availability of multiple sources
of funding for projects inhibit effective oversight over the construction program.
* An excessively long budget and planning cycle which inhibits planning, de-
8 i and gost estimation. se 4 an
fined project scope, poor or incomplete construction design, and fre-
quent mid-course change orders for unneeded items result in cost shifting and
costly. contract delays.
* Divided accountability. between central office and the local facility for con-
struction projecta.

A recently completed OIG audit of a major construction project at one VAMC
noted several significant problems including (a) specifications and other provisions
of the construction contract being treated as guidance not requirements, (b) the con-
tract being awarded with the knowledge that the drawings and specifications were
defective, and (c) failure of VA to adequately supervise and monitor the construction
project. ‘These problems contributed to significant cost overruns, improper
Teprogramming of funds to cover the shortage of construction funds, and inferior
construction.

In an ongoing review of a construction project at another VAMC, poor planning,
improper management, and lack of controls have resulted in cost overruns in excess
of $15 million. If sufficient funding is not made available, the project will have to
be scaled down, which will impact negatively on VA’s ability to fully utilize what
has already been constructed.

In my opinion, many of the problems that exist today stem from VA not fully im-
plementing recommendations from prior studies and reviews. My office is current]:
conducting a review of VHA’s construction management program. This review will
include further evaluation of actions taken in response to VA's internal review. and
include recommendations for additional opportunities for improving VA's manage-
ment of its construction program.

T believe improving the management of VA’s construction program, thereby exer-
cising better oversight and control over all as; of each construction project, is
an opportunity for VA to improve Program Performance and reduce spending.


87

Again PVA applauds Secretary Jesse Brown and Under Secretary for Health Ken-
neth W. Kizer for their guidance and foresight in taking the first steps toward re-
structuring the VA health care system. And while the need for structural change
is acute, the cure for VA’s long term success and viability will depend on the follow-
ing: eligibility reform; maintenance of VA’s core mission of providing specialized
services; guaranteed funding for the provision of health care services; and retention
of non-appropriated funds (e.g. third pony reimbursements and Medicare pay-
ments), These changes will provide the VA health care system with the instruments
and incentives it needs to deliver efficient and quality health care to our nation’s
veterans.

Mr. Chairman PVA will support the reorganization of VHA. We will assist in the
process in any way we can to ensure the quality of VHA’s program for spinal cord
injury and dysfunction, so vital to our members’ well being, is sustained. PVA will
also insist on excellence in other specialized services for blinded veterans, for veter-
ans in need of prostheses, for those in need of special mental health services such
PTSD. Like us, these veterans depend on VHA for service that cannot be matched
by other federal programs or private sector providers.

Thank you for this opportunity to testify. We look forward to continuing to work
with you and this Subcommittee in the fature.

Mr. Suays. I am going to ask now David Gorman to make some
comments. And I realize that this is an issue that is very familiar
to you, but you haven’t had much time to prepare your statement,
and thank you for your comments.

Mr. GorMaN. Thank you, Mr. Chairman. I think that short no-
tice is better than no notice at all.

I want to really say how we appreciate being asked to partici-
pate. I think oftentimes sometimes policymakers and others in pro-
fessions and disciplines sit around a table and make decisions, and
oftentimes the voice of the consumers and the patients are often
left out. And that’s really what we are.

The organization I work for, the Disabled American Veterans, is
comprised of 1.1 million members, all wartime, service-connected,
disabled veterans. That’s who I speak for today, and that’s who I
think most of us place the priority on where VA services should be
dealt, and that’s with the service-connected veteran.

lam going to try to, therefore, speak in the tongue that you so
eloquently said that sometimes government officials do speak in,
and we have certainly heard some of that. But I think what has
really been brought to the table in the last 2 years, 2 years plus
now, has really been a concerted effort to try to look at this system
that nobody can make any sense out of. They don’t know if heads
are up or tails are down when they look at the VA health care sys-
tem and try to do something constructive with it.

I think Dr. Kizer, in the short tenure he has been with VA,
maybe 6 months or so now, has come in from the outside and
looked at a system that really has been institutionalized since
World War II. And he sits at a table and says, why am I doing
this? I shouldn’t be doing this kind of thing. I am the Chief Execu-
tive Officer of the health care system. I shouldn’t be signing off on
these kinds of things. I want to run the system. And I believe it
is a system.

So I think we are all looking at his efforts that have been
brought to the table in a positive vein, and I think this reorganiza-
tion plan of restructuring simultaneously the field operations of VA
and the central office structure are compatible, they need to go for-
ward, and the DAV is supportive of those.



8

In an effort to streamline directives and cut red tape, we have reviewed 1,638 of
VA's 3,500 directives, and we have eliminated 96.5 percent of those reviewed. So far,
we have reduced the amount of directions given within our organization by 17,285
pages and we are working on additional reductions.

‘A has four Reinvention Labs—the Baltimore and Milwaukee Medical Centers,
the Sioux Falls VA Medical and Regional Office Center, and the New York Region:
Office. These labs have led the way toward patient- and customer-focused ap-
proaches to health care and claims processing.

The VA Regional Office in New York has completely re-engineered its organiza-
tional structure and work processes for handling compensation and pension claims.

By reducing the number of steps involved in processing, we are now providing vet-
erans improved service. These efforts resulted in special recognition when Vice
President Gore presented the very first Hammer Award to the Regional Office in
March 1994.

Self-managed work teams empower employees and inspire enormous change in
their duties and responsibilities. Veteran customers have testified eloquently on
their satisfaction with the new process.

‘We continue to consider contracting out cemetery operations where it is cost bene-
ficial and feasible. Full-service contracts are in place at 24 closed and 2 open ceme-
teries with low burial rates. Contracting is good practice at these 26 locations as
fuil-time employees are not required and the sites are not located where other na-
tional cemeteries could maintain them.

PERFORMANCE MEASUREMENT

VA is actively involved in the implementation of the Government Performance
and Results Act (GPRA) of 1993.
yree performance measurement pilot projects were launched in FY 1994 covering
the loan guaranty program, the New York Regional Office reinvention lab, and na-
tional cemetery operations.
is the primary vehicle through which VA is developing more complete and
refined performance information to better determine how well its programs are
meeting their intended objectives.

TIMELINESS OF CLAIMS PROCESSING AND APPEALS

Timeliness of appeals processing has been of major concern for some time. Over
the last few years, a primary focus of the Veterans Benefits Administration has
been the study of its entire adjudication process. This multi-faceted study has in-
cluded a review of the current process, the identification of areas for improvement
and restructuring, and the development and implementation of plans for improving
the service provided to our customers.

Two special panels were convened to make recommendations for improvements in
Brocessin claims for both the Veterans Benefits Administration (VBA) and the

joard of Veterans Appeals (BVA).

The VA's Blue Ribbon Panel on Claims Processing for VBA and the Select Panel
on Productivity Improvement for BVA included representatives of the major Veter-
ans Service Organizations who are knowledgeable about claims processing and who

resent our customers.

1 Blue Ribbon Panel on Claims Processing analyzed the problems of the adju-
dication process and the issue of claims backlog in our Regional Offices. The Panel
made 43 recommendations.

Twenty of these recommendations have been implemented and another ten will
be implemented by the end of March of this year. The remaining thirteen will be
implemented by the end of 1995.

t the end of December 1993, the pending backlog at our regional offices peaked
at almost 574,000 claims. A year later, the backlog had been reduced to less than
462,000 claims. During that same period, the average time to complete an original
disability compensation claim was reduced by 43 days (from 213 to 170).

VA plans to sustain and expand this success by taking advantage of a aumber
of improvement opportunities.

Additional changes in organizational design and claims processing are underway
in all of our regional benefits offices. These changes have been inspired by our Vet-
erana Benefits Administration’s intense interest in reengineering its business proc-
ess ta imprave customer service.

Our Adjudication and Veterans Assistance Divisions will be realigned to improve
processing time and service.

Because timeliness of processing is of such concern, Public Law 103-446 mandated
formation of a nine-member Veterans’ Claims Adjudication Commission to evaluate



AGENCY OVERSIGHT: DEPARTMENT OF
VETERANS AFFAIRS

MONDAY, MARCH 13, 1995

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON HUMAN RESOURCES AND
INTERGOVERNMENTAL RELATIONS,
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,
Washington, DC.

The subcommittee met, pursuant to notice, at 1:07 p.m., in room
2247, Rayburn House Office Building, Hon. Christopher Shays
(chairman of the subcommittee) presiding.

Present: Representatives Shays, Morella, Davis, Scarborough,
and Green.

Staff present: Lawrence Halloran, staff director and counsel;
Christopher Allred and Robert Newman, professional staff mem-
bers; Thomas Costa, clerk; Cheryl Phelps, minority professional
staff; and Elisabeth Campbell, minority staff assistant.

Mr. Suays. Mr. Secretary, I want to welcome you to our hearing
today. I feel a little guilty that we gave you such a small table
here, but you honor our committee with your presence and we
thank you very much for being here.

The purpose of this hearing is to give us an opportunity to get
to know each other better and to give you an opportunity to state
for the record where you think your successes are, where you feel
your challenges are, and then just to respond to questions that we

ave,

This is really your Department’s day, so we are not going to ask
you to summarize any testimony if you don’t want to. atever
you want to put on the record, we would be delighted to have you
do that. I am joined here by the acting ranking member, Mr.
Green, from—I was going to say Texas, but I have to be more pre-
cise and say Houston. Is it kind of like a State within a State?

Tf I could, I will ask the three of you to allow us to swear you
in which is what we do for all witnesses that come before the com-
mittee. We can just take care of that business, then get on with our
testimony.

[The prepared statement of Hon. Christopher Shays follows:]

PREPARED STATEMENT OF HON. CHRISTOPHER SHAYS, A REPRESENTATIVE IN
ConGREss FROM THE STATE OF CONNECTICUT

Our witness today is Jesse Brown, Secretary of Veterans Affairs, and we are
Pleased to have him with us as we begin a series of oversight hearings on the VA.

We invited him here to discuss the department’s mission. We will raise fundamen-
tal questions about the department and the challenges it faces. What is VA’s current
mission? Is it the right mission in 1995? Is the mission being reached? Is it worth

mM


42

T also ask unanimous consent that our witnesses be permitted to
include their written statements in the record because they will all
be summarizing. Let me say that the full statements have been
very helpful for our staff in preparing us for this, so I’m very grate-
ful that you’ve given us in-depth comments. But for the purposes
of this hearing, to be able to ask you questions, it’s helpful to have
you summarize.

For the record we have Stephen Trodden, who is the Inspector
General, U.S. Department of Veterans Affairs, accompanied by Mi-
chael Sullivan, who is the Assistant Inspector General for Auditing.
We also have David Baine, the Director of Federal] Health Care De-
livery Issues in the General Accounting Office, accompanied by
James Linz.

And I am not sure, you're the Assistant Director?

Mr. Linz. For Federal Health Care Delivery.

Mr. Snays. For Federal Health Care Delivery. OK.

STATEMENT OF STEPHEN TRODDEN, INSPECTOR GENERAL,
U.S. DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED
BY MICHAEL SULLIVAN, ASSISTANT INSPECTOR GENERAL
FOR AUDITING; AND DAVID BAINE, DIRECTOR OF FEDERAL
HEALTH CARE DELIVERY ISSUES, GENERAL ACCOUNTING
OFFICE, ACCOMPANIED BY JAMES LINZ, ASSISTANT DIREC-
TOR, FEDERAL HEALTH CARE DELIVERY

Mr. Suays. It’s nice to have all of you here. If you would stand
up and raise your right hand.

[ Witnesses sworn.]

Mr. Says. For the record, the witnesses have all answered in
the affirmative.

And, Mr. Trodden, we welcome you beginning this hearing. And
thank you for being here.

Mr. TRODDEN. Thank you, Mr. Chairman, members of the com-
mittee. It is my privilege to be given this opportunity to share with
you what might be called the state of VA from an IG’s perspective.

As the Chair has noted, my prepared statement is admittedly
lengthy, and I will not try to condense it even into a 5-minute
opening statement. It was intentionally comprehensive, and I hope
it has provided the committee food for thought, both in preparation
for this hearing and in any subsequent deliberations.

Mr. Suays. I'd like to affirm that it has and gratefully received.

Mr. TRODDEN. Thank you, Mr. Chairman.

So for ease of reference to the follow-up questions of this commit-
tee, I will simply say here that my statement has three principal
parts. The first segment deals with opportunities to improve pro-
grams and cut costs, the second segment deals with resource allo-
cation issues, and the third segment deals with oversight and ac-
countability issues.

In the first section, I deal with construction management, Work-
er’s Compensation issues, acquisition, information resources man-
agement, affiliation issues, and what I call the stovepipe mentality
in

In the second section, I deal with some political and fiscal reali-
ties, resources versus workload imbalances, the staffing and utili-


73

Mr. Towns, I’ve gone through two cycles; and you're welcome, as
well as the other Members, to do the same.

Mr. Towns. Thank you very much, Mr. Chairman.

Let me begin by sort of saying to Mr. Trodden that your written
statement is about as powerful as I have seen since I’ve been in
the Congress, and that’s something like 13 years. And I just want-
ed to share that with you.

You know—however, you know, in some of your comments,
though, you seem to sort of back away from some of the things that
are said here. So I just want to make certain that——

Mr. TRODDEN. I hope not, Mr. Chairman.

Mr. SuHays. That he wrote it?

Mr. Towns, Well, no, I just want to make certain that we clearly
understand. I like what I’m reading over here.

Mr. TRODDEN. I do not intend to back away from the statement,
Mr. Towns, other than that one sentence that I commented on in
my opening remarks. I did have a context for that that was dif-
ferent than you received it. I wanted to be sure that I was clear
on that.

Mr. Suays. Did you say that Congressmen take things out of con-
text? .

Mr. TRODDEN. No comment.

Mr. Towns. Let me just Fat it this way. You say your concerns
about the VA’s ability to effect reform in the past were mostly fo-
cused on its decentralization of operations to the field. Is this cor-
rect? Decentralization is a fundamental aspect of the vision ap-
proach. Are you saying that the VA may not be able to enact vi-
sion? Is that what you’re saying? I want to make certain that’s
clear. I don’t like to do this, but——

Mr. TRODDEN. No, that’s fine, Mr. Towns. What I’m trying to
say—and I ee with Mr. Baine here. He says that one of the
premises of the VISN reorganization is that central office has
micromanaged the field. And my reaction to that is I’m not in favor
of micromanagement, but I haven’t seen micromanagement. I
haven’t seen a heck of a lot of management, much less
micromanagement.

Now, the history of the central office role would be that they will
put out policy, they will react properly to problems, for example,
that the GAO raises or that my office raises, and they will put out
policy that looks like it’s well targeted to address the problem that
we identified.

What I don’t see and haven’t seen in the past is a lot of manage-
ment follow-up to make sure that that policy is, in fact, imple-
mented. And the great history, the common theme of my 5 years
here, has been to revisit problems that we thought we had fixed,
only to find that they hadn’t been fixed. So that’s what I mean by
the absence of management.

What the field seems to mean by micromanagement is that
central office has spent their whole time deciding who gets what
promotion or what director gets moved from hospital A to hospital
B, and that’s perceived by the field as micromanagement. And it
well may be.

But in terms of management, absolutely insisting on certain fun-
damental principles that have to be implemented in the field and


82

Specialized services are not easily distinguishable from acute
care services, and they can’t exist in a vacuum. VA can only pro-
vide high-quality specialized services to veterans with a solid acute
care infrastructure in place. SCI medicine relies on a highly inte-
grated approach to care delivery which simply couldn’t take place
if the VA only operated SCI centers, and the same is true of other
specialized services.

The second area I would iike to stress is that of eligibility reform,
and I am sure you know and it has been discussed this morning
already that the current system is confusing, at the very least. An
as we have said many times before, it results in bad economics and
bad medicine. Patients ineligible for lower cost outpatient care
must now wait until they are sick enough to be admitted for expen-
sive inpatient care.

And we are not policymakers either, but we strongly believe that
Congress should enact legislation which would reform eligibility for
health. care in order that eligible veterans are able to obtain the
full spectrum of care. This will result in a more efficient approach
and will surely result in healthier patients.

We strongly believe that eligibility reform is essential to success-
ful allocation of resources within VA. And until VA physicians can
make treatment decisions without referring to arcane criteria
which now control veterans’ access to different VA health care set-
tings, the benefits of a decentralized management system as articu-
lated in VA’s current plan can only be partially realized.

Mr. Trodden has stated in the IG’s report that the most impor-
tant part—one of the most important part of VA’s reorganization
plan is the development of system-wide health care policies and
practice parameters, and we believe very strongly that he is correct,
there. We believe such parameters or guidelines are essential to en-
sure accountability as VA begins to reorganize in these VISNs and
across the country in the specific hospitals.

I would like to close with a few general observations about VA’s
reorganization plan.

Basically, we see it as a good first step; and we congratulate the
Secretary and Dr. Kizer for their foresight. But we are concerned
about a few things. And, again, I am being a little parochial here,
but the reorganizational plan is silent about how spinal cord injury
services would be protected. Spinal cord injury medicine is hig]
cost and labor intensive, and we are concerned that SCI medicine
would be extremely vulnerable to dollar-driven decisions made by
local directors.

The plan is also silent on the specifics of SCI medicine and the
future configuration of those services. VA should outline in greater
detail the management structure that must preserve the quality of
VA’s specialized services, including blind rehab, PTSD, homeless-
ness issues and spinal cord injury.

And, third, the VA’s reorganization plan does not address the
issue of eligibility reform. .

Finally, there is no doubt that VA will be a much different place
10 or 18. years from now. More than likely, it will be smaller; and
more than likely it will be treating dependents and possibly others
who could benefit from its expertise in areas like spinal cord injury
medicine.



AGENCY OVERSIGHT: DEPARTMENT OF VETERANS
AFFAIRS

HEARINGS

BEFORE THE

SUBCOMMITTEE ON HUMAN RESOURCES
AND INTERGOVERNMENTAL RELATIONS

OF THE

COMMITTEE ON GOVERNMENT
REFORM AND OVERSIGHT
HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS
FIRST SESSION

MARCH 13, AND MAY 9, 1995

Printed for the use of the Committee on Government Reform and Oversight

a

U.S. GOVERNMENT PRINTING OFFICE
23-610 CC WASHINGTON : 1996

For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-052690-6

oS




30

The Western Blind Rehabilitation Center (WBRC) has continued to provide excel-
lent rehabilitative training to blind veterans. This was supported by a recent report
of a site visit by Ronald L. Miller, Ph.D., Blinded Veteran Advocate. The staff va-
cancy levels at the Palo Alto VAMC have fluctuated over the years. On October 1,
1993, the date which VACO Blind Rehabilitation Service has used as a benchmark
for staffing levels, the WBRC had 48.3 authorized FTEE. Budget restraints have

prohibited the medical center from filling all of the esitions resulting in ongoing
vacancies. The new authorized level is 46.3 FTEE with two vacancies. ‘one of these
vacancies is currently being recruited and it is anticipated that the second vacancy
will be filled by mid-summer.

One of the reduced FTEE was the Assistant Chief of the WBRC, a position which
was eliminated along with other assistant service chief positions in order to reduce
management layering. Despite a very rigorous hiring freeze underway at the Palo
Alto VAMC, the Director has permitted the WBRC to recruit and appoint staff. In
order to increase the efficiency of the program, the Chief of the WBRC developed
a streamlined organization which maintains the high standards of service to veteran
patients while reducing the FTEE by 2.0.

Mrs. MORELLA. Thank you. I have a constituent who has taken
a pig leadership position in terms of blind issues with regard to

Mr. Brown. Just one other thing I would like to state for the
record. We are so concerned about our blind veterans that I asked
Ron Miller, who is the former executive director of the Blind Veter-
ans Association to come on board with us to look at and make an
in-depth analysis of our programs to make sure that we are doing
what we should be doing. He is a veterans’ advocate and is going
to make sure that we respond appropriately.

Mrs. MORELLA. Very good. Thank you. I don’t know whether, Mr.
Chairman, you wanted to pursue at all the Persian Gulf injuries.

Mr. Suays. I would be happy to have you pursue that.

Mr. Secretary, do you have—we said until 3 and I would love to
be able to go until 20 of. Is that a problem for you?

Mr. Brown. I am at your pleasure.

Mr. SHays. The more you say, the more I want to ask you, but
I will get you out of here by 20 of.

Mrs. MORELLA. Simply, Mr. Secretary. We hear so much about
it. 60 Minutes did something on it. What are you doing with regard
to the Persian—

Mr. Suays. Would you talk just a little louder?

Mrs. MorRELLA. Yes. Persian Gulf Syndrome, or whatever you
want to call it, when you have all those veterans that served over
there and the ailments and nobody seems to want to take the re-
sponsibility for it, how are you handling this?

Mr. Brown. Well, the 60 Minutes piece, I like—I’d really like to
respond to this question because if people look very carefully and
listen very carefully to what is happening, they are not beatin;
on the VA too badly. It is primarily DOD and I would like to thin
the reason for that is we at VA are doing some things right.

As I was explaining to the chairman, one of the things that I am
very happy about is that we are being proactive on these issues.
We could have taken a view as was done on Agent Orange and
waited 20 years before we did anything for these young folks.
Under our old criteria, we were only authorized to provide com-
pensation for veterans that are suffering from disability as a result
of disease or injury.

As a result of our legislation that was passed last year, we are
now providing compensation for undiagnosed illnesses, for those


89

of my health care in the private sector. I want to be able to con-
tinue to go to where I know I can get quality health care delivered
in a manner that I need it and from people who know how to de-
liver what I need, and that’s in the VA medical facility.

Mr. Suays. Thank you very much, Mr. Gorman.

Mr. Buxton, would you have some very brief comments? And
then we will let the ranking member ask some questions.

Mr. Buxton. Thank you, Mr. Chairman, for inviting me to come
up to the table. The American Legion is pleased that you did that.

I think the strongest feeling that the American Legion has right
now is being a staunch advocate for eligibility reform in the VA.
We don’t think that the dollars that are appropriated for VA health
care for service-connected and poor veterans should be forced to be
expended for the care for nonservice-connected veterans.

fe know that VA can collect from third-party payers, but we
also know that they are not allowed to keep those dollars; and, as
a result, there is a major leak in the funding for VA, because a lot
of dollars are expended for taking care of nonservice-connected vet-
erans. Medicare subvention to the VA would be an important way
to sustain the VA as well. We should look at VA appropriations in
terms of service-connected and poor and look at other dollars for
nonservice-connected veterans.

T would like to take exception to the earlier remarks that the VA
is operating in the dark ages. That was a pretty general statement.
However, we don’t believe that is true.

Mr. SHays. Attributed more to me than those who testified. It
was a question, but attributed to me.

Mr. Buxton. The VA health care delivery is, in many cases, more
specialized and of better quality than some delivered in the private
sector. I can speak to that because I worked in the private sector
health care for 40 years. I think the Joint Commission reports will
substantiate that VA does deliver good care.

Mr. SuHays. I do need to interrupt you for this point. Nobody was
saying that they weren't delivering good care. I think the issue is,
are we modernized? Are we responding to the same kinds of chal-
lenges that modern hospitals in the private sector are responding
to? And I think that, clearly, we could agree that they aren’t keep-
ing abreast that way.

'r, BUXTON. Thank you. Actually, a move to the care in the most.
appropriate setting. There has been a lot of discussion this morning
of moving to outpatient care.

Mr. Suays. Right.

Mr. Buxton. Outpatient care isn’t necessarily the preferred mode
in many cases, as you know. So we would prefer to say, move it
to the most appropriate care setting.

In regard to micromanagement, yes, the VA _ is
micromanaged——

Mr. SHays. I am going to do this. I am going to allow you to
make some comments after. Mr. Towns, you want to just ask a few
questions? And then I will get back to you.

Mr. Towns. Thank you very much, Mr. Chairman, and I appre-
ciate your consideration because I do have to leave.

Mr. Bollinger—and being a veteran myself, I am concerned that.
veterans may have health care needs unique to certain regions


84

trative structure, improving efficiency at the source. But these management im-

provements are meaningless unless eligibility reform gives the system a rational
ealth care product to provide. Until physicians can make treatment and placement

decisions without referring to the arcane criteria that now control veterans’ access

to different VA health care settings, the benefits of a decentralized management can

only be partially realized.

Veterans Integrated Service Networks

VHA’s reorganization Proposal would restructure VHA’s field operations and its
central office management. 's field operations would be restructured around the
concept of Veterans Integrated Service Networks (VISN). Under this concept, VHA’s
current field operations (four regional field management offices) will be replaced by
22 Veterans Int ited Service Networks nationwide. A director will manage each
VISN area. The VISN directors will be responsible for ensuring the full range of
services, inclu lized services and programs for disabled veterans. VISN di-
rectors will report directly to the Office of the Under Secretary. According to the
proposal, VISNs will focus on (1) integrating acute and long term inpatient and am-

latory services, and (2) achieving the greatest possible health care value for the
allocated resources provided.

We support the reconfiguration of VHA’s field operations because it vests in the
VISN directors the authority and flexibility needed to operate VA medical facilities
in the context of a rapidly evolving health care system. VISN directors will be
tasked with developing and implementing VISN budgets, consolidating and/or re-
aligning functions, and contracting with non-VA providers for medical and non-med-
ical services. Under this proposal, the directors will be able to tailor health care op-
erations to correspond with local needs. VISN directors will be afforded greater lati-
tude in responding to state health care reform initiatives. Moreover, PVA recognizes
that the success of VISNs will be intrinsically tied to the individual directors, They
will be responsible for ensuring the continuity of medical services within the VISN
framework and the viability of specialized programs.

While PVA supports the enhanced authority and flexibility the reorganization
plan will Rive VISN directors, we are concerned about the implications this new au-
thority will have on SCD medicine. For example, a VISN director may view SCD
medicine as a high cost, labor intensive program and may decide to cut services.
In such an environment, SCD medicine would be extremely vulnerable to budget
and program manipulation at the local and VISN level. We strongly recommend
that protections be implemented to safeguard SCD medicine and to ensure continu-
ity of services provided to SCD veterans within VISNs.

Mr. Chairman, we realize you have had the opportunity to hear testimony from
the General Accounting Office on their assessment of the Under Secretary’s plan.
We have also had the chance to review their work. Over the years, PVA has worked.
with GAO, sharing much of our analyses and opinions with them. We believe they
often offer constructive suggestions for necessary VA change. However, in the case
of the document we reviewed, “VA Health Care: Retargeting Needed to Better Meet
Veterans, Changing Needs” GAO only seemed to hear half of the message we tried
so hard to relay in Strategy 2000, Phase II: Meeting the Special Health Care Needs
of America’s Veterans. The half they clearly understocd was the fact that veterans
rely upon the specialized services they receive in the VA health care system and
that these VA services fill a void that exists in the private sector's medical care sys-
tem. They also point to the waiting times and queues these services sometimes
have. We fully agree and suggest that VA correct these problems with program ca-
pacity that exacerbates waiting times for these services, such as post-traumatic
stress disorder treatment and blind rehabilitation, that veterans desperately need.
The part that didn’t seem to get through to the GAO was the fact that these services
cannot exist independently. They cannot be teased out of the rest of the totality of
the VA health care system. The very benefit of VA’s spinal cord injury centers is
their integrated approach to delivering spinal cord medicine.

jalized” services are not easily distinguishable from “acute care” services.
They cannot operate interdependently without them. We promote a joint emphasis
on specialized services and the need to enhance acute care services and implement
managed care in the Independent Budget and Strategy 2000: Phase II. VA can only
provide high-quality specialized services to veterans with a solid acute care infra-
structure in place. Specialized services consistently rely on online support from
“acute care” providers. For instance, Spinal Cord Injury medicine relies on an inter-
disciplinary approach to delivering care-care is coordinated among cardiologists,
urologists, neurologists, dermatologists, mental health professionals, rehabilitative
specialists, and many other clinicians. This highly integrated approach to care deliv-



12

Construction Programs
Budget Authority
1994 1995 19%
Parking ....... uM 16.3 0
‘Minor Projects 155.5 152.9 229.1
Major Projects 4601 354.3 513.8

* Includes Emergency Supplemental Funding,
Office of Inspector General

te Mions]
1994 1995 1996
Budget Authority
314. 38 335
Employment:
Ct vinnie 400 399
GOE—General Administration
{in Mitions)
1954 1995 19%

29 227.1
2922 2,903

Mr. SHAYS, Thank you, Secretary Brown. I wanted to first wel-
come Dr. Kizer and Mr. Vogel. It is nice to have both of you here.
I would be happy if you have any comments that either of you
would like to make, we have time, we would be happy to hear any
comment or would you just like to go into questions?

Dr. Kizer. I will defer mine to questions.

Mr. VoGEL. Same thing, Mr. Chairman.

Mr. SHays. Mr. Secretary, if I could just have you tell me, what
is the first thing that comes to mind when you think of your big-
gest successes? You have had a number, but where are you most.
pleased?

Mr. Brown. Well, I am most pleased, I would think, and prob-
ably maybe some of the bureaucrats would not agree, but I am
most pleased personally with our efforts to bring a higher level of
sensitivity to the Department, and that has resulted in our ability
to respond even faster to the needs of our veterans.

And I am talking about in the area of, for instance, what we did
with Agent Orange, that war has been over for 20 years, and we
are now, the science is catching up and we were able to add two
additional disabilities to our presumptive list, and they are mul-
tiple myeloma and respiratory cancers.

I am pleased that we learned a tremendous lesson from how we
managed or mismanaged Agent Orange as we tried to deal with
the issues of the Persian Gulf, and I think, quite frankly, when we
compare the time lines, we are about 15 or 20 years ahead of where
we were on the same type of issue in Agent Orange.

We are, for instance, doing four things I think very well. One, we
are providing medical care basically on demand for any Persian


54

Collecting and Assessing Information:

Archaic reporting and management information systems also impede oversight.
Simply put, VA management does not have timely, relevant, reliable, program re-
sults information. The information that is available is frequently inaccurate and in-
complete, and is process rather than results oriented.

There are two sound reasons why reports of any kind ought to be prepared by
field staff for submission to higher level authorities. First, is to monitor compliance
with policy. The second is to gather data to assess performance for management de-
cision making. However, my office has ‘determined that required reports prepared
by field staff for submission to VA central office are often not used for any purpose.
Evidence of this has been demonstrated in several OIG reports involving surgery-
related issues.

OIG work noted that VA central office (VACO) officials took no action and, at
times, did not even inquire when some medical centers failed to submit required re-

rts. In some cases, officials were not even aware that required reports had not

een submitted. In other cases, reports that clearly indicated out-of-line conditions
generated no inquiry from VACO staff. This suggests that the reports were either
of no real value to VACO officials, or the officials were not prepared to act on the
conditions which might have been revealed in them. Audits and healthcare inspec-
tion reports indicate that this condition is widespread in VA operations.

Integration of Financial and Operational Information Systems for Management Deci-
sion Makin,

Systems that integrate financial, operational, budget, and performance informa-
tion, and provide timely and meaningful information to managers, are essential for
Teinventing ernment; that is, changing fovernment processes to make them work
better. I fully support this concept and have committed a significant amount of
audit resources to help achieve these objectives.

Much of this work has already produced improvements in the reliability of finan-
cial information in VA, as evidenced by the results of four audits of VA’s Consoli-
dated Financial Statements. VA also is making progress in developing performance
measures. However, much still needs to be done to shift the focus of performance
measurement from program inputs to program results in order to better determine
how well programs are meeting VA goals.

I believe that performance measurement and integration of financial and oper-
ational information fyeems should ultimately provide a “report card” answering the
question of how welf VA is doing. VA and Congress cannot only be satisfied with
a good set of books. VA management ultimately is responsible for establishing goals,
objectives, and performance measures that tie to Congressional objectives, and for
developing the systems for measuring how well VA performs.

As I have stated in earlier testimony before the House Committee on Government
Operations, Subcommittee on Legislation and National Security, the OIG found lit-
tle evidence suggesting that program managers used VA's financial statements to
manage their programs. The systems used to produce these financial statements
need to be integrated with program and performance information to be of any real
value. My office has worked diligently with VA's financial managers to ensure finan-
cia] statement accuracy, but it is critical that the Program managers complete the
next step—i.e., incorporate the financial statements and supporting information into
the management decision making process.

The last two OIG audits of VA's Consolidated Financia! Statements determined
that VA had made a significant effort in identifying and presenting performance
measures in VA management's overview that accompanies the financial statements.
However, while numerous measures were included, the financial statement overview
generally focused on operating statistics concerning programs.

Performance Measurement:

The CFO is working with VA management and has several actions underway in
conjunction with the GPRA that, when completed, should help measure program
performance in relation to VA goals and objectives. Actions underway include devel-
oping a system for measuring performance throughout VA by shifting the focus of
performance measurement from program inputs to program results.

VA isa tong ‘way from achieving the ultimate goal of using performance measure-
ment _as a tool for improving the efficiency, effectiveness ‘and economy of VA's over-
all effort. Ultimately, VA should have reliable data that indicate whether it had a
good year or a bad year. While the NPR, GPRA and CFO are aimed at improving
results, VA’s consolidated financial statement should be the vehicle for communicat-
ing the true impact and accomplishments of the VA. VA is moving in the right direc-



96

underutilized hospitals all over, when what you see in northeast
Indiana is a—the major hospitals in Fort Wayne, increasingly, the
regional hospitals getting hooked up where they send the acute
care in, that you would have a similar system where veterans could
tap into that and if they—one hospital in Fort Wayne is a burn
center, another one more specializes in heart, rather than trying to
cover everything out of one unit, and it doesn’t make a lot of eco-
nomic sense.

But underneath it there is a political problem. And that is, as
long as there is an accountability, you see your clout there and you
are concerned, particularly if veterans become a decreasing per-
centage of the population, that if we merge it, that you won’t have
as much clout in the sense of being able, you said, to monitor. But
monitor, in effect, what you are saying is you feel the government
is going to be more fair to veterans than the medical system, which
presumes that if you feel politicians are going to be more respon-
sive and not cut your budget, that means you feel you have lever-
age over those politicians that you might not in another system. Is
that really kind of a common feeling among veterans’ groups?

Mr. FULLER. I don’t think we are talking about clout, Congress-
man. I think what we are talking about is insuring that veterans
get the best care. And if you have veterans going to every doctor
and every clinic and every hospital in this country, you are not
going to be able to identify whether the actual laws that the Con-
gress has written regarding what veteran gets what and where
they get it and how much they get are being followed.

Mr. SouDER. You are saying part of that is because they view
you as their primary client. So in addition to the political—the peo-
ple at the hospital view the veterans differently.

Mr. FULLER. We have always looked at the Congress to make the
laws. The Congress designed a system that said that the Federal
Government was responsible for taking care of the health care of
the Nation’s veterans. If that’s the case, then it is the responsibility
of the Federal Government to be able to monitor whether the provi-
sion of that care is adequate whether or not you have someone in
a VA nursing home or a private sector nursing home someplace,
how are you going to be able to monitor the quality of that care
if everyone is just given a ticket and told to go off and just get
what you need?

Mr. Souner. Isn’t it true that we would monitor it the same way
we do now? In other words, in effect monitoring, because quite
frankly, none of us really follow it that closely. There is an agency
designated to make sure that you are cared for. Now, if you have
cards and you are not getting the care and you feel that discrimina-
tion, politically that is going to come back up through the Veterans
Administration and back through us through the political system
to address as well, is that not true?

Mr. VOLLMER. If I could build upon your whole question, first of
all, you reference the fact that there is excess capacity in VA hos-
pitals. There is excess capacity in civilian hospitals, too. And I
think some of the things that we are seeing, both in VA and in
the—

Mr. Souper. I meant that in all the hospitals.


xb)

So I can’t fault the reaction to the report. It’s, generally, you’ve
got a legitimate problem. We're going to make this change. My con-
cern is on the implementation, of that and in holding their feet to
the fire to make it happen.

Now one last thing—I know this is a long answer. I think Dr.
Kizer needs all the help he can get with the policies that he’s
briefed to this committee on his reorganization. Because what he
said and what he’s going to be able to make happen are two dif-
ferent things. And I think he’s got a culture at the hospital level
that’s going to resist that change. At least they’ve resisted me in
the past. .

I’ve been preaching performance measures and criteria for evalu-
ating these facilities now for 5 years. VA’s culture has been very
resistant to that. I have no reason to believe, other than the fact
that Dr. Kizer has got line clout and I don’t, that they’re going to
be more receptive to him than to me. So anything the Congress can
do and this committee can do to undergird his effort in those areas,
I would fully support.

Mr. Towns. This is a very quick answer, and I want to have one
question for Mr. Baine before my time runs out.

Mr. SHAYsS. You've got time.

Mr. Towns. OK, thank you, Mr. Chairman.

You indicated that you were not a policymaker.

Mr. TRODDEN. Yes, sir.

Mr. Towns. And, however, in reading your statement, you indi-
cated very clearly that legislation might be needed. Are you sayin;
if you were a policymaker you would suggest some legislation?
Make sure I understand this. We’ve been on break, so I might be
a little slow this morning.

Mr. TRODDEN. No, I—let me see if I can straighten that out.

Mr. Towns. OK. Thank you.

Mr. TRODDEN. I am not a policymaker. I think the Congress
should, for example, take to heart the questions that GAO raised
and decide what it is that VA is supposed to be delivering. I think
the Congress should get behind performance measures. These
things are not very clear.

As I think you’ve probably been through, if you read the eligi-
bility rules, the Secretary and everybody else is in favor of eligi-
bility reform, I would submit if for no other reason than that VA
eligibility rules read like a Wall Street lawyer might have written
them. They’re very complex. I have to turn to Mike Sullivan on my
left every time this question comes up, who's eligible for what, in
and of itself would argue for some clarity.

VA has educational programs. Is their purpose to get the vet a
job or is it to get him a course of study? Before VA can come back
with performance measures and how well it’s doing, I’m suggestin;
that the charge from the Congress to the Department could stand
quite a bit of clarity.

Mr. Towns. All right. Thank you very much, Mr. Trodden.

Mr. Baine, eligibility for certain health care services is currently
linked to receipt of hospital care in VA facilities. Isn’t access to
comprehensive outpatient services a critical factor in reducing
costs?


36

Dr. Kizer. Actually, within an institution, it is much more com-
plicated than that. It depends on where you allocate your fixed
variable costs, and your indirects. Hospitals are high cost centers,
and insofar as you can get away from using them, you should ulti-
mately end up saving money, since hospitalization accounts for the
largest amount of the health care dollars.

r. SHAYS. Would the issue of post traumatic stress disorder—
one of the hearings I had in the full committee of then-Government
Operations, national security was something that has haunted me,
and I have never really found to my satisfaction—and I won’t even
give the statistic that was given to us—but a large number of Viet-
nam vets who came home and had this disorder and committed sui-
cide.

Do we have any handle on the number of veterans from the Viet-
nam War who have taken their own lives?

Mr. Brown. Yes. I think we have our own research center that
looks at that kind of issue. We have about 500,000 of them that
we have identified and we treat about 20 percent of them. I am
sure we can get some information on that question to you, Mr.
Chairman.

Mr. Suays. The statistic was so large, it almost seemed to dupli-
cate the number of veterans that we lost during the war, not com-
mitted suicide in the hospital, but just in general, just taking their
own lives.

Mr. Brown. I understand. We will get some information to you.

[The information referred to follows:]

A study in the American Journal of Psychiatry, June 1990, indicated that fewer
than 9,000 suicides occurred among all Vietnam veterans from the time of discharge
through the early 1980s. This contrasts with unsubstantiated reports of up to
100,000 such suicides. However, VA researchers have concluded that Vietnam veter-
ans who were hospitalized for wounds or who were wounded more than once had
statistically significant increased risk for suicide. This information is used by mem-
bers of VA's psychosocial services to help identify hidden emotional wounds and stop
preventable deaths.

Mr. Suays. You all three have been very cooperative and very
helpful witnesses, and Mr. Secretary, we will probably not need to
calf on you and your valuable time, but it is possible that Dr. Kizer
and Mr. Vogel, that we will be asking you to come before the com-
mittee again.

And I just want to state for the record our intention will be to
work with you to help you do the job we have requested you to do
as a Congress and the American people, and we are very grateful
for the services of all three of you and we are very grateful that
you came here today.

Thank you very much.

Mr. Brown. I would like to say, Mr. Chairman, I think you know
I have nothing but the deepest respect for you since I first met you.

Mr. SHays. Since you first dissed me the first time.

Mr. Brown. I think you are a wonderful person, and I want you
to know that anything I can do to cooperate with you to achieve
your goals, I am ready to do that, sir.

Mr. SHays. Thank you very much. Thank all three of you. This
hearing is adjourned.

(Whereupon, at 2:45 p.m., the subcommittee was adjourned.]

{Additional information submitted for the hearing record follows:]


48

welfare, frustration in dealing with multiple service providers who appear unaware
of the veteran’s treatment status or situation elsewhere in VA. This results in unac-
ceptable delays and fragmented and duplicative efforts on the part of VA in serving
veterans.

‘As automation has progressed, difficulties associated with systems that share
data and technology among VA organizations have increased. Changing needs and
multiple architects have made many existing systems overly complicated and dif-
ficult to maintain. Most of these systems are aging and becoming costly to maintain.

‘The vast majority of VA IRM systems remain independent and serve limited, pa-
rochial interests. For example, VA currently operates four distinctly different main
data centers in support of agency users. Each center provides computer operations
support to specific communities throughout VA. The Under Secretaries for VHA and
Veterans Benefit. Administration (VBA), and the Director for the National Cemetery
System (NCS) are responsible for overseeing their own systems. These systems were
developed with little consideration of interconnectability and interoperability.

In addition to the individual systems, significant IRM initiatives are currently un-
derway within VA that highlight the critical need to accomplish the coordination
and cooperation that everyone recognizes is necessary. VA is implementing. single,
integrated financial management system; developing a Master Veteran to
improve the management and delivery of services to veterans; and replacing the 25-
year-old Personnel and Accounting Integrated Data System with a modern Payroll
‘and Human Resources system.

VA decided that the emphasis on cooperation and coordination is necessary be-
cause of the long experience in VA with stovepipe systems development, lack of com-
patibility in information throughout VA, and lack of central oversight and decision-
making authority relative to IRM issues.

Under the current VA organization, the CIRO, who is responsible for coordinating
TRM functions in VA, has no ability to ensure that VA organizations adhere to the
policies issued by this office or meet the standards for the development of new sys-

ms.

Under the “One VA” concept, all systems should be able to share data. Without
a strongly coordinated IRM function, there is no assurance that all systems will
communicate to the benefit of the veterans we serve. J recognize that there are
many competing interests in VA activities. But, VA exists first to serve veterans and
VA efforts should focus first on ensuring that their needs are met. In this time of
reform, VA should take the opportunity to reconcile all the competing demands and
chart a course which makes optimal use of available information management re-
sources.

Affiliation Related Issues:
Most VAMCs are affiliated with medical schools, allowing interaction and inter-
dependence in patient care, medical education, research, and sharing of resources.
ile VA and Congress recognize that affiliated medical schools provide significant
benefits to VA, concern exists that VA’s relationship with some medical schools
makes it more difficult to effectively manage VAMC operations and resource alloca-
tions. I share this concern. In 1992 the OIG began a series of audits of affiliation-
related issues. To date, my office has performed five audits concerning the following
issues.

* Time and Attendance of Part-Time Physicians

* Resident Salary Disbursement Agreements

* Resident Work Limits Initiative

* VAMC Physician Staffing Levels

* Scarce Medical Specialist Contracts with Affiliated Medical Schools

Collectively, these audits identify opportunities to better utilize an estimated $320
million. Separately, each audit indicates an opportunity to improve program per-
formance and cut costs. For example, the OIG audit of VHA’s Resident Work Limit
(RWL) Initiative demonstrated the continuing need for detailed, independent over-
sight of VHA activities.

‘or the RWL initiative, Congress provided VA a total of $219 million in fiscal
years 1992-1994. VHA planned to request an additional $155 million in future
years. The purpose of RWL funds was to allow VANCs to hire additional staff to
achieve compliance with accreditation standards on resident physician work hours,
supervision, and ancillary duties.

OIG audit found that the RWL Initiative was a valid one, but VHA planners
overestimated the need for RWL funds and VAMCs did not consistently use the
funds for intended purposes. In 1991, before RWL funds were allocated, VHA sur-
veyed the VAMCs to determine the level of compliance with accreditation standards.
However, VHA planners did not examine the results of their own survey nor use



53

jectives. Program managers should be able to use these measures to assess the effi-
‘ciency and effectiveness of their programs, to design actions to correct problems, and
to demonstrate program achievement.

Recent OIG reviews of VHA’s, VBA’s and NCS's strategic plans found that the
achievement of most program goals and objectives could not be measured because
criteria for performance measurements have not been established or were not spe-
cific or quantifiable enough to measure accomplishment. VA managers have the op-

tunity to improve criteria for measuring program efficiency and effectiveness by

leveloping more specific and quantifiable performance criteria.

VA has taken the position that “absolute” criteria do not always exist and, in
some cases, are difficult or even impossible to develop. This is where “relative” cri-
teria have a role. Relative criteria-setting often is referred to as “outlier analysis,”
“most efficient organization analysis,” or “gap analysis.” In all cases, the procedure
is to take a particular indicator of performance, such as ratio of workload versus
costs among units with similar missions, and display the individual units in order
of cost.

Applied to VA organizational units, one could measure, for example, how much
it coats one medical center to perform a surgical operation versus another medical
center’s cost for the same operation. If the range of costs is, for example, $2000 per
operation to $7000 per operation, one can question whether the medical center near
the high end of the cost is efficient. Thus, the universe of organizational units and
how they are displayed on a particular variable create the “measuring stick” of their
relationship to one another. It also is important to ensure that the efficient units
are effective. This could be done by a similar ranking of the medical centers by, for
example, surgical outcomes.

By using such relative measures, it is possible to evaluate any group of organiza-
tional units on a variety of factors. Relative measures have the advantage of not
requiring vast amounts of research and testing in their development. They do not
require experimentation or use of “control” groups. Relative measures also avoid dis-
agreements over their appropriateness to the units being measured, because it is
the performance of those units themselves compared to others with which they are
measured. Examples of this type of analysis will be included in the OIG draft re-
ports on the VHA surgical program and on VHA physician staffing.

If VA is going to be successful at measuring program performance and holding
managers accountable for achieving goals and objectives in programs where absolute
criteria cannot be developed, consideration must be given to establishing relative
criteria as a means for assessing performance and improving VA operations.

Soon after my appointment as Inspector General, I met with the principal VA
managers to determine what complaints they had with the OIG, and what they
wanted or expected from us. One complaint frequently articulated was that IG audi-
tors did not have the background to competently evaluate the results of professional
activities. In particular, they questioned the criteria on which our judgments rested.
To this I replied, “Tell ‘us what you believe is good service. Tell us your goals. Pro-
vide us your criteria and performance measures, and we will evaluate the results
of operations against those criteria and standards, and provide you with results on
how well you are doing.”

VA rec ‘izes that it has to meet the requirements for performance measures a8
established by GPRA, and it is working to establish quantified goals and perform-
ance measures. This, however, is only ‘one aspect of assessing overall performance
and holding managers accountable. Having reliable financial and cost accounting
systems is equally important.

Cost Accounting Systems:

All aspects of VA operations are impacted by cost accounting which measures
costs against predetermined goals. Recently, the need for a system to measure and
evaluate costs has received greater emphasis as a result of the CFO Act, GPRA, and
NPR. In today’s climate of fiscal restraint, the pressure to become more cost effec-
tive is greater than ever. Accomplishing this, however, requires the ability to evalu-
ate the costs to perform services.

Currently, VA lacks the necessary cost accounting systems to perform this re-
quirement. For example, recent OIG audits have identified VHA cost. reporting sys-
tem limitations. VH.

’s current cost reporting system cannot generate meaningful
summary reports relating to budget objectives, work units, or outputs without sig-
nificant manual intervention.

With VA’s recent development and implementation of the Financial Management
System, VA is starting the process of developing the basis for recording and tracking
costs (expenses) to match with output, My office has recently begun a review to
evaluate cost accounting within the VA.


49

it in allocating RWL funds. OIG analysis of the survey found that VAMCs requested
significantly more resources than were needed to achieve compliance. In fact, most
VAMC. reported that they were already in compliance with the standards.

After receiving RWL funds, VAMCs used the funds to pay for staff positions that
existed before RWL Initiative was developed, to hire staff in clinical activities
that were already in compliance with the standards, and to fill positions that were
not related to resident duties. Also, VHA did not establish performance measures
or controls to ensure that RWL funds were used as intended.

The OIG estimated that, of the $219 million in RWL funds, VAMCs only needed
about $72 million to achieve compliance with the standards. The remaining $147
million was neither needed nor used for the RWL initiative. The OIG recommended
that VHA not request additional RWL funds unless the need could be fully justified.
VHA decided not to request the additional $155 million in RWL funds for the
1996 budget. Further, has agreed to reexamine its use of RWL funds and de-
termine any future need. . .

The OIG is continuing its oversight of affiliation issues. My office is beginning an
audit that will further examine selected affiliation activities and their effects on how

allocates resources. By reviewing the operations of comparable affiliated
VAMCs, the OIG will continue to identify opportunities for VA to improve its a
ation agreements and reduce costs.
Stovepipe Mentality:

During the past 5 years, my office has dedicated much of its audit resources to
nationwide program reviews designed to address systemic issues. In the course of
conducting these audits involving segments of all of VA’s components, programs and
operations, it has become apparent that each major component has developed a
stovepipe mentality in its approach to planning ita programs and providing services
to the veteran. This stovepipe mentality has contributed to either the non-desire or
the inability of each component to effectively communicate with another component
to address Common goals and problems for the good of the veteran.

OIG reviews of VA's strategic planning process and benefits delivery systems have
shown that there is minimal horizontal communication among VA components. For
example, an OIG review of VHA’s strategic plan determined that VHA had not ad-
dressed VA's goal to improve the timeliness and quality of the benefit claims proc-
ess—believing this to be the sole responsibility of VBA. Medical examinations, how-
ever, are within the scope of the benefit claims 88. Such stovepipe thinking lim-
its opportunities to ad VA-wide goals and objectives to improve total services
to veterans.

OIG reviews consistently have shown that there are many programs that would
benefit from better communication and enhanced Working relationships among VA
components. In response to recent OIG efforts, VHA and VBA are beginning to work
together to enhance services, reduce costs, and improve program results in the fol-
lowing areas.

on and Pension Claims Processing
igibility Data
ra nefit Payments
* Collection of Ist-Party Co-Payment Debts

Open, effective communication and united planning efforts among all VA compo-
nents will help improve the quality and timeliness of services provided to veterans.
Shared goals and objectives and joint performance measures also will help provide
opportunities for VA to improve overall program performance and cut costs.

Il, OPPORTUNITIES TO IMPROVE ACCOUNTABILITY OVER BUDGETING AND THE
ALLOCATION OF RESOURCES

VA's budget request has grown from $29 billion in FY 1990 to almost $38 billion
for FY 1995. Historically, VA has used an incremental approach to budget planning
(ie., the budget is based on funding “current services” levels of existing programs,
to which adjustments, usually new and expanded programs, are added), Once a pro-
Fram or feclity is initially established and funded, it routinely becomes part of the

istorical “recurring base” of the budget planning ‘process, with little or no further
justification required in subsequent budgets.

Although the historical-ineremental budget planning process may be adequate in
managing VA’s monetary and burial benefits program, the process has made it in-
creasingly difficult for VA to respond to the changing demographics and health care
needs af veterans. Bocause of the limitations of historical-incremental budget. plan-
ning with regard to managing the fast-changing health care environment, VA i fre-
quently unable to: (1) identify actual program costs, (2) determine appropriate pro-
gram funding levels, or (3) evaluate program performance.


78

Mr. Towns. Yes. Thank you very much, Mr. Chairman.

Mr. Trodden, you have indicated that the VA fails to realize mil-
lions of dollars in savings in its procurement activities. Does any-
thing in the VHA reorganization plan address this problem? If not,
how should the plan be amended?

Mr. TRODDEN. It’s not specifically, I don’t believe Mr. Towns, dis-
cussed in VHA’s reorganization plan. However, there is an initia-
tive under way that is designed to deal with the issue that I raised.

The fundamental problem in VA’s past has been they haven’t
known—I know this sounds silly, but you asked me to be blunt—
they haven’t known what they were buying. They haven’t known
it in quantities. And so this is where VA, in my opinion, has to deal
with the question, is it a system or isn’t it? Is it 172 separate hos-
pitals or is it a major buying force?

Typically, in the past, VA would negotiate-with, say, a pharma-
ceutical company for a line of pharmaceuticals under FSS, Federal
Supply Schedule contracting procedures, which basically sets a
price for the drug under the premise of: If I buy any, what would
you charge me? And the answer, of course, is, oh, if you buy any,
1 wiil charge you 10 bucks a pill. Whereas—again, the power to
frame the question.

If VA were saying, I need to buy 10 zillion tons of this particular
pharmaceutical, what price would you charge me, the answer
might well be, if you agree to purchase in that bulk, I will agree
to charge you $3 a pill. And it has been the inability of VA in the
past to commit to those quantity purchases because the central
buying authority hasn’t always known what the history of require-
ments have been that’s caused the kind of contracting they talk
about.

They now have a system under way that’s designed to capture
the quantity buys that VA is making. I’m hopeful that should that
pay off, as advertised, VA will be able to do more bulk buying, like
the IV example that I have in my prepared statement.

Mr. Towns, Mr. Trodden, you indicated that millions in Federal
Employees Compensation Act costs could be saved or avoided by re-
turning work-capable claimants to work. Are the VA pilot programs
a useful attempt to correct this problem? Will the VISN program
approach actually present additional concerns?

Mr. TRODDEN. No, I don’t think VISNS will bring me more con-
cerns, Mr. Towns, because the VISN concept is that the VISN di-
rector won’t be so much hospital focused in the future, at least
that’s the way the rhetoric goes. He'll be patient focused, and he'll
be looking at the needs of serving the veteran patients in his net-
work. And since he is only going to have a limited amount of re-
sources I hope that he will be even more incentivized to not spend
them on people who are capable of working.

The second thing that VA has already done, and which to me
makes at_sense and I hope it proves out, the tab, the bill for
these folks who were off on worker’s comp and couldn’t work, used
to be centrally funded. So if the hospital had a number of workers
who were on the worker’s comp rolls, they weren’t feeling the price,
they weren't feeling the pain in their budgets of having these work-
ers on the worker’s comp rolls. That was centrally funded.


88

They do not however, as some people think, contain an element
of eligibility reform. But I think with the reorganization, the VA is
going to be allowed and permitted to do certain things in the field
without eligibility reform, as Mr. Baine alludes to. Some of those,
if permitted, they are going to be allowed to open up additional
points of access where veterans don’t have to drive, whether it be
20 miles or 200 miles, to go to a VA hospital, this big brick building
set up on the hill that people look to the VA as to get their health
care.

The issue of demand and workload was brought up, and I think
somebody used the figure over the last 50 years or 20 years or 25
years, the demand for VA care has diminished by, I think, 50 per-
cent. I am not aware of that figure being accurate.

It may be that the occupancy rates of VA facilities have de-
creased by somewhere—I don’t think to that level, but maybe ap-
proaching that level. And some of that I think is suppressed de-
mand. I mean the VA just doesn’t operate. They are moving away
from the bed-based model as they should, but the eligibility rules
do come into play. Resources come into play. If you can’t fund per-
sonnel to staff beds in a VA medical facility, then you are not going
to be able to place patients in those beds. That’s where the occu-
pancy rate falls in.

The eligibility rules are such that no one can make sense of
them. For instance, if you break your leg in front of a VA hospital,
they can carry you in, fix it, set it and put’a cast on it, but you
can’t get crutches to go out of the facility. The eligibility rules

say——

Mr. Suays. Do what? I’m sorry.

Mr. GorMAN. Crutches. You have to hop out with a cast on your
leg. That doesn’t make sense to us, and I don’t think it makes
sense to many people, but that’s the way the rules have been de-
signed over the years, with no ill intent.

think that a lot of people, veterans’ organizations, have come
to the table. Members of Congress have listened and have compas-
sionately listened and try to do the right thing by building in cer-
tain eligibility requirements, maybe some expansion of care, some
special programs. And it’s just gone topsy-turvy, and what we have
ended up with is this morass today that we are trying to look at
and deal with.

The other—Dr. Kizer once described in a couple of settings what
he views hospitals to be in the future, and he views them to be
nothing more, at least in the VA, as giant intensive-care units. So
I think that speaks to the mentality of where VA would like to go.
And that is, you shouldn’t be in a hospital. You should be receiving
care in an ambulatory care setting in the community as contem-
porary medicine is being practiced in the private sector.

The one other comment I would make, because I don’t know
what your time is——

Mr. SuHays. Since you introduced that, the ranking member needs
to leave shortly after 12, and I want to make sure he is able to in-
troduce some questions, but we will be here for a little longer.

Mr. Gorman. Then I would make the flat statement that as a
user of VA services and some specialized services over the last 25
years since I have been out of the service, I do not want to get all


43

zation of medical facilities, surgical program issues, physician staff-
ing issues, and performance-based budgeting.

And in the final section, I deal with the goals and performance
accountability, cost accounting, information collection and assess-
ment, the integration of financial and operational information, per-
formance measurements questions and also the issue of the VHA
reorganization.

Mr. Chairman, this is clearly an ambitious agenda. As you per-
mitted, I request that my entire statement be entered into the
record. Mike Sullivan will help me try to address the committee’s
questions.

Tl only say in closing that you probably noticed that my state-
ment is a mix of concrete VA-specific issues and issues that have
a broader managerial context. If there is an overarching theme to
my remarks, it is that VA and probably the U.S. Government as
well is struggling to adapt to societal changes, budgetary pressures,
and the requirements of law such as the Chief Financial Officers
Act and the Government Performance and Results Act. And they're
struggling with these things in an effort to become more cost-effec-
tive, more businesslike, more analytical, while at the same time
maintaining the Department's commendable veteran focus. I en-
courage the Congress to maintain its push in these areas and to
incentivize the Department to make progress.

One ad-lib, if the committee would permit.

Mr. SHays. Sure. You ean have more than one ad-lib.

Mr. TRODDEN. In response to Mr. Towns’ comment——

Mr. SHays. Could you just bring the mike down a little bit? I
think it will pick up your voice better.

Mr. TRODDEN. Is that better?

Mr. SHAYS. I think so. As close as you can get to it.

Mr. TRODDEN. OK. In response to Mr. Towns’ opening remarks—
I'm not going, to back away from my opening statement, but hear-
ing it cold, where I talked about no progress, I want to make sure
that the context of those remarks that I had in mind when I wrote
them was primarily in the issue of central office vis-a-vis field man-

ment relations, the extent to which VA is an integrated system
of health care, while at the same time properly delegating to the
field level the implementation of health care delivery. And so, the
lack of improvement that I referred to in my statement was in that
area.

I do not mean to suggest that the Department hasn’t made sig-
nificant progress in other areas, both on their own and in response
to IG recommendations. I have a number of examples that, in the
questions and answers, I think I can properly give the Department
credit for having made improvements in response to IG reports and
1G recommendations.

My concern, when I made the more global statement, was in this
entire area of central office versus field, centralized management
versus decentralized policy execution, and I hope we can explore
that issue further. So, with that, I'll close and permit the commit-
tee to move on.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Trodden follows:]


CONTENTS

Hearing held on:
March 13, 1995 ..
May 9, 1995

Statement of:

Bollinger, John, Seen, executive director, Paralyzed Veterans of Amer-

ica; accompanied by Douglas Vollmer, associate director for government
relations, Paral; zed Veterans of America; and Richard B. Fuller, direc-
tor of esieh mai program development, Paralyzed Veterans of Amer-
ica; and D: Gorman, Disabled American Veterans; and Frank
Buxton, Pein Legion ...
Brown, Jesse, Secretary, Department o
Trodden, Stephen, Inspector General, Department of Veterans Af-
fairs, accompanied by Michael Sullivan, Assistant Inspector General
for Auditing; and David Baine, Director of Federal Health Care Deliv-
ery Issues, General Accounting Office, accompanied by James Lina,
Assistant Director, Federal Health Care Delivery ...
Letters, statements, etc., submitted for the record by:
Baine, David, Director of Federal Health Care. Delivery Issues, General
‘Accounting Office, prepared statement of
Bollinger, John, deputy executive director, Paralyzed Veterans of ‘Amer-
ica, prepared statement of . ee
Brown, Jesse, Secretary, Department of Veterans Affairs:
Information concerning suicides
Prepared statement o!
Green, Hon. Gene, a Representative i in Congress From the State of Texas,
prepared statement of
Kizer, Dr. Kenneth W., Under Secretary for Health, Veterans Health
Administration:
Information concerning overview of diabetes ..
Information concerning the Palto Alto VAMC
Shays, Hon. Christopher, a Representative in Congre:
of Connecticut, repared statement of ..

‘eterans Affairs

Souder, Hon. Mark E., questions for and answers from Mr. Brown
‘Towns, Hon. Edolphus’ @ Representative in Congress From the
of New York:
pared statement of ...

jiestions to and answers from Mr. Bollinger
Trodden, Stephen, Inspector General, U.S. Department of Veterans Af.

van repared statement of .
iJ. Under Secretary for Benefits, Veterans Benefits Administra.

ve information concerning regional offices’ initial selections of claims
processing models ...

aly

42

59
83

of

22
30

37

90
44

28


66

of pal ients; and (4) formed alliances other hospitals to share high-cost services
and equipment to prevent costly duplication.

Similar changes are needed in the VA system if it is to become more efficient and
capable of competing with private sector hospitals. VA’s recently announced plan to
reorganize its medical centers into 22 VISNs is, among other ings an attempt to
strengthen planning on a network rather than facility basis. In a dition, VA envi-
sions consolidating high-cost services in fewer facilities.

Although these are goals that we strongly support, VA’s early efforts at network
planning have not been successful. We recently reported that VA’s central office had
not given adequate poidance to its regional offices and medical centers on how to
change VA's facility-by-facility construction planning process into an integrated net-
work planning process. As a result, VA overstated its need to increase its extended
care capacity. Although our report was issued in December 1994, VA has not taken
8 position on our recommendations that it revise its strategic planning guidance to
better support networkwide rather than facility-by-facility planning.’

If VA has difficulty in changing its construction planning to a network basis,
VA—however well-intentioned its plans may be—will find it even more difficult to
make important decisions about consolidating services and closing underused facili-
ties. One option may be to establish an independent panel, similar to the military
base closure commission, to recommend changes.

Special Care Needs of Veterans Should Be Better Targeted

Another option for restructuring the VA health care system would be to retarget
resources used to provide care for higher-income nonservice-connected veterans to-
Nard service-connected and lower-income veterans whose health care needs are not

eing met.

About 15 percent (319,000) of the 2.2 million veterans using VA medical centers
in 1991 were nonservice-connected veterans with incomes of $20,000 or more. About
11 percent (91,520) of the single nonservice-connected veterans (832,000) and 57
percent (227,430) of the married nonservice-connected veterans (399,000) using VA
medical centers in 1991 had incomes of $20,000 or more. Among married nonservice-
connected veterans using VA medical centers, 21 percent (84,000) had incomes of
$40,000 or more.

VA could use those resources to target the special care needs of veterans and
strengthen its ability to fulfill its safety-net mission. For example, the resources
could be used to

—conduct outreach to medically underserved populations, such as homeless
veterans;
—expand programs that address special care needs; or
—expand services for lower-income, uninsured veterans,
Expanding Eligibility for Veterans

While eligibility reform would be needed if the Congress wants VA to provide a
uniform set of benefits to all veterans, such an expansion would fundamentally
change VA’s health care mission and has significant implications for cost and access
to care. Currently, veterans’ entitlement to care, even for service-connected veter-
ans, is limited to those services that can be provided within available space and re-
sources.

Keeping the resource constraints while broadening the entitlement to services
could result in shifting VA resources away from providing services to service-con-
nected and lower-income nonservice-connected veterans in order to provide a wider
range of services to higher-income nonservice-connected veterans. In other words, it
might decrease services available to service-connected veterans.

in the other hand, eligibility reform that would remove the space and resources
constraints would essentially turn VA into an open-ended entitlement program like
Medicare. Removing the resource constraints and expanding VA entitlement to free
comprehensive health care services to all veterans currently eligible for free care
(about 9 to 11 million veterans), as VA proposed last year, could add billions of dol-
lars to VA’s health care budget. The cost would depend on the number of veterans
taking advantage of such expanded eligibility and the extent to which changes are
made in the VA system to make care more accessible to veterans.

One option for limiting the cost of eligibility expansion is the use of cost. sharin;
to offset the costs of the expanded benefits. For example, VA might be authorized
to provide veterans any available health care service without-changing existing eli-
gibility for free care. In other words, veterans could purchase, or use their private

20 Meech Care: Inadequate Planning in the Chesapeake Network (GAO/HEHS-95-6, Dec.


52

physicians needed. I believe that this has been a contributing factor to the large dif-
ferences in physician stalfing ratios. I also believe that allocating resources based
n historical-incremental budgeting, as opposed to performance based budgeting tied
to relative workload, is a contributor to the wide disparity in allocated resources.

My office is in the process of drafting the audit report for VHA review and com-
ment. Hopefully, they will be able to more definitively determine the rationale for
the wide disparity in physician to patient staffing ratios.

Heed to Establish a Performance Based Budget Process:

Ultimately, in order to be fully effective in the way VHA plans, budgets for, and
executes programs to meet the health care needs of veterans, VA will need to re-
place its historical-incremental approach to budgeting with a program-results ori-
ented budgeting system. In my opinion, an integral part of this system should be
the development and implementation of a cost accounting system that ensures data
integrity and identifies actual costs of each individual program and relevant sub-
sets. This, will provide VA the, basic management tool for facilitating development
of comprehensive program budgets that reflect alternative policy and performance
goals on a priority basis and at various funding levels, as well as the information
systems that effectively measure program results.

VA suffers from inadequate accounting and budgeting systems. In particular, VA
does not have an effective system to account for costs, particularly costs of medical
care delivery. Consequently, VHA does not have accurate or reliable data on the
costs of medical services, or the means to effectively compare costs among facilities.
This impairs VHA’s ability to manage operations and hold managers accountable for
results of operations.

This condition exists because VA budget and resource allocation processes have
not required an effective cost accounting system. VA has relied upon incremental
budgeting, and proportional resource alfocation, to fund operations. In part, this
may have resulted because VA administrators were required by law to maintain a
certain level of presence at all facilities, and did not have a great deal of discretion
to move resources. VA management has not been motivated to develop “performance
budgets,” or the accounting and information systems needed to administer perform-
ance budgets.

111, OPPORTUNITIES TO IMPROVE INTERNAL OVERSIGHT AND ACCOUNTABILITY IN A
DECENTRALIZED ORGANIZATION

Adequate internal oversight of VA operations, including performance measure-
ment, is vital to VA’s ability to improve results old managers accountable. VA
is making progress in this area, but it faces significant hurdles if it is to satisfy the
requirements of the Government Performance and Results Act to improve program
outcome through performance measurement. While much remains to be done, I be-
lieve that VHA’s reorganization is on the right track.

To improve internal oversight and accountability in a decentralized environment,
VA needs to clearly articulate what it wants to accomplish, establish criteria for
measuring performance, develop the necessary financial and operational systems
needed to collect and report accurate and timely information, and use these systems
to assess overall performance and outcomes. OIG audits indicate a need for substan-
tial improvement in this area.

If VA is going to be successful in measuring the performance of VA programs for
the purpose of improving results and holding managers accountable, the following
areas need to be addressed.

* Goals and Performance Criteria
* Cost Accounting Systems
* Collecting and Assessing Information
* Integration of Financial and Operational Information Systems for Manage-
ment Decision Making
* Performance Measurement
* VHA Reorganization
Goals and Criteria Development:

Establishing goals and the criteria for measuring performance against these goals
are critical to determining the efficiency and effectiveness of VA activities. The per-
formance measurement process, required by the GPRA, is dependent upon clearly
articulated goals for each program, and performance measurements which disclose
the results (outcomes and outputs) achieved and how well the program is meeting
the intended objectives (impact).

Performance criteria need to disclose, in an objective, quantifiable, and measur-
able form, the extent to which programs are achieving their missions, goals, and ob-



26

Mr. Suays. Are what?

Mr. BROWN. Full. In the VA, it is about 74 or 75 percent. Now,
what is driving this is that I think is what we have already dis-
cussed is that—it is very expensive to do business on an inpatient
setting, so people and smart business folks, and the VA is following
that line, they are doing business on an outpatient basis. That's
one of things that is driving it. And by the way, in our 1996 budget
when we are talking about renovating hospitals and so forth, at the
same time incorporated in that is a 30 percent reduction in the
number of beds that we already have.

Another point that I think is important—when we talk about ex-
cess——

Mr. SHays. Let me, on this one issue. You say a 30 percent re-
duction. In other words, we have reduced the number of bed space
at veterans’ facilities.

Mr. Brown. I guess what I am saying is that in the 1996 budget
request, when we ask for money to do renovation projects and pri-
marily in minor construction, in those renovations we are going to
reduce our beds by—on average, by about 30 percent. So that basi-
cally is saying to the planners, we expect to use less beds out in
the future because we are moving toward providing care on an out-
patient basis.

Now, OK.

Mr. Suays. I am going to remind you of the particular question,
though. What I am wrestling with is that I am being told that hos-
pitals are basically dinosaurs. In a sense I think we need them but
we don’t really need as many of them. Clearly we will go to out-
patient and we will go to different design type of facilities, and we

ave 172 hospitals.

What I am trying to reconcile is the fact that I am making an
assumption that right now we are at a certain level of capacity. I
should first ask you what that capacity is or what are the number
of bed spaces that we use versus our capacity, and get a sense of
what your tread line tells you and you have told me something that
I had not been aware of. I just had always made an assumption.

You are telling me—I had always known that we had an income
base test for care at a veterans facility. I always made the assump-
tion, always, of that any veteran could go, he just had to pay or
she just had to pay. And you are telling me they can’t even go,
which boggles my mind. In the future, if we allow veterans who
can’t go to go and to pay, is the next step to making sure we fully
utilize our hospitals?

Mr. BROWN. Well, see, and that was the point that I am getting
at. See, when a lot of people talk about excess capacity in the VA,
it’s a false conception. It’s false in the sense, sure, we may have
some excess capacity there and that excess capacity is driven by ef-
ficiency and it is also driven by a deliberate attempt to restrict ad-
mission to our hospitals. And if we wanted to change that tomor-
row, we can say, all right, anyone who, say, served during World
War II can gain admission to our hospitals. We would be bulging
at the seams. It has nothing to do with demand. It has to da—

Mr. Suays. I understand that.

Mr. BRowN [continuing]. We deliberately said we don’t want you
because we cannot get—don’t have enough resources to staff these


22

Interesting. Are you doing it? Can someone give me information
on that?

Dr. Kizer. I believe there is a study that the VA has participated
in, as one of its collaborative studies, along with a whole host of
other studies that have basically shown, or at least the medical lit-
erature in the composites shows that the closer to normal that a
diabetic keeps his or her blood sugar, the less likely they are to de-
velop complications and, in particular, complications of neuropathy
and cataracts.

Mrs. MORELLA. So can you supply me with information about
that study? Where it is now?

Dr. Kizer. We can certainly provide for you information about
VA's involvement, although I would hasten to add that these types
of studies have been done in multiple places by VA and non-VA fa-
cilities.

Mrs. MorRELLA. Well, then, the VA portion of it then.

Dr. Kizer. Sure.

Mrs. Morea. That would be great.

[The information referred to follows:]

OVERVIEW OF DIABETES

Diabetes affects 13 million Americans and costs over $23 billion annually. The
most common form of diabetes occurs in older adults. The population of people over
65 will grow from the current 31 million to over 60 million ¥ the year 2025. There-
fore, diabetes will continue to be a major health problem. Normally, insulin from
the pancreas increases sugar (glucose) uptake into muscle and fat 'cells and
creases glucose production in liver. About 25 percent of diabetes is caused by the
destruction of the insulin secreting cells in the pancreas (insulin-dependent or Type
I diabetes). About 75 percent of diabetic patients in the U.S. are adults with non-
insulin-dependent (Type II) diabetes, which is an inherited disease. In Type II dia-
betes, patients continue to make insulin but the target tissues become resistant to
insulin actions.

The diagnosis of diabetes is made by finding high blood sugar levels. Because
symptoms are few early in the disease, most patients are not diagnosed until 4
years after blood sugar is elevated. Obesity, high-fat-diets, low-fiber intake, and lack
of exercise enhance the symptoms of this disease. A major challenge of diabetes
management is helping patients to make important lifestyle changes. Maintaining
normal blood sugar levels reduces the risk for complications of diabetes. When nec-
essary, insulin and other drugs may be used to control high blood sugar levels.
Many times these drugs may be given by mouth but more severe diabetes may re-
quire daily injections into muscle tissue for adequate blood sugar control.

Diabetes is the eighth most common diagnosis among veteran patients, and about
18,000 veterans are currently being treated. It is the leading cause of blindness, leg
amputation, and kidney failure for veterans. Additional complications of diabetes in-
clude hardening of the arteries (atherosclerosis) and high blood pressure.

Damage to nerves (diabetic neuropathy) is the most frequent complication of dia-
betes, Nerves are damaged in the legs and feet most commonly causing sensory loss
and loss of muscle control. Kidney damage (diabetic neuropathy) is the leading
cause of kidney failure (end-stage renal disease). About 40 percent of all dialysis pa-
tients need dialysis because of Siabetes, and about $2 billion is spent on their care.
About 35 percent of all patients with diabetes will progress to kidney failure. The
risk factors for diabetic kidney disease are a family history of cardiovascular disease
and a family history of high blood pressure. There are drugs available that reduce
the risk of diabetic kidney complications. Damage to the eyes (diabetic retinopathy)
in diabetic patients is common. The risk of damage increases with the duration of
diabetes. Although diabetic retinopathy is a leading cause of vision disability and
blindness, it may be treated by laser therapy or with a procedure called
photocoagulation if diagnosed early.

SCOPE OF VA DIABETES RESEARCH

In FY 94 VA spent $7.2 million in funding 72 projects for the study of diabetes.
An additional $9.9 million from non-VA sources support another 182 diabetes


34

rected to patient care, i.e., toward the actual delivery of care as op-
posed to administrative type people.

Ms. PHELPS. And this network includes the ambulatory care fa-
cilities that you were talking about earlier? It incorporates the
transition from hospital care to outpatient?

Dr. Kizer. The Veterans Integrated Service Network, or what
has become known as the VISN, includes all of our assets that we
may have in a given area—medical centers, nursing homes, or
other long-term care facilities, clinics, our vet centers, and anything
else that I may have omitted.

Ms. PHELPS. One last question, Mr. Chairman.

One of my colleagues raises the question of the World War II
nurses, what kind of treatment opportunities are they getting cur-
rently and how do you envision improving their access?

Mr. SHays. Let me just clarify it for my own mind. These are
nurses who are considered veterans or not considered veterans?

Ms. PHELPS. Yes.

Mr. SHays. Are they considered not veterans?

Ms. PHELPS. These are the ones that are considered veterans.

Mr. Suays. OK.

Mr. BRowN. OK. I’m glad you asked that question because, his-
torically, we have not treated our female veterans the way we
should have, and I don’t say this in a cynical way that people sit
around a table and they conspire to not treat female veterans right.
Female veterans constitute about 4 percent of the entire veterans
population. But if we look at the active duty forces, we see about
11 to 12 percent of the active duty force are females and reserve
is as high as 15 percent female. Ultimately they will become veter-
ans so we need to move in that direction.

That is one of the reasons why many of our renovation projects
are so important. I’ve gone to VA hospitals where we actually had
to knock on the door and put the men out of the bathrooms to allow
women to go do the bathrooms. That’s an outrage. They served just
like their male counterparts did. But we are making progress. We
have women coordinators in all of our hospitals now.

And in addition to that, they actually have a stronger benefit
now than the males because it is possible that a male veteran can
be confused on whether or not he is going to get outpatient care
or inpatient care. If a female comes in our hospital, into our sys-
tem, they get everything. We have a women’s clinic and the wom-
en’s clinic in some of our facilities that takes care of them and the
areas are really beautiful: And when they come in, they have OB/
GYN specialists there and if we can’t provide that care on an inpa-
tient basis, we contract it out.

So it is a stronger benefit that is available to our female veter-
ans, and we are trying very hard, through our outreach initiatives,
to get that word out to them because we want to do the right thing
and that is also why the 1996 budget and, quite frankly, the $206
million that were rescinded in the House for 1995 both are very im-
portant to us.

Ms. PHELPS. Thank you.

Thank you, Mr. Chairman.

Mr. Suays. Thank you.


58

tant step toward getting the organization of the Veterans Health
Administration in shape.

Td like to now turn to several challenges that threaten the long-
term viability of the direct care system. Clearly, VA is at a cross-
roads, regardless of how successful it is in improving the efficiency
of its own system.

I would briefly like to highlight four challenges: First, over the
last 25 years, workload in VA’s hospitals has dropped by over 50
percent, and further declines are likely.

Second, VA needs to find resources to meet the special care needs
of veterans such as treatment for posttraumatic stress disorder and
substance abuse.

Third, VA needs to find the resources it needs to meet the grow-
ing demand for long-term care services.

And, finally, VA needs to find ways to make access to outpatient
care more equitable. Veterans’ ability to obtain needed health care
services frequently depends on where they live and to which facility
they go.

Td like to now turn to some options for restructuring the health
care system. First, some VA hospitals could be closed or services
consolidated.

VA and the private sector have reacted very differently to the de-
clining inpatient workload. For example, hundreds of private hos-
pitals have closed over the last 5 years, but no VA hospitals have
closed because of declining workload. In fact, VA plans to add hos-
pitals in five States in the next 2 or 3 years.

Another option for restructuring the health care system would be
to retarget resources. About 15 percent of the veterans using VA’s
medical centers in 1991 were nonservice-connected veterans with
incomes of $20,000 or more. VA could use these resources to target
the special care needs of veterans and strengthen its ability to ful-
fill its safety net mission. .

The third option that could be considered is eligibility reform.
While eligibility reform would be needed if the Congress wants VA
to provide a uniform set of benefits to all veterans, such an expan-
sion would fundamentally change the veterans health care system
and has significant implications for both cost and access to care.

Our written statement discusses several potential options for
paying for expanded eligibility. One option for increasing the work
load at VA hospitals, if that’s the desire of the policymakers, would
be to expand VA's authority to treat nonveterans. Expanding the
government's role in providing care to nonveterans could, however,
jeopardize the fiscal viability of private sector hospitals.

Finally, one option for meeting the increased demand for nursin,
home care with available funds is to increase cost sharing. In fiscal
year 1994, VA Provided nursing home care to about 31,000 veter-
ans at a cost of over $1.5 billion. VA offsets less than one-tenth of
1 percent of its costs through copayments. VA could have recovered
hundreds of millions of dollars by adopting the copayment practices
used by State veterans’ homes and by establishing an estate recov-
ery program patterned after those established by many States
under their Medicaid programs.

In conclusion, Mr. Chairman, the veterans health care system,
we believe, is clearly at a crossroads.


76

Mr. BaInE. I certainly believe it is, Congressman Towns. I—in
listening to Mr. Trodden—I want to point out one thing. I’m not a
policymaker either. But, I think the move to turn VA into a pri-
marily outpatient, an ambulatory care system, is very, very impor-
tant.

If VA is to remain a viable system for the foreseeable future it
has got to turn this boat around, and it could use the help of the
Congress in doing that.

Mr. Towns. I know you indicated very clearly that you are not
a policymaker, but it won’t stop this question from coming to you
as well.

Mr. BaINE. OK.

Mr. Towns. Is legislation likely to be necessary to restructure
the veterans health benefit programs?

Mr. BAINE. I’m sorry. Could you——

Mr. Towns. Is legislation likely to be necessary to restructure
the veterans health benefit programs? Will we need legislation to

lo that?

Mr. BAINE. The VA can do some things with eligibility through
providing guidance to their medical centers out of central office and
so forth, but I believe that if eligibility reform takes the form of
changing the benefits or making people entitled to care who are not
now entitled to care on an outpatient basis, that legislation would
be needed, yes, sir.

Mr. Towns. Thank you very much, Mr. Chairman. I yield back.

Mr. SHays. Mr. Chrysler wanted to ask some questions, but he
is testifying at another hearing, and I just think that what we will
do is do each 5 minutes more.

We could spend a great deal of time with each of you. Your state-
ments are both excellent, and your comments are helpful as well.

But the picture I get is a system in which we are dealing with
a very important and sensitive group. We are dealing with our vet-
erans, and so I think there is a built-in caution to say things so
carefully that no one takes offense politically and so on. But what
I see is a system of facilities located where there was workload in
years past. Some of these areas may not have as many veterans.
Then we have newer areas. Obviously, people have shifted. There
has not been that kind of adjustment in population with our facili-
ties.

We are seeing in the private sector private hospitals become
more competitive and some actually being closed down, and I am
struck with these realities. One is, we can expand who is covered
in a veterans’ facility to have it not just be those who have lack
of financial resources and those who have illnesses or injuries that
are related to their responsibilities in the service. We can invite
families to be part of these facilities. We can‘include people in the
private sector to use them. And then, as you point out, Mr. Baine,
then we are directly competing with the private hospitals.

But I guess my question is, how is it conceivable that we can,
in the years to come, have viable, competitive, cost-effective hos-
pitals i? we don’t close some of them down and we don’t increase
the patient need in others? I just don’t know how we can do it. So,
if we make no changes, each of you tell me what happens to the


28

those kinds of services which we provide. So we again are taking
care of them. We are their safety net and I think that we have an
obligation to continue to do that because they have done so much
for the Nation.

Mr. Suays. Connie, are you going to be here a little longer?

Mrs. MoRELLA. I won’t be here much longer.

Mr. Suays. Let me call on you. You don’t need to be brief.

Mrs. MORELLA. Thanks, Mr. Chairman.

By late January 1995, each regional office was supposed to report
its choice of model to the VA along with an implementation plan.
This was going to be received in April and I am not sure whether
or not the regional offices have provided their plans to the central
office and where is it right now?

Mr. VoGEL. Mrs. Morella, they have in fact given those plans to
the central office. They came through the area directors and on to
me and we are assisting them with the adoption of various organi-
zational models. Reason being, when you administer entitlement
programs as we do, which are fairly heavily prescribed by law and
regulation, they can in fact cause us to measure our operations and
sometimes can be without the proper amount of creativity and
imagination.

fe are trying to move the regional offices, the people who do the
loan guarantee work and provide GI education benefits, pension
and compensation, and all the things you know so well into modes
of operation which are based on teams with fewer hand-offs, more
decisionmakers, and coordinating all of that is the reason we have
delayed our schedule.

But I have all those models in and they are being reviewed now
and adopted. One size doesn’t fit all. The Secretary used that
phrase a little earlier in his testimony. We help—allow them to
profit from the mistakes of offices that have reached out and adopt-
ed some creative approaches to the managemeént of claims work.

Mrs. MoRELLA. Would you share with this committee, when you
complete it, what the decisions have been? I realize one size does
not fit all, but you know, the fact that you have received all of
these reports, evaluated them, and given them prematurely to the
various regional offices.

Mr. VOGEL. We would be pleased to share that with you, Mrs.
Morella.

[The information referred to follows:]

e Veterans Benefits Administration is currently reviewing the regional offices’
initial selections of claims processing models. The plans which accompanied the se-
lections raised several critical issues which must be addressed from an administra-
tion viewpoint before proceeding further. Included among the issues are funding im-
pact and adequate measures of success. In addition, the models must be integrated
Into the other reengineering activities currently underway within the Veterans Ben-
efits Administration.

The Under Secretary for Benefits has established a Modeling Support Group to
address those issues. The group will be responsible primarily for assisting in the se-
lection, implementation and monitoring of the claims processing models at the re-
gional offices. The group will review the models in concert with an analysis of the

findings and results of the various claims processing studies, projects, and task
forces conducted by or on behalf of the Veterans Benefits Administration.

The Modeling Support Group will convene initially on April 25. The purpose of
the first. meeting will be to define the scope of the group’s mission and a schedule
for fulfilling that mission. The Veterans Benefits Administration will provide a copy
of that schedule to the Committee.



94

tain feeling within the veterans’ community that the VA health
care system is our system. But, apart from that, we know it is the
responsibility of the Federal Government, and not Kaiser
Permanente, to be able to monitor the quality of the care, the types
of services, the amount of services that the government is paying
for in this situation.

So, without VA hospitals we would be setting up an entirely dif-
ferent type of bureaucracy in order to be able to monitor what kind
of services these individuals would be getting from the HMO
around the corner versus being able to go to VA hospitals where
we know what the services are, what the medications are, what the
amounts are and what you need and expect.

There was a comment made earlier by the GAO about a study
they did last year on the experience of other countries that had
identifiable veterans health care systems and how they dissolved or
integrated those systems into other health service systems over a
period of time.

It is very easy to attempt to make comparisons that Finland did
it this way and they got rid of their VA hospitals, and if we could
do the same thing here everybody would be very happy. Canada,
as well, had an identifiable VA health care system which gradually
shrank and eroded away and is just about completely gone at this
point.

But if you try to compare the United States with Finland and
Canada, in each instance, these countries had some other system
for the veterans to go to. Finland is a socialist country. It had a
universal health care system. Canada had a universal health care
system. And so there was a support structure there that they could
still put their veterans into and monitor.

The Congress, last year, made the decision we are not going to
go that route. Our fear right now is that if you started to give vet-
erans vouchers or mainstream them here or there, it is going to be
impossible. You are going to have even more of a helter-skelier
type of eligibility system than you have right now.

Mr. SouDER. Does anybody else have a comment?

Do you have a comment on that?

Mr. BuxToN. I just wanted to comment on Dr. Kizer’s plan for
VISNs for the future for the VA, would definitely move the health
care closer to the veterans by means of a system of community-
based clinics which would put the health care closer and the vet-
eran wouldn’t have to travel all those miles. But we certainly
wouldn’t object-——

Mr. Suays. If the gentleman would just suspend a second. Would
the gentleman mind yielding to this?

Mr. SouneRr. Fine.

Mr. SHays. I don’t see the Veterans Administration really mov-
ing forward with out-based clinics. I don’t see it happening. And so
maybe you could address that as well. .

The hospitals are underutilized so there is an incentive to utilize
the hospitals. The hospitals are in certain parts of certain States,
and so people have to travel there.

Mr. Buxton. I think the private sector, Mr. Chairman, has
learned their lesson about centralized health care delivery and that


9

VA's process and recommend solutions. The Commission has been appointed, has
begun operations, and is scheduled to submit its report to the House and Senate
Veterans’ Affairs Committees by May 2, 1996.

The Veterans’ Benefits Improvements Act of 1994 authorized the Board of Veter-
ans’ Appeals to issue decisions made by individual Board members rather than by
three member panels.

This authority and implementation of recommendations by a Select Panel on Pro-
ductivity Improvement that I convened have resulted in a 17 percent improvement.
in appeal processing time. And we will do better.

USE OF TECHNOLOGY

On February 2, 1995, VA activated a toll-free telephone number for Persian Gulf
War veterans and their families to access information on benefits and issues which
directly concern them. This effort to provide Persian Gulf Veterans direct informa-
tion has already proved very successful. We have received almost 30,000 telephone
calls during the first month of service.

Medical and benefits information is now available at all times through the VA-
ON-LINE bulletin board. Anyone with a personal computer that includes a modem
and a communications package may access this information.

We are also developing a Master Veteran Record (MVR) to integrate multiple
independent veteran fies This will permit the most common data about each vet-
eran, to be shared by all service providers, whether at a benefits office or a VA medi-
cal center.

The MVR will permit prompt and complete updates in a veteran's record, such
as changes in family dependents or mailing addresses. Veterans will experience
fewer delays and fewer repetitious questions, faster response from service providers,
and access to a unified view of their benefits status.

VA education claims processing is being consolidated from 58 to four sites as a
part of our re-engineering efforts. Our aim is to enhance the already high quality
service and improve customer satisfaction through more timely benefits delivery and
to provide operational efficiencies. The consolidation has been completed for 22 of
our 58 sites and the balance will be consolidated by the end of 1996.

Mortgage loan accounting activities are being consolidated for improved fiscal con-
trol. Six offices have been consolidated into three other offices in pilot form. Based
on the success of the pilots, we glen to expand this approach to more offices in 1995.

This year our Veterans Benefits Administration is consolidating into four sites the
human resources functions now performed at 52 locations. The consolidation will
allow VBA to maximize the use of its Human Resources. Management professionals
across state lines. The resulting personnel savings will be redirected to the delivery
of benefits.

We are also working with a Navy Reinvention Lab to acquire their software de-
signed to significantly reduce paperwork processes associated with personnel activi-
ties.

In addition, the Veterans Benefits Administration is consolidating the manage-
ment of its two records centers (retired benefits records and service medical records)
located in St. Louis, MO. Through this initiative, we will streamline records oper-
ations; more focused, responsive management control; take advantage of
greater flexibility to use employees between operations at the two sites; and reduce
administrative costs.

Information technology is a tool that all agencies need in order to help in the proc-
ess of restructuring, re-engineering and improving how we do business. While a tre-
mendous and indispensable tool, information technology requires significant invest-
ment. The President’s FY 1996 budget includes $99.6 million for VBA information
technology initiatives.

SHARING PROGRAMS

A. principle objective of sharing programs is to maximize lization of federal
health care resources through agreements between the Department of Veterans Af-
fairs and the Department of Defense.

We are very proud of our medical sharing program with the Department of De-
fonse. We now have 670 agreements in effect with 140 military medical treatment
falls representing 4,170 shared services. This is 819 percent increase over the
FY 93 number of agreements.

VA and the Air Foree have shared a medical center for several years at the New
Mexico Federal Medical Center in Albuquerque. We have similar sharing agree-
ments with the Air Force at the Nellie Federal Hospital in Las Vegas, and at the
Anmy’s Lawton, Oklahoma clinic .


7

system. If we continue as we are going, what happens to the sys-
tem?

Mr. BAINE. In my opinion, Mr. Chairman, if the system remains
as it is, given the decline in veteran population and a number of
other factors, I believe that the system will wither away by itself
over some period of time.

Mr. SHays. But by doing it that way, Members of Congress don’t
have to make a more direct

Mr. BAINE. That is true.
an Suays. In other words, you allow the patient, in a sense, to

jie.

Mr. BAINE. That’s my own Rersonal opinion. I think that the
trends that we have seen over the last 25 years are headed in that
direction.

One other comment I would like to make in response to your
opening comment——

Mr. BAINE. I am fond of saying that it is entirely possible to pre-
serve and perhaps enhance the veterans health benefit without
necessarily preserving the hospital system, the health care system
as it is today. This has been done, as you may be aware, in some
other countries wheré the veterans health benefit has been en-
hanced and veterans have priority over other citizens in the private
sector.

Mr. Suays. Yes.

Mr. BaINE. If the Congress and if the policymakers, to use Mr.
Town’s phrase, were to decide that that’s the way to go, this would
provide VA an ppportunity to do the things that it does probably
better than anybody in this country, for example, treatment of spi-
nal cord injury, posttraumatic stress disorder, mental health, drug
and alcohol abuse, and blind rehabilitation.

Mr. SHays. Your point being that there is a greater area of ex-
pertise here and so on?

Mr. BaINe. Yes, yes. And these are all services that are provided
by some medical centers around the country. In my view, resources
could be shifted to pay increasing attention to those kinds of serv-
ices, and for the acute care needs of veterans, perhaps make great-
er use of the private sector.

Mr. SHAYS. Mr. Trodden, what happens to the system if we allow
it to continue the way it is? You pointed out changes you suggest.
we make to highlight efficiencies of hospitals and so on—or the
lack of efficiencies. But, if we make no changes, what happens to
the system 5, 10, 15 years from now?

Mr. TRODDEN. I think the system is in trouble if no changes are
made. I think there is probably agreement on that score. For exam-
ple, I think there is agreement from the Secretary, from the Chief
Medical Director on down, that the thrust of modern medicine is
away from inpatient treatment and toward outpatient treatment.

So, if nothing else, we have a set of eligibility rules right now
that make it tougher for a veteran, eligibility-wise, to get out-
patient coverage than it does to have him admitted to the hospital.
That makes little sense to me. So, if nothing else, it would seem
to me that would have to change.

Mr. SHays. Mr. Towns.


83

One thing is certain. We believe it’s a national resource, and we
believe very strongly that it’s very much worth preserving.

And that concludes my statement. Thank you.

Mr. Suays. Thank you very much, Mr. Bollinger.

[The prepared statement of Mr. Bollinger follows:]

PREPARED STATEMENT OF JOHN BOLLINGER, Deputy EXECUTIVE DIRECTOR,
PARALYZED VETERANS OF AMERICA

Chairman Shays, Ranking Minority Member Towns and Members of the Sub-
committee, on behalf of the Paralyzed Veterans of America (PVA), I wish to thank
you for this opportunity to present testimony today regarding the Veterans Health
Administration's (VHA) Reorganization Proposal. PVA commends the Secretary of
the Department of Veterans Affairs (VA) Jesse Brown and the Under Secretary for
Health Dr. Kenneth W. Kizer for submitting a progressive reorganization plan for
VA's health care system. Moreover, PVA would like to praise Dr. Kizer’s leadershi
of VHA and his courage for undertaking the daunting task of realigning VHA’s
health care delivery system.

Paralyzed Veterans of America (PVA) is a Congressionally chartered veterans’
service organization all of whose members have experienced catastrophic spinal cord
dysfunction (SCD). Since our founding nearly fity years ago, immediately followin,

forld War Il, our members have relied upon the VA health care system for the ful
range of health care. The extensive and continuous medical and rehabilitative care
requirements of SCD individuals encompass the broad range of medical specialties
the VA offers and VA in addressing the needs of SCD veterans has developed a
unique gystem of SCD) services, many of which have no counterparts in the private
sector. This system of care consists of acute, sustaining and long-term care services
which addresa the lifetime needs of veterans with spinal cord injury or dysfunction.

Because of the broad spectrum of health care services PVA’s members require we,
as an organization, have historically focused much of our energy in working to en-
sure that the VA health care system meets these requirements. Through studies,
research and continual monitoring of service provision PVA addresses the health
care needs of our membership. For this reason we are pleased to present our views
regarding the Teorganization of the VA health care system.

VA views the 's plan as a step in the right direction, one that will change
the veterans’ health care system to a more patient centered and efficient program.
To that end, PVA extends its experience and expertise to this Subcommittee and
to the VHA to assist in anyway in the realignment of the veterans’ health care sys-
tem to meet the health care needs of all its users, including those veterans with
spinal cord dysfunction (SCD).

Mr. Chairman, PVA supports this effort by the VA to streamline its management
structure and enhance the efficiency of the veterans health care system. However,
in doing so, we must make certain that VA does not lose sight of the VA’s primary
health care mission. The VA has historically focused on addressing those medical
requirements of veterans which are noticeably prevalent in the veteran population
and related to their military service. For PVA’s members those services have been
provided by the VA’S system of spinal cord injury/dysfunction care. For other veter-
ans the VA has created unique programs focusing on many specialized areas of need
such as, amputee care, blind rehabilitation, long term care and PTSD and mental
health care. As the VA’s restructuring moves forward it is extremely important that
these core, specialized services are given special consideration, It is essential that
these specialized services are recognized as being the cornerstone of VA’s health
care mission. The reorganized VA must maintain and enhance these specialized
services which will to allow VA to retain its unique role in meeting the health care
needs of veterans.

PVA, along with three other national veterans, service organizations, develops an
Independent Budget each year which provides Congress a counterpart to the Admin-
istration’s budget request for VA programs. This document also provides particular
recommendations our organizations ave for managing VA resources. For many
years, the Independent Budget has called for the same type of decentralized man-
agement evident in the Under Secretary's “ Vision for Change.” The Independent
Budget’s greatest call over its nine years of publication, however, has been for eligi-
bility reform. Such reform would allow VA practitioners to make the most appro-

i ical decisions regarding treatment of their patients, regardless of that vet-
lity classification. We believe that eli y reform is essential
to successful allocation of resources within VA and one that is missing from the
organization plan. It is one thing for VA to reorganize and decentralize its adminis-



5

these recommendations have been implemented and the rest are in
the process.

In the area of adjudicating claims for benefits, 1 am happy to re-
port that we have made great progress in reducing our processing
time. With our proposed budget, we will reduce processing time for
original disability compensation claims from 213 days in May 1994
to 140 days in 1996. That is a reduction of more than a third, and
we are working toward a goal of 106 days by 1998.

The Board of Veterans Appeals continues to address the unac-
ceptable amount of time it takes to process an appeal. The board
of appeals is now authorized to issue decisions by individual board
members rather than by three-member panels, provide pay com-
parability with administrative law judges, and increase the number
of board members.

In fiscal year 1996, we are requesting 28 additional positions
which increase the board’s staff to 477. We expect a reduction in
average response time from 745 days to 687 days. We are also
shifting resources from administrative areas so we can increase the
number of decisionmakers, and we are making other changes to im-
prove productivity. For example, we are now using more automa-
tion, and we are bringing board members into the review process
earlier.

Also, we have established performance standards for board mem-
bers. The implementation of the recommendations by the select.
panel on productivity improvement for BVA has resulted in a 19

ercent improvement in appeals processing time, and we will do
etter, Mr. Chairman.

Last month VA activated a toll free telephone number to provide
information on benefits and issues of direct concern to Persian Gulf
veterans and their families. We have received almost 30,000 tele-
phone calls during the first month of service.

Mr. Chairman, we are working very hard to incorporate informa-
tion technology in our reengineering in spite of the significant in-
vestment required. VA and DOD are sharing services and facilities
through 670 agreements in effect with 140 military medical treat-
ment centers. This is an effort to maximize utilization of Federal
health care resources.

Several of the recommendations of the National Performance Re-
view are the elimination of restrictive provisions and appropria-
tions laws, multiyear funding and the cessation of management by
FTE. VA would find it very easy to manage and provide service and
benefits to veterans if these restrictions were removed or reduced.

We therefore, Mr. Chairman, recommend that all action taken to
improve the Federal Government as a whole should recognize the
differences between agencies. One size does not fit all. Solutions
must include the flexibility needed to suit the circumstances of
each individual agency.

In closing, Mr. Chairman, VA is very eager to apply the prin-
ciples of reinventing government to become even more customer fo-
cused, to streamline our processes, procedures, and operations, and
to be more cost-effective and efficient. As we work toward those
goals, we must keep one thing in mind, Mr. Chairman, and this
Means a lot to us. We must not ask our veterans to fit into the so-


81

being here, and we want to do the right thing by you and our coun-
try, and we look forward to your testimony.

‘At this time, if all of you would raise your right hand.

(Witnesses sworn.]}

Mr. Suays. For the record, all five gentlemen have responded in
the affirmative and are under oath.

Let me be clear, we are going to have testimony then from three
different individuals. We are going to start with you, Mr. Bollinger.
You were our invited guest, and with some warning, and everyone
else is an invited guest on short notice. And, Mr. Bollinger, we are
delighted to have you here and welcome our testimony.

fr, BOLLINGER. Thank you very much, Mr. Chairman, and thank
you for inviting this expanded panel here on short notice. I don’t
feel quite as guilty about focusing my comments on a specialized
service.

Mr. SHays. We are happy that we have at least resolved that, be-
cause you certainly were eager to have others participate and so we
are happy that they have.

Mr. BOLLINGER. Before I comment on the restructuring of VA
and Secretary Brown and Dr. Kizer’s plan, I want to take just a
moment to tell you about the stake that PVA members and para-
lyzed veterans have in this issue.

Health care delivery is something that we depend on every single
day of our lives from the first moment of injury and for the rest
of our lives. Our ability to obtain quality acute care, rehabilitation,
sustaining care, long-term care will dictate the quality of our lives.

Interdisciplinary medical care is a lifelong need for PVA’s mem-
bers. Prosthetic equipment, neurologists, urologists, plastic sur-

eons, adaptive devices, all those things are a part of our daily
lives. So our stake in the restructuring of VA is very high.

VA's unique expertise in the specialized area of spinal cord injury
is something that we depend on ve heavily, so it is with this
point of view that I share our thoughts on VA’s future with you
today.

As you consider the restructuring of VA, there are several areas
that I would like to stress today that I think are most important
both in terms of the costs to our country and in terms of the provi-
sion of quality health care, and these areas are specialized services,
entitlement reform and funding and health care practice guidelines
or parameters.

As you know, specialized services include’ such care as spinal
cord injury medicine, blind rehab and PTSD. These are areas
where VA has over the years developed a unique expertise. And as
the April 1995 GAO report testifies, these special services fill a
void in the private sector’s medical care system. And we know very
well that in the case of spinal cord injury, and with the exception
of a few model centers that exist, VA’s the only game in town for
most paralyzed veterans. And even with some of the shortcomings
VA has, VA provides the most comprehensive interdisciplinary care
that we desperately need.

It must be understood that in order to fulfill the missions dis-
cussed in GAO’s report, the specialized services and the safety net
mission that they mention, these services can’t exist independently,
and that’s where we differ from the GAO’s report.


92

ceive part of their education in the VA, and that adds a great deal
to the quality of health care universally, not just in the VA.

Thank you very much, Mr. Chairman.

Mr. Suays. I thank you.

And what I am going to do is I am going to start with questions.
And Mr. Vollmer and Mr. Fuller, please feel free to comment. If
you wanted to make just a brief comment now, I would be happy
to hear it. Otherwise, we will start with the questions.

The only way I can really learn is to just be very up front and
very open with you, and I might say something that you can take
offense with, but I will learn better this way.

The way my mind works, we have a certain number of veterans
that we have said qualify for assistance, those who have injuries,
service related, and those who do not have financial resources. We
have eliminated the use of these facilities by other people, basi-
cally. Am I pretty generally on target?

Now, I hear the word eligibility, and what that says to me is, Mr.
Gorman, you are making a comment that maybe some of the reduc-
tion in the demand for services may be related to who we say is
eligible and who isn’t. We have an interesting issue. Do we try to
maintain all of the hospitals? And, if so, at what level do we main-
tain them? And if in the process of trying to maintain all of them,
do we cripple too many of them in the sense that we are not going
to allocate the resource?

I mean, as a policymaker, this is what I am wrestling with. And
the challenge that we are going to have on this side is that we
don’t want to offend any veteran, especially someone like myself,
who was a Peace Corps volunteer when my friends were in Viet-
nam. And so, you know, the temptation for all of us on this side
of the desk is to simply back away and just let the system evolve
somehow.

I don’t think we have the resources to maintain all the hospitals
at the condition they need to be, and so maybe you all could ex-
plain something to me. I don’t understand why a veteran would
want to travel 1¥%2 hours to a veterans’ hospital to get a service
that they could get as well in their own local hospital. And I won-
der why we don’t have a veterans’ card that entitles you to go to
any hospital you want and get the best service and that you be
first in line.

So tell me why—what scares you about that kind of system that
would enable the veteran to go to the hospital nearest with the
card and get the service they want?

Mr. GorMAN. If I could just make a couple comments. I know Mr.
Fuller would want to get in with more of the specifics.

Mr. Suays. Sure.

Mr. GorMAN. First of all, I am a Vietnam veteran, a combat vet-
eran. I take no offense at anybody who is not a veteran. I think
we all did what we did.

The point that I would make is that we do have, I believe, a com-
mitment to honor. And the commitment to honor—we are going to
the 50th anniversary of the end of World War II and we are going
through all these ceremonies, and | think we saw this at the height
of the Gulf war when our young men and women came home vic-
torious. It was a celebration, but it was a short-lived celebration,


60

direct delivery system. For fiscal year 1996, VA is seeking an appropriation of about
$17.3 billion to maintain and operate 173 hospitals, 376 outpatient clinics, 136 nurs-
ing homes, and 39 domiciliaries. VA facilities are expected to provide inpatient, hos-
pital care to 930,000 patients, nursing home care to 35,000 patients, and domiciliary
care to 18,700 patients. In addition, VA outpatient clinics are expected to handle
25.3 million outpatient visits.

‘Over the last 65 years, VA has scen a significant evolution in its missions. In the
1940s, a medical education mission was added to strengthen the quality of care in
VA facilities and help train the nation’s health care professionals, In the 1960s, its
health care mission was expanded with the addition of a nursing home benefit, And
in the early 1980s, a military backup mission was added.

The type of veterans served has also undergone an inevitable evolution. VA has

adually shifted from a system primarily providing treatment for service-connected

isabilities incurred in wartime to a system increasingly focused on the treatment
of low income veterans with medical conditions unrelated to military service. Simi-
larly, VA once treated an almost exclusively male veteran population but is now
striving to meet the privacy and health care needs of increasing numbers of women
veterans. Finally, the growth of private and public health benefits programs has
given veterans additional health care options, placing VA facilities in direct competi-
tion with private sector providers.

ACTIONS NEEDED TO IMPROVE THE EFFICIENCY OF VA HOSPITALS

Because VA is not subject to many of the cost-containment pressures, such as the
Medicare prospective payment system, exerted on private sector hospitals in the last
10 years, it lags far behind the private sector in efforts to improve the efficiency
of its hospitals. For example, VA continues to perform most cataract surgery on an
inpatient basis years after the private sector has shifted such surgery to an out-
patient basis. Similarly, VA’s lengths of stay continue to be significantly longer than
those in the private sector.?

VA's complex eligibility and entitlement provisions are frequently cited as a pri-
mary reason why VA cannot move more care out of hospitals and into ambulatory
care settings. However, our work has pointed to management inefficiencies, not eli-

ibility provisions, as preventing VA from shifting much of its current hospital work
fade ambulatory care settings.

VA's eligibility provisions were amended in 1973 to specifically authorize the pro-
vision of ambulatory care to any veteran—regardless of income or other factors—
when that care would obviate the need for hospital care. The eligibility provisions
would, for example, allow VA to perform cataract surgery on an outpatient basis to
obviate the need for inpatient care.

Our work over the past 5 to 10 years has identified a series of recurring manage-
ment problems limiting VA's abiliy to improve both the efficiency of its health care
system and services to veterans. S cifically , VA lacks

—oversight procedures to effectively assess the operations of its medical cen-
ters,

—systems to shift significant resources between medical centers to provide
consistent access to VA care,

—information systems capable of effectively coordinating patient care between
VA facilities and

—a corporate culture that values economy and efficiency.

VA has a number of initiatives to address these problems and strengthen manage-
ment while further decentralizing control.

Central Office Oversight
VA’s central office lacks much of the system wide information that it needs to ef-
fectively (1) monitor the performance of its medical centers, (2) ensure that correc-
tive actions are taken when problems are identified, and (3) identify and dissemi
nate information on innovative programs developed by its medical centers. For ex-
ample, VA did not know .
—How many veterans are denied health care services because of a Jack of re-
sources and what 3 of veterans are being denied care?
—Which VA facilities have excess capacities that they are able to sell to the
Department of Defense or the private sector??

2An unpublished VA study reported the average length of stay in VA hospitals to be 10.6 days
in 1991 compared with 6.8 days in private sector hospital

3VA medical centers are authorized to enter into affiliation agreements with nearby medical
schools. Through these agreements, VA centera and medical schools may share excess services
as a means of improving the efficiency of operations. This can be done through joint acquisition



56

area that our committee should focus on the more, and maybe just
make some comments on at least one of those three areas.

Mr. TRODDEN. OK. The central theme that I would suggest for
the committee’s consideration, Mr. Chairman, are the issues that
surround the Government Performance and Results Act, the CFO
Act, and the whole set of issues of what it is that’s expected of the
Federal Government and in this case the Department of Veterans
Affairs in the way of producing an annual report.

I have my own visions here, and I would love the opportunity to
share that with the committee, but at the moment I don’t know
that they’re anything more than my visions or my interpretation of
what the Congress had in mind when they passed the CFO Act and
GPRA. But I would envision, for example, that, ultimately, the De-
partment of Veterans Affairs would be producing an annual state-
ment that would not only show a set of Balanced books and records
from a financial standpoint but would also be describing in mean-
ingful performance terms whether VA had a good year or a bad
year.

In the prior year, for example, did VA deliver more services to
veterans, more effectively, with higher quality, than the year be-
fore? Or did they not?

And in order to produce such a document, I think there needs to
be great clarity of the public policy of the United States with re-
gard to what the Department of Veterans Affairs exists to do on
the one hand, and then, second, given that clarity, I think it’s then
incumbent on the Department to come back to the Congress with
meaningful performance measures that would describe how well
VA is executing the public policy of the United States.

So I think there’s room for a lot of improvement in the clarity
of what the charter is; the expectation level of the Congress and
the American people for VA; to whom should we be providing bene-
fits, what, when, where and how. And then there’s room, consider-
able room in my mind, for VA to come back to the Congress and
pose meaningful performance measures that describe how well that
mission has been executed.

Now I have in mind, maybe not in my tenure but before I leave
this earth at least, to see an audited financial statement that
would be as meaningful, for example, to the Secretary of Veterans
Affairs as the annual statement of profitability is to the chairman
of General Motors or any other corporate entity that you choose to
pick. I don’t think we're there yet, and I would like to see us move
in that direction.

Mr. SuHays. That's a fairly serious indictment, if we don’t know
what our mission is.

Mr. TRODDEN. I don’t think it’s unique to VA, Mr. Chairman. I
think there’s a lot of agencies that now, given the passage of GPRA
and given the passage of the CFO Act, are struggling with just
those very questions, things that have been presumed for years and
years and now one is forced to articulate.

Mr. SHays. Well, we'll get into that in the questions. I guess we
could see the same thing with Members of Congress, in making
sure we know what our mission is.

Mr. Suays. Mr. Baine.


18

bring the processing time for benefit claims from 140 days to 106
days and keep bringing that down. How is that coming?

e other complaint I hear is the fact that when you get an ap-
peal at the Board of Veterans Appeals it just seems to take forever.
Is there anything we can do on that from our perspective and what
arg you doing?

ir, BROWN. Yes, sir. First of all, let me state that we are ex-
tremely, extremely happy with the numbers on the Veterans Bene-
fits Administration side, that is Mr. Vogel’s side. As you correctly
Pointed out, we expect by 1998 to have our original compensation
claims down to about 106 days. Two hundred fifty thousand in
terms of a backlog is really where we want to be. At 250,000, that
will keep all 13,000 of our employees working 8 hours a day, and
we are rapidly moving in that direction, so I am happy with that.
I don’t think that you are going to hear complaints too much longer
complaints from the adjudication side of the House.

Now, as it gets to the Board of Veterans Appeals, that is another
story, Mr. Davis, and this is why. In 1991, the average what we
refer to as response time was about 139 days. Today, it is over 600
days at the Board of Veterans Appeals. That is from the time the
case is certified to go to the board until they actually make a deci-
sion. So you can see we are talking about 2 years, and while the
numbers showed a little dip primarily because of some manage-
ment initiatives that we took, for instance we allowed one judge or
board member to sign the case. That created an additional effi-
ciency of about 27 percent. Right now they are in the process of re-
structuring the whole system. That is going to create some more
efficiency, I think, but the bottom line is this, is that we still are
making decisions on less cases than those that are coming in. So
we haven't leveled this out yet.

Mr. Davis. The backlog is rising; in other words?

Mr. BRown. That is exactly right. While the numbers that we
cited to you in the official record would show that it dropped down
just a little bit, but the bottom line is that we still have more cases
coming in than we have going out. So our whole effort now is to
try to balance this out.

I would say to you, many people would suggest that a lot of this
is because of the VA’s inefficient structure, but that is not really
the truth. What this is all about is the court. Before we had the
Court of Veterans Appeals or Judicial Review Act in 1988, each
case was considered, what we used to refer to, on its own individ-
ual merit, which meant it had no precedent setting measure what-
soever. Each case was considered Uifferently. When the court came
in, every case that the court renders, whatever the decision, it then
became binding on all cases throughout the system, so let’s just as-
sume for the sake of —

Mr. Davis. That would take care of other backlog issues?

Mr. Brown. Let’s assume for the purposes of illustration there,
today the court renders a decision saying in order to comply with
due process you are going to have to put an X on every case. Well,
we have 46,000 cases that are already ready to come to the board.
Theoretical , all 46,000 would have to be looked at again in order
to comply with the decision that was made today. So that gives you
an example of the kind of complexity that we are now involved in


AT

egory of customer for comparability when negotiating the FSS price. There are, how-
ever, other groups of buyers that receive greater price discounts, such as national
accounts or state and local governments.

In the past, VA has been told by the contractors that VA was not comparable to
national accounts, for example, because VA could not negotiate to purchase specific
quantities or dollar amounts, Part of the reason for this is that VA was unable to
identify how much it needed because it did not have reliable, historical data on
amounts purchased in the past. VA’s automated tracking system should solve this
problem and allow VA to negotiate much larger purchases than it has in the past.

In many cases, the best prices are given to customers who commit to large quan-
tity buys. In other cases, customers who purchase full product lines are given larger
discounts than those who purchase a few products. Accordingly, 1 believe that na-
tional VA contracts, as opposed to each VA medical facility buying for its own needs,
can be negotiated at a lower price based on buying practices across the entire VA
health care system with commensurate larger buys.

‘A also needs to become more creative in negot
example, VA could negotiate better pricing by usi
provide larger discounts as incentives for purch: ng in larger quantities.

VA needs to do a better job of identifying an urchasin more cost effective
items. For example, in a recent OIG audit, it was determined that better commu-
nication among VA medical facilities about the results of drug research and which
drugs are cost effective would produce about $44 million in cost savings annually.
Some VAMCs identified cost effective drugs to use in their drug formularies, but
had not shared this information throughout the VA medical system. Therefore, some
patient treatments were more costly because the treating physicians were unaware
of cost efficient substitute drugs, many of which could have been purchased in large
quantities, resulting in even further savings for VA.

Developing cost effective drug formularies is not an attempt to limit the flexibility
of physicians to select the most appropriate drugs for their patients. Rather, it is
an attempt to-identify cost effective drugs that satisfy the treatment needs of veter-
ans that can be used throughout VHA in large quantities.

To achieve maximum concentration of VA’s buying power, I believe consideration
must also be given to standardization of drugs, medical supplies, and medical equip-
ment, to the extent practicable, across the entire VA health care system. This is not
to suggest that some bureaucrat in Washington should dictate to YA surgeons what
sutures should be used. VA needs to track what it uses and then allow VA’s sur-
geons and nurses to collectively settle on a limited range of products, that best meet
u nei needs and that concentrate VA’s buying power to the maximum extent pos-
sible.

The benefit of standardization and la rehases is illustrated by VA’s decision
to purchase I.V. solutions. VA concluded that I.V. solutions are generic, and that
economies of scale could be realized by large buys of a-single brand. VA solicited
a competitive bid to purchase I.V. solution for all of VHA. The net effect was a sav-
ings of over $65 million during a 6-year period (1988-1993) on this item alone.

Information Resources Management:

VA's use of information resources management (IRM) is critical to controlling
costs and improving the performance of VA programs.

However, consistent with VA’s policy of centralized direction, and decentralized
implementation, each VA organization has evolved an infrastructure to address its
own IRM needs. This has resulted in fragmented and untimely policy development,
and systems being developed independently of one another without consideration of
sharing of information.

VA automated information systems currently:

* do not provide VA management with needed information for effective deci-
sion-making,

* are not integrated,

* are dificult to usé and increase the time necessary to respond to veterans!
needs, ani

* adversely affect the accuracy, relevancy, timeliness and completeness of VA

ita.

ing the best possible terms. For
tiered pricing structures which

To attempt to foster communication and cooperation and to strengthen IRM ef-
forte within VA, the Chief Information Resources Officer (CIRO) for VA has estab-
lished both a Senior IRM Steering Committee and a Senior Information Resources
Management Council. One of the most serious impediments to unified service deliv-
ery is the inability of VA offices to access each others’ data bases or to share infor-
mation of veteran status among field stations. From the veteran’s perspective, this
results in multiple independent contacts on issues vital to the veteran's health and



51

VAMCs have become apparent. For example, some VAMCs that provide comparable
services and treat about the same number of patients have substantially different
staffing levels. In FY 1993, for example, one VAMC treated about 36,560 unique pa-
tients and had total st of about '1,383 FTEE. Another VAMC treated about
37,520 patients and had 2,980 FTEE. This means that for about the same number
Of patients, the one VAMC had more than double the staff of the other, similar
VAMC. As indicated in a recent OIG audit, this is not an isolated incident. Dif-
ferences in staffing levels exist throughout VA’s health care system. These dif-
ferences are major and require intensive exploration and explanation by VHA.

I believe that many factors have contributed to these disparities over a long pe-
riod of time. Among them are VA’s historical-incremental budgeting approach, the
lack of comprehensive VANC operating indicators and performance measures, paro-
chial interests that have opposed rational proposals to change specific facility mis-
sions, and the regulatory and procedural barriers that make downsizing and trans-
fer of resources extremely difficult,

VHA is reorganizing its facilities into Veterans Integrated Service Networks
(VISNs). This provides VA with the opportunity to bring about more equitable re-
source allocation and improved access to patient services across the nation. The con-
cept is that the VISN Director will properly distribute resources throughout his/her
network. | do wonder, however, how resources will be equitably distributed to each

rector.

Surgical Program Realignments:

Recent OIG audit work has shown that some VAMCs continue to operate surgical
specialty programs that are not viable for either or both of two reasons. These pro-
grams are not feasible at some facilities because the cost-to-benefit ratio is inordi-
nately high when compared to other VA facilities to which patients could be re-
ferred. Or, more importantly, they are not viable because the specialty workload is
not high enough for the surgical staff to maintain a minimally acceptable skill level.

The solution to both of these conditions is to concentrate certain surgical specialty
workloads at selected medical facilities. This advantage in costs and the level of sur-
gical skill will have to be reviewed in the context of the access problems that
emerge.

Surgical Summary:

My office is in the process of drafting summary report of VHA’s surgical pro-
gram, The report is the culmination of 8 previous reports, and it will provide an
overall assessment of surgical activity throughout VHA. It will detail the need to
develop and implement. « nationwide stratogy that will confront declining surgical
workloads and changes in the health care environment.

The draft report will challenge VHA to redefine the missions of VAMC surgical
activities nationwide, and to set goals for allocating resources to these functions con-
sistent with existing surgical activities that have demonstrated productivity and ef-
ficiency. These efforts, over time, are expected to generate millions of dollars in cost
efficiencies that VHA could redirect to other high priority health care needs.

report also will discuss opportunities to improve management information
systems that monitor surgical activities, to better document the supervision pro-
vided surgical residents and anesthesia providers, and to validate justifications for
minor surgical construction initiatives.
VA Medical Center Physician Staffing Levels:

VAMCs employ about 19,400 full-time equivalent employee (FTEE) staff, contract,
and resident physicians with salary and benefits costs of about $1.8 billion. Physi.
cian staffing may offer an opportunity to improve resource allocation among

‘AMCs, For example, an ongoing OIG audit has identified significant disparities in
the allocation of physician staffing among similar VAMCs. To illustrate, among 64
affiliated VAMCs, which accounted for about 76 percent of total VA physician FTEE,
the ratios of patients treated to physician FTEE ranged {rom a low of 86:1 to a high
of 191:1, which indicates that some VAMCs treat twice as many patients per Physi-
cian as other facilities.

y office has been unable to attribute the wide disparity in the allocation of phy-
sician FTEE to such factors such as (1) reported physician time spent on education
and research, (2) the number of residents in training, or (3) the acuity and/or com-
plexity of care provided. When these factors were accounted for, essentially the
same VAMCs appeared in the same higher and lower ranks of relative resource allo-
cation.

‘This audit may further demonstrate the need for performance measures or oper-
ational indicators, Historically, VAMCs have not had physician staffing standards
or operational indicators that would help them determine the number and type of



80

Mr. SULLIVAN. I don’t at this time, sir.

Mr. SuHays. That was very insightful—or wise.

Mr. Linz. The only thing I would add is that I really think the
Congress and VA have some very tough choices to make because
of the decline in VA hospital utilization.

Mr. SHays. Yes.

Mr. Linz. Should actions be taken to admit nonveterans or to
admit veterans’ dependents to try to prop up the hospitals? Or
should you start moving toward transferring the veteran’s acute
care program toward the private sector and focusing on the special-
ized services?

Mr. SHays. These are major issues, and you have duly warned
us, I think, of the need to address this, and, you know, as policy
decisionmakers, it is our decision, but I am happy you have raised
these policy questions for our concern.

This has been a very helpful hearing and enjoyable as well. I
would like to request that someone from each of your offices stay
to listen to our last panel. It won't be as long.

John Bollinger, deputy executive director of the Paralyzed Veter-
ans of America. We have also invited on short notice David
Gorman, the deputy national legislative director of Disabled Amer-
ican Vets. And they have had the opportunity to hear your com-
ments, and they might have some responses to that. And so if
someone—either all of you or some of you could stay, it would be
very helpful.

Mr. TRODDEN. I will be able to stay myself, Mr. Chairman, at
Teast until 12:30; and if it goes beyond that, I will leave somebody

ere.

Mr. SHays. Thank you very much. I really appreciate it. And
we'll call our second panel. And, again, thank you all for your testi-
mony and your contribution.

We were, during part of this hearing, joined by Mr. Chrysler and
Mr. Souder as well, for the record.

And we also are joined by Frank Buxton from the American Le-
gion, and it is wonderful to have you here as well. I am happy you
came to the hearing. We are inviting you on short notice, and I just.
think it is very appropriate that you all be participants.

d we are also joined by Douglas Vollmer, is that correct? So
we have accounted for everyone.

Mr. Fuller. And, Mr. Fuller, you are with——

Mr. FULLER. Paralyzed Veterans of America.

STATEMENT OF JOHN BOLLINGER, DEPUTY EXECUTIVE DI-
RECTOR, PARALYZED VETERANS OF AMERICA; ACCOM-
PANIED BY DOUGLAS VOLLMER, ASSOCIATE DIRECTOR FOR
GOVERNMENT RELATIONS, PARALYZED VETERANS OF
AMERICA; AND RICHARD B. FULLER, DIRECTOR OF HEALTH
POLICY PROGRAM DEVELOPMENT, PARALYZED VETERANS
OF AMERICA; AND DAVID GORMAN, DISABLED AMERICAN
VETERANS; AND FRANK BUXTON, AMERICAN LEGION
Mr. Suays. Let me tell you all that we need to swear you in.

Mr. Bollinger, I am not expecting you to stand up, ut I thank
you all for your service to your country and you all honor us by


13

Gulf veteran who feels that he or she is suffering from a problem
that developed concurrent with their service in the Persian Gulf,
No. 2, because of the cooperation of this body, we are now payin
compensation as of February 3, we are actually issuing checks an

decisions that grant service-connected benefits to veterans who are
suffering from undiagnosed illnesses. I am very happy about that.

Three, we are moving forward with all speed in trying to find out
exactly what the cause is, and that is one of the reasons why our
research initiatives are so very important to us. We have about 40
projects that are out there. We have set up our own research cen-
ters. We have three of them, one in Boston,. one in East Orange,
NJ, and one in Portland, OR.

‘Then the last thing that I am really extremely proud of because
it ties in with the real genesis of your question, and that is our out-
reach effort.

We believe very strongly if people have been hurt or somehow
disadvantaged as a result of having served in the Nation, we think
those benefits that the Congress set aside should be made available
to these individuals, so we have undergone a massive effort trying
to contact all of the people who have been ossibly exposed to prob-
lems that would interfere with their ability to become a part of
mainstream America.

Mr. Suays. What is the first thing that comes to mind when you
think of your biggest challenge or your least successful venture to

late?

Mr. Brown. I would think it is the massiveness of the system.
This is a system, sir, where we have over 200,000 employees, we
operate off of a $38 billion budget which means spending some-
where around $100 million each and everyday. As you try to bring
about change because the system is so huge, that change comes
very, very slowly, and with that, you end up having a higher frus-
tration level.

But I think that we are now moving in the right direction, and
I say that primarily with respect to two, just two of our programs.
Everything that we do, when we talk about our mission, and we
talk about all of the VA employees and all of the resources that we
have, we are really only talking about three missions.

The mission is quality health care, timely benefits and services,
and burying our veterans with dignity. Now, I believe, and this is
an area that we are going to have to fix, there is no doubt about
it, and Dr. Kizer I think is well on his way to fixing it, is that the
Nation has already decided that it is going to provide medical care
to our veterans, and as such I think that we must do whatever is
necessary to make sure that they are receiving good, strong com-
prehensive quality health care.

If you are going to provide health care, then that is what you
should do. If you are, you can’t nickel and dime it to death because
you are making life and death decisions. If you are not going to
provide it, then get out of the business.

Mr. Suays. The outpatient clinics, is this a program that you are
pursuing or is this a program that you are just basically doing pilot
programs on?

Mr. Brown. It is a program that we are Pursuing. T would say
to you, sir, that it is not something that the VA all of a sudden


55

tion, but Congress should keep pressing all Departments and Agencies to produce
financial statements that reflect overall mission performance.
VHA Reorganization:

As addressed in an OIG report on the implementation of VHA's strategic plan and
performance measurements, the degree of achievement of VHA’s goals and objec-
tives could not be effectively measured because of the lack of specific performance
criteria. As a consequence, oversight of the achievement of program goals and objec-
tives could not be performed, making it difficult to hold field managers accountable
for effectively managing and utilizing resources. However, the recent reorganization
of VA’s health care system provides opportunities to improve internal oversight and
accountability over the field. For example, by tying the performance elements of
medical center director performance appraisals to VISN goals, objectives, and cus-
tomer standards, VHA will serve as a good example of the progress that parts of
VA are making with performance measurement and accountability.

VHA's reorganization marks an era of reform for VA. The change from a system
having substantial central office control over the daily operations of medical facili-
ties, to the concept of organizational leadership by national headquarters is widely
supported. Also supported is the change to VHA program oversight of such fun-
damental end products as quality and timely patient care. VHA’s success in achiev-
ing this change, however, will depend on the development of criteria for performance
measurement.

The change from regions to VISNs should result in better coordination between
headquarters and the field, and help facilitate the integration of administrative,
clinical, academic and research staff within a network area. This is designed to im-

rove patient care and program results. However, the relationships, or processes,
etween medical centers, VISNs, and headquarters have not yet been well defined.
Issues such as the level of authority VISNs will have over medical centers within
their jurisdiction, and the degree of autonomy VAMC directors will have with re-
spect to how they use allocated resources, are unclear. Before the VHA reorganiza-
tion is implemented, roles and responsibilities should be clearly delineated.

In my opinion, an important part of the VHA reorganization plan is the develop-
ment of system-wide health care peli ies and practice parameters by which patient
care outcomes can be measured. While I expect the concept of medical practice pa-
rameters to face some opposition from VHA’s clinical establishment, I have been a
strong and vocal advocate for some form of quantifiable measures by which the OIG,
VA, and the Congress can use to assess the quality of patient care and other VA
provided health services.

Required performance measurement to improve results and enhance service is a
cornerstone of VHA’s reorganization plan. For example, VHA plans to develop per-
formance measures which allow comparison of the results of medical center oper-
ations with private sector counterparts. This assumes, of course, that the private
sector is making similar efforts in performance measurement. Modernizing and de-
veloping relevant management information systems that provide uniformity in the
data collection necessary for oversight and monitoring are also being planned.

VHA’s reorganization is a step in the right direction, but it does not solve all its
problems, nor all of VA’s problems. Many of the concerns that I have raised
throughout my testimony, dealing with issues such as construction management,
budgeting and allocation of resources, acquisition practices, and performance meas-
urement, continue to be opportunities for improvement.

During the 5 years that { have been Inspector General, I have seen major portions
of VA that have been under constant reorganization, with no significant change or
improvement in VA operations. The VHA reorganization plan is an opportunity for
change and improvement. Now, it is only a plan. As VHA strives to implement the
plan, assessments, feedback, and adjustments will be needed to refine and improve
operations. To this end, my office is dedicated to conducting independent and objec-
tive oversight aimed at helping VHA, and VA, fulfill its mission in the most effec-
tive, efficient, and economical way possible.

Thank you for the opportunity to present this comprehensive over-view of VA op-
erations to the Committee. I will attempt to answer the Committee's questions.

Mr. SHAYS. Before I call on Mr. Baine, I just wonder if you would
just give the committee a little bit more detail. Usually, we have
to work the other way and ask people who testify to conclude their
statements. But I wish if you could just give us a little bit more
meat in terms of what you feel in those three areas, which is the


2

doing? Should the federal government start such an activity if it did not exist today?
‘These questions must be asked about each program and every policy.

Today we will also discuss VA’s organization, operations, policies and programs.
We want to know what is working well in addition to what 1s not working so well.
We will examine the Secretary’s plans for cost reduction, improved efficiency and
departmental reform.

‘or FY96, the VA is requesting $39.5 billion in budget authority, a $1.3 billion

or 3.4% increase over FY95 budget authority. Discretionary spending in the budget

est is $19.2 billion, a 5.5% increase over FY95. VA’s employment. level request

js for 280,077 FTEs, a very slight rise over FY96 levels. We pe to identify oppor-
tunities for cost reduction in these numbers.

The subcommittee is particularly interested in hearing the Secretary’s plans for
restructuring the VA’s vast health care system and improving the effectiveness, effi-
ciency and quality of its health care services. The Veterans Health Administration
(VHA) now operates 173 medical facilities, 376 outpatient clinics, 39 domiciliaries,
and 133 nursing homes. VHA also administers 1,800 research projects for the VA.

The failure of health care reform legislation leaves unanswei the question of
how the VA will adapt its health care delivery system to the changing health care
marketplace. The subcommittee would be interested in the Secretary’s vision of how
the VA will be providing health care in 5 or 10 years and if the VA is still interested
in being a competitive provider.

We are planning additional hearings on the VA. Witnesses will include VA’s In-
spector General, the General Accounting Office, Congressional Budget Office, and
others from the public and private sectors familiar with the VA and its programs.

We look forward to Secretary Brown’s testimony. It will be helpful to this sub-
committee in discharging its responsibilities and we thank him for his time and
views.

[Witnesses sworn.]

Mr. SHavys. It is wonderful to have you here.

Before I call on Mr. Green, I would just ask unanimous consent
that Members be permitted to insert opening statements for the
record and also to allow our witnesses to do the same, and further
ask unanimous consent that the hearing record remain open for 3
days to allow Members to submit statements and questions for in-
clusion in the record.

Without objection, I would then proceed, and just invite Mr.
Green to make any comments he would like to make before we ask
you to speak.

[The prepared statement of Hon. Edolphus Towns follows:]

PREPARED STATEMENT OF Hon. EDOLPHUS Towns, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF NEW YORK

Military service is the most basic and sometimes the most necessary form of na-
tional service. For that reason alone, the Department of Veterans Affairs should em-
our federal commitment to honor and support veterans, their families and
their survivors. If we are to responsibly carry out that commitment, VA’s dual mis-
sion of providing specialized care for veterans with service-connected medical prob-
Jems and functioning as a safety net for veterans with low incomes must be sus-
tain
With the potential number of VA beneficiaries now totaling about 70 million, and
a staff of 260,000 throughout the United States and abroad, the policies and oper-
ations of the Veterans Administration affect the lives of one-third of the American
population. I welcome today’s hearing as an important first opportunity to consider
the Administration's strategy for restructuring and revitalizing VA. And I thank
you, Chairman Shays, for scheduling this hearing which I know you have planned
as a candid and balanced first look at Department of Veterans Affairs operations
and meaningful discussion of its future. did th posed
lay I point out, however, that even this agency did not escape the cuts
by the Republicans in their 1995 rescissions package. How we can invite the Sec-
retary to testify as to the efficacy of VA operations when the House is at the same
time planning to cancel six outpatient medical clinics—clinics serving one of the
most vulnerable and venerable groups in our society, is beyond me. se actions
are indefensible, and are a slap in the face to those who put their lives and limbs



72

Mr. Suays. Have either of you done studies that would determine
that you could provide a better service to veterans by letting them
go to their own local hospital?

Mr. BaineE. We have done some work with regard to polling vet-
erans. Polling is not the right word—we’ve had focus groups.

Mr. Snays. Surveys.

Mr. BaINeE. Surveys. And there is a fair amount of sentiment,
that a large portion of veterans would rather go for their normal
care to their private providers near where they live. As a matter
of fact, I think you'll find that most veterans—most of the 26 to 27
million veterans—do just that, because they have private insurance
or they're covered by Medicare or some other kind of insurance cov-
erage, which permits them to go to their private providers. And
then they will come to VA for the things that are not well covered
under the Medicare program or their private health insurance.

Mr. SHAYS. My time has run out, but, Mr. Trodden, did you want
to comment to that?

Mr. TRODDEN. No. A short answer would be I haven’t done any-
thing directly on that question, Mr. Chairman, but we did do a re-
view a couple years ago of eight small surgical units. And we
found—our concern was not primarily cost, although that was a big
factor, but also our concern was volume of activity that would keep
surgical skills at a level needed to maintain proficiency. And we is-
sued a report that said that those eight surgical units ought to be
considered for what we called consolidation. And the hue and cry,
particularly on this side of the government, was substantial.

r. SHAYS. This side being Congress?

Mr. TRODDEN. This side being Congress, yes, sir.

Mr. Suays. You speak in tongues sometimes.

Mr. TRODDEN. I'm sorry, sir.

Mr. SHAYS. You’re almost as bad as Alan Greenspan.

Mr. TRODDEN. I'll be direct. The Congress’ reaction was quite
vocal. You want me to be more colloquial, I’m saying they called
my Deputy IG out to the west and keelhauled him. And the ques-
tion was:

Mr. Suays. OK, that’s fair, that’s fair.

Mr. TRODDEN. Do you want—and the question was, do you want
this pointy-headed bureaucrat from Washington closing your hos-
pital?

Now I submit the most important power in Washington is the
power to frame the question. And the question, in my opinion, more
appropriately would be, if you’re only going to have your gall-
bladder snatched out once in your life, do you want to have it done
down the block by an outfit that does it a couple of times a month
or would you be willing to travel 100 miles to an outfit that does
it 20 times a day? I think you might get a different answer to that
question, depending on how the question is framed.

Mr. SHAYsS. Let me call on Mr. Towns.

And I appreciate your more direct comment. I have a sense that
we're afraid to ask the question because we may not like the an-
swer and that we may need to be asking some questions. I don’t
mean in this room, but I mean these broader questions that both
of you hinted at.



27

beds so we have got to get beyond that. We have got to put that
in its proper context. g lot of folks allege that we don’t have
enough market out there—we don’t have enough people. We have
more people to use our facilities than we can shake a stick at at
this point.

Mr. SHays. You know what would be helpful because we are
talking in generalities. I would love to get a handle on what those
numbers are. And Dr. Kizer, could you give me a sense? Could you
respond to this question as well? Or any other comment you want
to make.

Dr. Kizer. If I understand your question correctly, typically the
major limitation to getting into the hospital is the number of beds
that might be available that are staffed. In many cases, there may
be authorized beds at a facility because of staffing constraints,
funding constraints that limit staffing. The other thing that is im-
portant to recognize about the VA is that about 30 percent of our
beds are psychiatric beds for long-term mental illness and other
mental conditions which is very different than in most private hos-
Pitals.

Mr. SHays. Let me ask you, if someone has a psychiatric chal-
lenge, that they would not have income? I mean, I could draw two
inferences, I could say that if you have been a veteran, you have
been faced with a lot of psychological challenges that have affected
you and, therefore, you are going to have a disproportionate share
who are, in fact, veterans. :

Or I could say that given the way we allow entrance into our
hospitals, that we have in a sense have weighted it toward people
who have psychological challenges because they don’t have income
producing ability. You sée the difference?

Dr. Kizer. I see perhaps a difference. There has been a conscious
effort to try to provide care for veterans who have mental illness
and to provide them the appropriate facilities so that they can be
treated. As I know you are aware, there are many nonveteran per-
sons with chronic mental illness who are wandering the streets in
our society today. The VA has made an effort to at least provide
a place for veterans who have mental illness to be taken care of
in a more humane setting than the streets of our major cities.

So that is perhaps one of the reasons.

Mr. Brown. Let me follow up on that, Mr. Chairman. When you
talk about the process being weighted, it is weighted and it’s
weighted toward the poor, 60 percent of the people that we treat
at our hospitals are poor. And if it were not for the VA hospital,
they would be welfare recipients. The private sector doesn’t want
them because they don’t have the ability to pay.

It’s weighted toward the psychiatrically impaired and it’s weight-
ed toward them because they, too, because of the nature of their
illness have been ‘economically deprived. They don’t have the re-
sources and, in addition, nobody wants to be bothered with them
primarily because they are hard to treat, they are hard to manage.

if you look—and the list goes on, that we are providing care to peo-
ple that the private sector does not want to be bothered with.

If you look at our nursing homes—go to any of our nursin;
homes—and you will see all those old fellows there, World War I,
World War II. They don’t have any money to be able to pay for


70

tain and maintain the inpatient focus of the care it provides. That’s
got to change. It’s just got to change.

The rest of American medicine is going to largely ambulatory
care, largely managed care, with case managers for individual pa-
tients. There are places, pockets around the VA health care system,
where that is being started. It’s not widespread, and I think it’s
going to be a long time before that becomes the norm.

Mr. Suays. That strikes me as an indictment of two things. It’s
an indictment that we’re not getting the best service we can, and
we're paying a lot more for the service than we should be paying.

Mr. BAINE. I believe that’s correct.

Mr. SHAys. It sounds to me like you’re describing a system not
quite in the dark ages but way far behind the rest of the medical
Programs around the country.

r. Trodden, do you agree with that comment?

Mr. TRODDEN. I’m going to make a distinction, Mr. Chairman.
When I say VA is at a crossroads, it’s not exactly in the same con-
text with what Mr. Baine’s just said.

Mr. SHAYs. You're not deserting him here, are you?

Mr. BAINE. It wouldn’t be the first time.

Mr. TRODDEN. I’m going to draw a different distinction, Mr.
Chairman.

Mr. Suays. Please be candid.

Mr. TRODDEN. That’s what I’m trying to be. I really do view that
the Inspector General’s Act and the way it’s written, both specifi-
cally and in its overall thrust, establishes that I am not a policy-
maker. So I want to make that clear to start with. I think it’s en-
tirely proper for the GAO to recommend to the Congress policy
changes.

And when the GAO talks about maybe VA ought to retrench and
do the things that it does best and not necessarily be a full service
medical system, that’s entirely proper for the GAO to recommend
and for the Congress to consider. I have no view on that. Obvi-
ously, the —

ir. SHAYS. What do you mean, you have no view on that?

Mr. TRODDEN. Well, let me finish it. I think it is the—I know it
is the administration policy to oppose that. My crossroads is that
I think VA——

Mr. Suays. But be clear on this one part. You are an independ-
ent agency. What the administration has as a policy has nothing
to do with what you're about?

Mr. TRODDEN. Correct. That is correct, sir. And whether that’s
their policy or my policy, you’re right, I have every right to be inde-
pendent, and I am independent.

Mr. SHays. OK.

Mr. TRODDEN. But I am not a policymaker.

Mr. Suays. Fine. I am asking you a particular question, though.
Do you think it’s at a crossroads?

Mr. TRODDEN. I think it’s at a crossroads, but the crossroads that
I envision is a slightly different one. I think VA is at a crossroads
in terms of coming to grips with its resource allocation in such a
way that it can maintain its viability. Whatever its charter is from
the Congress to VA, in terms of what veterans get treated with
what range of services, I think VA is very much at a crossroads in


63

(from 91,878 in 1969 to 39,953 in 1994). VA reduced its operating beds by about
50 percent, closing or converting to other uses about 50,000 hospital beds. The de-
cline in psychiatric beds was most pronounced, from about 50,000 in 1969 to about
17,300 beds in 1994. (See fig. 1.)

Figure 1: Operating Beds in VA Hospitals (1969-94)
On)

Operating beds (in thousands)
110

1900 1976 1979 1906 1909 1996

— Tow
—— Moical
Surgeal
Psyehiatne

insert figure 1 here

A number of factors could lead to a continued decline in VA hospital work load.

For example:

"fhe number of veterans with health ingurance coverage is expected to in-

crease, which will likely decrease demand for VA acute hospital care. Almost

all veterans become eligible for Medicare when they turn 65 years old, even if
they were employed in jobs that did not provide health insurance.

—The nature of insurance coverage is changing. For example, increased en-
rollment in health maintenance organizations (HMO)—from 9 million in 1982
to 50 million in 1994—is likely to reduce the use of VA hospitals. Veterans with
fee-for-service public or private health insurance have a financial incentive to
use VA hospitals to avoid copayments and deductibles. This financial incentive
is largely eliminated when fhey join HMOs because there is little or no cost
sharing. Proposals to expand Medicare beneficiaries’ enrollment in HMOs could
thus further decrease the use of VA hospitals.

—The declining veteran population will lead to significant declines in VA
acute hospitalization even as the acute care needs of the surviving veterans in-
crease. The veteran population is estimated to decline by one-half over the next
50 years. The downsizing of the military will likely make the decline even more
dramatic. With fewer new veterans entering the system, the veteran population
will decline more rapidly, and the percentage of veterans 65 years old and hav-
ing Medicare coverage will increase. In addition, many veterans leave the VA
system when they become Medicare-eligible.

—VA hospitals too often serve patients whose care could be more efficiently
provided in alternative settings. The major veterans service organizations noted
in their 1996 Independent Budget that a recent study indicated that VA could



20

days at the Board of Veterans Appeals, so we are past that. But
still 700 days is too long.

Mr. Suays. Mr. Davis, I am going to give you some more time.

Mr. Davis. I just wanted to ask one other question along this
line. I think we can agree, particularly with your retroactivity rules
and everything else and people dying and losing rights, that is just
unacceptable. To the extent—and you are dealing with very dif-
ficult problems with a very limited budget. Aside from the budget,
is there anything else we can do to help you, any laws that we can
pass?

That retroactivity seems especially very harsh on veterans who
can win the day but they have lost 2 years just waiting in line to
get those rights asserted. If you can think of anything, let this com-
mittee know and the Veterans Committee. I am sure my colleagues
would like to respond to that.

Mr. BRowN. I have some very definite views. I had our attorney
general counsel look at one case that was in Puerto Rico where the
VA took action to reduce many of those who lived in Puerto Rico
that were receiving 100 percent disabilities.for mental disorders
and they did it contrary to the legal standards. A lawsuit was filed
and the lawsuit said, you will reinstate them. Well, I think 10
years had went by; is that right, Mary?

Ms. KEENER. Yes, sir. Actually we entered into a settlement on
the case.

Mr. Suays. Do you mind just speaking into the mike because we
have this being recorded. State your name if you would.

Ms. KEENER. Mary Lou Keener, general counsel. Actually what
happened in the case the Secretary is referring to is that we en-
tered into a settlement with all the claimants. As of the date of the
settlement, some of the claimants had died. The question arose
would their spouses or heirs be able to collect the veteran’s full por-
tion of the settlement.

The decision was no, because of the statutory restriction that al-
lows only 1 year’s retroactive pay for a surviving spouse. Thus they
would not be able to retrieve the total amount that the claimant
would have received in accordance with the settlement. Therefore,
the law that the Secretary referred to earlier applies here.

Mr. Brown. So in other words, in this case of the retroactive, if
the veteran had lived, he would have gotten retroactive benefits for
about 10 years. Since he died —

Mr. Davis. That he had earned and his spouse should have re-
ceived?

» Mr. Brown. That’s right. That was illegally taken away from
1m.

Mr. Davis. I know we would be happy in putting some legislation
on that. Thank you very much for your candor on a tough, tough
issue for you.

Mr. Brown. Yes, sir. Thank you so much for your concern.

Mr. Suays. Thank you.

Mrs. Morella.

Mrs. MorELLa. Thank you. I do think it is grossly unfair and we
will see what we can do legislatively, maybe with some assistance
from your general counsel on that.


37

QUESTIONS SUBMITTED BY HON. MARK E. SOUDER AND ANSWERS FROM MR. BROWN

Question: 1 am concerned regarding the proposed integration of a Veterans Ad-
ministration Medical Center located in Fort Wayne, Indiana with another located
in Marion, Indiana. I fully support efforts to provide cost-effective, quality medical
services for the veterans who have served our country so well. And, I understand
that increasing administrative costa have reduced the ability of the Department of
Veterans Affairs to provide services at the level of quality it has traditionally pro-
vided American veterans.

My concern rests not with the necessity of more cost-effective efforts, but with the
process in making the decision to integrate the services of these two facilities. Spe-
cifically, I would like to know more about what factors are considered in making
a decision to integrate the services of two Veterans Administration Medical Centers.
For example, is the size of the city in which the facility resides a consideration? Is
the number of potential veterans to be served by the facility considered? Is the prox-
imity of an alternate VAMC of importance? Finally, are the ages and conditions of
the facilities involved a factor upon which to make a decision such as this?

Answer: The process used to plan for the integration of medical centers is predi-
cated upon maintaining and expanding (to the extent possible) high quality services
to veterans while streamlining operations. It is expected that the medical center in-
tegrations will make the continuum of care provided to veterans more accessible and
cost effective. As a direct result of the integrations, resources currently dedicated
to redundant administrative functions will shifted to enhance direct, hands-on
patient care activities to the maximum extent possible.

Four major factors entered into the decision to integrate these two facili

lementary missions, history of shared services, shared patient base, and
between facilities.

. Complementary Missions: One major factor in the decision to integrate
VAMCs Marion and Fort Wayne is the complementary missions of these two
medical centers. Fort Wayne VAMC, which currently operates 95 hospital and
53 nursing home beds, provides primary and secondary medical and surgical
care. Marion VAMC, which currently operates 450 hospital and 69 nursin;
home beds, provides primary and secondary medical care and all levels o}
neuropsychiatric care. A new 240-bed psycho-geriatric nursing home care unit
is under construction at Marion, which will be activated from the conversion of
171 hospital beds plus the existing 69 nursing home beds.

© History of Shared Services: Another factor taken into consideration is the
history of shared services between the two sites. For example, Fo:
VAMC has no inpatient and very limited outpatient psychiatric cay

ally relied on the Marion VAMC for these services. Marion VAMC,
having no inpatient surgical capabilities, has historically referred patients re-
quiring primary surgery to the Fort Wayne VAMC.

The implementation of a single, unified computer system will provide cli
cians at each location with seamless access to shared patient data. Opportuni-
ties are currently being explored to implement a telemedicine computer system
linking clinicians at each location to further enhance the timeliness and quality
of diagnostic and patient treatment activities.

« Shared Patient Base: The long-standing inter-relationship of these two med-
ical centers is illustrated by their shared patient base. Approximately 28 per-
cent of the unique patients served by each are shared with their integration

rtner.

a Distance Between Facilities: The distance between the Fort Wayne and
Marion VAMCs is 65 miles. This relatively close proximity has undoubtedly con-
tributed to the existing levels of cooperation and coordination.

In this case, neither the size of the city nor the number of potential veterans to
be served were taken into consideration when making the decision to integrate these
facilities; neither would impact the success or failure of implementation. These fac-
tors are taken into consideration when localized facility planning takes place, such
as determining programmatic needs, staffing ratios and bed levels, and will continue
to be used in specific planning efforts for the integrated entity. The age of existing
buildings was also not considered, because it would not impact the potential for suc-

cessful integration. The Department of Veterans Affairs construction process contin-
ually assesses the condition of its buildings and provides for their upkeep as needs
arise.

goals for this integration include a unified vision and mission between the
ies, a full continuum of care to veterans not currently available through each
facility separately, enhanced continuity of care to veterans, and one standard of care
enveloping quality and access. Upon implementation of the integration, the facilities



57

Mr. BAINE. Good morning, Mr. Chairman and members of the
subcommittee.

Mr. SHays. Could I also—I’m sorry to interrupt you. I'd like to
acknowledge for the record that we are joined by Connie Morella,
who represents a good part of the districts that most of the people
in Washington live in. It’s nice to have her join us.

Would you have any statement you’d like to make?

Mrs. MORELLA. No, thank you.

Mr. Suays. Thank you, Mr. Baine.

Mr. BAINE. Mr. Chairman, thank you for inviting us today to dis-
cuss the future direction of the VA health care system.

Mr. Suays. I’m going to ask you to talk a little louder. And really
try to energize us here.

Mr. BAINE. My comments this morning will focus on actions
needed to improve the efficiency of VA hospitals, challenges that
threaten the long-term viability of the VA health care system and
options for restructuring the system.

Our prepared statement discusses a series of actions needed to
improve the efficiency of VA hospitals. I will limit my comments
this morning to two long-standing myths about the VA health care
system: That VA’s eligibility provisions prevent it from shifting
much of its inpatient workload to outpatient settings, and that
VA's central office, micromanages its medical centers.

The Congress amended VA’s eligibility provisions over 20 years
ago to specifically authorize VA to provide ambulatory care to any
veteran, regardless of income or other factors, when that care
would obviate the need for hospital care. Thus, hospital care for
cataract surgery, for example, would appear to be obviated if VA
provided the care on an outpatient basis. Nevertheless, most cata-
ract surgery in VA is still done on an inpatient basis. VA manage-
ment has been slow to take advantage of the flexibility Congress
gave it.

For example, VA’s methods of allocating resources to its medical
centers have historically been based on inpatient workload, creat-
ing incentives for medical center directors to provide care on an in-
patient rather than an outpatient basis. VA’s recently implemented
resource planning methodology shows some promise in overcoming
this incentive.

The second myth is that VA central office micromanages its med-
ical centers. VA operates not as a centrally managed health care
system but as individual medical centers competing with each
other to provide as wide a range of services as possible. Medical
center directors’ performances are often judged largely on the basis
of what new facilities and equipment they can bring to the center.
Little thought is given to the availability of services and equipment
at nearby centers or in the private sector.

Our work repeatedly finds that VA central office lacks much of
the system-wide information that it needs to effectively monitor the
performance of its medical centers, ensure that corrective actions
are taken when problems are identified, and identify and dissemi-
nate information on innovative or best practices.

VA’s plans to reorganize its health facilities into veterans inte-
grated service networks, mentioned by Mr. Towns, are an impor-


23

pri cts. There are active Projects in all 3 divisions of VA research (biomedical,
ealth services, and rehabilitation). In total, 236 VA investigators are funded with
$17,112,071 for diabetes studies and another 286 VA investigators are working on
diabetes related research projects without current funding.

GLYCEMIC CONTROL AND COMPLICATIONS IN TYPE I] DIABETES

A feasibility study on glycemic control and complications in type II diabetes
(NIDDM) was conducted at five VA Medical Centers (Boston, Hines, Houston, Min-
neapolis and West Los Angeles) between 1990 and 1993. This was a prospective ran-
domized controlled trial to determine whether it was feasible to compare standard
vs, intensive therapy in maintaining near normal blood and were followed for an
average of 27 months.

The results (which are scheduled to be published in the August, 1995 issue of DI.
ABETES CARE) indicate that such a study is feasible and that stepped insulin th
apy in type II diabetic patients is effective in maintaining near normal glycemic co:
trol for over two years without excessive severe hypoglycemia, weight gain, hyper-
tension, or dyslipidemi

‘A proposal for a long-term trial to assess the relative benefits and risks of inten-
sive therapy on macrovascular events in NIDDM patients was prepared by VA in-
vestigators from the feasibility trial and representatives from the National Heart
Lung and Blood Institute (NHLBI), the National Institute of Diabetes and Digestive
and Kidney Diseases (NIDDK), and the National Eye Institute (NEI). That protocol
was acientifically approved by the VA Cooperative Studies Evaluation Committee.

Since the proposed study is a 7 year trial with over 1400 patients which would
cost $28 million, the original plan was for a collaborative effort between NIH and
the VA in which female patients would be included: However, NIH has just inde-

initiated a $100 million, 7 year study in 21 centers nationwide to test the
f behavioral. modification and medication in preventing NIDDM in
high-risk individuals. The intended collaboration between NIH and the VA for the
long-term trial did not materialize. No decision has been made whether VA alone
can or should go forward with this trial because of its high cost and the difficulty
of recruiting a sufficient number of female subjects.

Mrs. MoRELLA. Do I have time for another question?

Mr. Suays. Yes, you do.

Mrs. MorELLa. All right.

It had to do with—I know I had one lined up that I wanted to
ask which had——

Mr. SHays. Are you going to be here for a little bit? Representa-
tive Green is going to have to leave and if we could let him ask
a few questions, then he can go.

Mrs. MORELLA. Certainly.

Mr. GREEN. Thank you, Mr. Chairman.

No one has asked concerning the rescission program and that we
have, and I know the six outpatient care projects are going to be
cut and I am——

Mr. Suays. I am glad you asked. I didn’t want to be provincial.

Mr. GREEN. None of them are in my area, so I don’t have to be
provincial.

Mr. SHays. You keep asking questions.

Mr. GREEN. I am concerned about. the effort because of in your
testimony, you talk about the increase in outpatient care needs as
compared to hospital days and yet we have six outpatient care
projects that are being elmina . And what is the impact on the
disabled or ill veterans and their families and how will these peo-
ple be reached if these six or this rescission package is successful?

Mr. BRowNn. Mr. Green, this whole rescission package really dis-
turbs me and from two perspectives. No. 1, we have never seen
anything like this before. As a rule, the Congress, the American
people through the Congress have always been there for our veter-
ans and all of a sudden, without consultation from the VA in terms



90

and—well, I can sort of name maybe tuberculosis in some areas of
the country is a real problem. In other areas, it’s not much of a
problem. Posttraumatic stress disorder in some areas more than
others. Will the VISN approach be able to respond to these re-
gional-specific kinds of needs?

Mr. BOLLINGER. I think it will. Because, with this approach, the
VISN director will, obviously, have a number of VA hospitals with-
in his geographic district. And, even now, if you look across the
country, there are hospitals that are—that excel in certain
deliverables, whether it be cardiology or whether it be psychiatric
care or whatever.

I think that via the VISN system that they will be able to have
a better handle on how to provide those kinds of services.

Mr. Towns. Mr. Chairman, what I would like to get permission
to do is submit some questions for the record.”

Mr. Suays. Sure.

Mr. Towns. I appreciate that.

Mr. SHays. Happy to do that.

{The information referred to follows:)

dune 8, 1995
John Bollinger
Deputy Executive Director
Paralyzed Veterans of America
801 Eighteenth Street N.W.
Washington, D.C. 20006

Dear MR. BOLLINGER:

Enclosed are three questions Congressman Edolphus Towns, the Ranking Member
of the subcommittee, was unable to pose to you during the hearing. Congressman
Towns would like you to review these questions and submit your answers to the
subcommittee so they can be included in the final record of the hearing.

I apologize for the late notification of this request and hope that you would be
able to provide the subcommittee your responses by June 22. Should you have any
difficulty meeting this deadline, please contact Kate Hickey of the subcommittee.
She can be reached at 202/225-2548.

Thank you for your time and attention to this matter.

Sincerely,
CHRISOPHER SHAYS
irman

QUESTIONS FOR JOHN BOLLINGER

1. While you clearly support the agency’s plan, you appear doubtful that the VA
will maintain and enhance specialized services. You testify that the V.A. needs to
demonstrate that it has the commitment and capabilities to adjust to the changing
health care environment.

—Is there specific reason for your concern? .

—Do you believe the culture in place to ensure your concerns are addressed?
What needs to change in order for the department to effect rea) progress?

—With the exception of the health care system, how would you prioritize
needed reforms? Are any of these reforms underway?

‘Can you provide any insight of how we might frame our consideration of
VA's reform initiatives to address your concerns?

—What other participants should we include this discussion?

2. Mr. Bollinger, in a recent report, GAO found that the VA health care system
does not adequately address veterans health care needs.

—What is your assessment of GAO's findings? Will the reorganization correct
these problems?

—Are there other health issues outside the VISN plan that will require re-
form? What action is the V.A. taking on these matters?

3, Among other things, your plan calls for removing regulations that, limit access
by most veterans to out-patient care and force VA hospitals to treat them in more
expensive in-patient settings.



44

PREPARED STATEMENT OF STEPHEN TRODDEN, INSPECTOR GENERAL, U.S.
DEPARTMENT OF VETERANS AFFAIRS

I am pleased to be here today to comment on opportunities for improving the
management and programs of the Department of Veterans Affairs (VA). Some of
these opportunities reflect situations that VA has been experiencing for years. Oth-
ers have emerged more recently in response to government-wide initiatives aimed
at reforming the way Federal agencies conduct business.

These are opportunities that will enable VA to improve program performance, en-
hance customer service, and ensure greater accountability on the part of manage-
ment for achieving results. They also will enable VA to reduce costs and use avail-
able resources more efficiently.

Taking advantage of many of these opportunities will be difficult. In some cases,
VA will be faced with the challenge of changing the way it has functioned for a lon,
time. VA has already begun to take a hard look at the way it does business and,
as a result, is currently in the process of reorganizing, streamlining, and reforming
many of its programs and processes. VA is to be applauded for these efforts. How-
ever, even though VA has made progress in the past few of years, it is my opinion
that more can and should be done.

The National Performance Review (NPR) created a challenge to reinvent the Fed-
eral government. Each manager is being challenged to become more entrepreneurial
and customer driven. We are all being asked to take a hard look at what programs
produce and to develop innovative proposals to enhance overall performance.

The line has been drawn between an outdated bureaucracy and modern business
practices. Crossing this line will require profound and deliberate change. To achieve
this change, we first must be willing to question everything we do, and ask our-
selves if there is a better way. This should not be done within the confines of exist-
ing legislative and regulatory restrictions. If changes in the laws that govern pro-
grams are required to achieve excellence, then we should seek legislative changes.

We must transcend cultural attitudes if they resist change in favor of preserving
the status quo. Nothing can be sacrosanct. We must be willing to put aside paro-
chial interests and work together to develop organizations and programs that are
based on quality management and sound financial principles for the common good
of the veterans we serve.

While the time for change has arrived, we need not rush. It is important that this
change be tempered with wisdom and experience. The course VA takes now will de-
termine how efficient and effective it will be for years to come. Throughout my testi-
mony, I will be commenting on some of the changes that VA is implementing, such
as the reorganization of the Veterans Health Administration (VHA), and discussing
other opportunities for change that VA and Congress need to consider as VA plots
its course for the future.

Many of these opportunities have been identified in specific oversight work done
by my office. Other opportunities reflect issues that have been developed in collabo-
ration with VA management as part of my long-term strategic planning process.
These issues are offered as areas for consideration in helping VA reinvent itself. I
will discuss these opportunities in the context of the following three areas of oppor-
tunity.

1. Opportuniti 8 to Improve Programs and Cut Costs

fit portunities to Improve Accountability Over Budgeting and the Alloca-
tion of Resources

III. Opportunities to Improve Internal Oversight and Enhance Accountability
in a Decentralized Organization

It is important to note that developing a framework for benefiting from these op-
portunities does not rest solely with VA or the Office of Inspector General (Id.

‘ongress also has an important role to play in helping VA overcome some of the
legislative and political hurdles it faces with respect to implementing needed reform.

I, OPPORTUNITIES TO IMPROVE PROGRAMS AND CUT COSTS:

In recent years, my office has issued many reports involving VA activities that

I believe get to the heart of good management. I would like to take this opportunity
to highlight specific reports and offer some observations about the relevance of these
reports in a broader context. In this section, I will address opportunities to improve
programs and cut costs in the following areas:

* Construction Management

* Workers Compensation

* Acquisition

* Information Resources Management

* Affiliation Related Issues



85

ery could not take place if VA only operated a Spinal Cord Injury center in a more
“sub-acute” care arrangement. The same is true of many other specialized services.

Veterans offer unique challenges to the VA medical care system. VA health care
ysers, as a group, are older, and often exhibit co-morbidities upon arrival at VA
health care facilities. A veteran receiving care from an amputee clinic team, for ex-
ample, may need access to a diabetes management clinic, to social services, and to
cardiological services all of which may be considered “acute care” services. Bolster-
ing acute care systems is consistent with enhancing specialized services. The two
operate together, not in isolation from one another.

‘We also are concerned with the general timbre of the GAO report which suggests
that any VA effort to improve veterans, access to VA. medical services or provide
them with a broader continuum of acute care services is needlessly duplicative and
fosters a “competitive” atmosphere, shifting costs to VA. As we have asserted,
needs a sound acute care system in place to support its specialized services. Sup-
porting the acute care infrastructure necessitates a “critical mass” of veteran users,

at is a certain number of veterans must use services to keep staff skilled and
practiced in the provision of care and to ensure cost-effective care delivery. The
types of enhancements the Independent Budget and PVA's Strategy 2000, Phase II
address are the needs for VA to create this “critical mass”. This will allow VA to

operate services more efficiently for the veterans it now serves and more cost effec-
tively for the American taxpayer. PVA views these eahancoments, not primarily as
an elfort for VA to compete for more users, but as a necessary adjustment to deliver-
ing care more efficiently to those it serves. We have also suggested that VA medical
centers be used to fill identified voids in the health care continuum, for example,
VA might be called upon to deliver care to dependents or beneficiaries of its sharing
partners in rural communities where VA is the sole provider. We believe that these
types of arrangements are beneficial to all

structure and function of VHA’s central office will also be significantly al-
tered. Central Office's emphasis will change from control of processes to monitoring
of outcomes. In short, central office will no longer micro-manage field operations. In-
stead, contra office will foeus an developing system-wide polices ‘and practice pa-
rameters.

'VHA’s reorganization proposal for field operations and central office management
is intended to produce tangible improvements in the quality and efficiency of care
provided to veterans. PVA supports the following goals promulgated in the reorga-
ization proposal: (1) decentralized central ols ©) increased acoountability atthe
delivery level; (3) a streamlined veterans health care system; and (4) greater effi-
ciency. In fact, PVA has advocated and urged change in these areas for quite some
time. PVA’s study, Strategy 2000 Phase Il: Meeting the Special Health Care Needs
of Americe’s Veterans, discussed in detail the need to restructure the VA health
care system. The study also advanced the need to safeguard VA's specialized serv-
fees and programs for disabled veterans .

Implications for Provision of Care to Veterans with Spinal Cord Dysfunction

PVA believes the VHA’s reorganization proposal is one of many steps that must
be taken to carry the VHA into a new and Ygorous future. PVA is also cognizant
of the fact that a misste, along the way could have disastrous implications for dis-
abled veterans. VA né to clearly demonstrate that it has the commitment and
capabilities to adjust to the changing health care environment. In particular special
care must be en to nurture and protect those services developed to meet the
unique needs of veterans with SCD and other veterans requiring VA's specialized

TVICes.

sel .
VA’s spinal cord injury/dysfunction care system affords veterans access to a com-
plex, comprehensive mix of health care services not readily available in the private
r. Providing all aspects of necessary medical and rehabilitative services, the VA
integrates acute, sustaining. and long-term services for veterans who experience spi-
nal cord dysfunction. The VA’s SCI system brings together the range of medical spe-
cialties necessary to address the lifetime requirements of veterans with SCD.

PVA is concerned about the quality and viability of SCD medicine as described
in the reorganization plan. To illustrate, VHA does not provide sufficient clarity as
to how the new central office and VISNs will interact to adequately assure quality
performance and outcomes for specialized services, most notably, care for veterans
with SCD. Without system-wide performance indicators, clinical practice guidelines,
and treatment outcome measures, central office and VISNs cannot ensure the prop
er resources and quality of care for effective SCD medicine. In addition, VHA’s pro-
posal does not state whether there will be designated coordinators or mnel to
monitor the conduct and quality of SCD medicine and other specialized services at
the local and VISN level. PVA’s membership depends heavily on the unique and



62

nected status of that work load. We are currently reviewing RPM to determine why
it does not shift more resources between medical centers.
Information Systems

Major improvements in both the ality of VA's services and the efficiency with
which they are provided depend on VA managers, ability to get the right informa-
tion at the right time. As we pointed out during last year’s health reform debate,
without accurate and complete cost and utilization data, VA managers cannot effec-
tively make such decisions as when to contract for services rather than provide
them directly and how to set prices for services it sells to other providers or how
to bill insurers for care provide to privately insured veterans.”

Accurate utilization data also are essential in monitoring patient care both to help
ensure quality and to prevent abuse. For example, a recent study by VA researchers
identified 35 veterans who had been admitted to VA hospitals 2,268 times over a
5-year period at an estimated cost to taxpayers of $6.5 million. The researchers
noted that VA doctors cannot easily tell when patients are moving from hospital to
hospital because VA medical centers do not have a centralized patient information
system.

VA is in the process of implementing a new Decision Support System (DSS) that
uses commercially available software. This system can provide data on patterns of
care and patient outcomes as well as their resource and cost implications. While
DSS has the potential to significantly improve VA’s ability to manage its health care
operation, the ultimate usefulness of the system will depend not on the software but
on the completeness and accuracy of the data going into the system. One longstand-
ing problem with VA's information and financial systems is that medical centers fre-

ently enter incomplete or inaccurate data or both. We are currently assessing

‘A’s efforts to implement DSS including efforts to improve the reliability of data
going into DSS.

VA Culture

VA operates not as a centrally managed health care system but as individual

medical centers competing with each other to provide as wide a range of services

sible. Medical center directors’ performance is generally "judged by what new
ies, services, and equipment they bring to the medical center. Little thought
is given to the availability of services and equipment at nearby VA facilities or in
the private sector.

To address this problem, VA plans to reorganize its health care facilities into geo-
graphic networks known as Veterans Integrated Service Networks (VISN) to trim
unnecessary management layers, consolidate redundant medical services, and use
available community resources. Two important parts of the reorganization of VA fa-
cilities into 22 VISNs are plans to establish performance measures and hold VISN
directors and medical center directors accountable for implementation of policy di-
rectives,

Because of the current lack of effective central office oversight of medical center
operations, we view the establishment of VISNs as an important step by VA in in-
creasing oversight of medical center operations, holding medical center directors ac-
countable for implementation of policy directives, and taking corrective actions on
problems identified.

CHALLENGES THREATENING THE FUTURE VIABILITY OF VA’S HEALTH CARE SYSTEM

Although actions to improve the efficiency of VA's hospitals are an important first
step in addressing current operational problems, VA faces many other major chal-
lenges in a rapidly changing health care marketplace. For example:
—A continuing decline in patient work load threatens the economic viability
of VA hospitals.
—Veterans have unequal access to health care services because of complex
VA eligibility requirements, limited outpatient facilities, and uneven distribu-
tion of resources.
—Needs of special care populations are not always met.
—An aging veteran population has an increasing need for nursing home and
other long-term care services.

VA Hospital Usage Declining

VA has experienced dramatic decline in its hospital work load, Over the past
25 years, the average daily work load in VA hospitals dropped by about 56 percent

7Veterans’ Health Care: Efforts to Make VA Competitive May Create Significant Riske (GAO/
T-HEHS-94-197, June 29, 1994).


86

specialized services of VA’s SCD medicine program. VHA’s realignment must be im-
plemented in a manner that will not compromise the SCD medicine program.

The reorganization proposal is remarkably silent on the specifics of SCD medicine
and its future configuration. For example, some VISNs will have several Spinal
Cord Injury Centers (SCI) while others will have none. The reorganization proposal
does not provide information on how services to SCD veterans will be arranged in
VISNs without an SCI Center. PVA recommends that VHA create an inter-VISN re-
ferral mechanism to ensure the appropriate provision of care to SCD veterans in
VISNs without SCD centers. We recommend that VHA thoroughly review the oper-
ation of SCD medicine within the VISN scenario to ensure that SCD veterans have
access to VA's SCD services regardless of where they live.

If the VHA is to preserve the unique quality and integrity of SCD medicine, as
well as other specialized programs, then must outline in greater detail a man-
agement structure that will ensure system-wide integrity in the context of decen-
tralized administration. To ensure this end, PVA recommends an organization that
would:

« Protect the resources essential to sustain strong specialized services pro-
grams

Develop clinical practice guidelines for specialized programs and develop
standards of care;

* Monitor performance and quality; and

* Enforce the coordination of funding, policy, standards, and quality assess-
ment to ensure the dependable access and high quality care for veterans within
the service network.

Funding for Specialized Services:

PVA recommends that resources for specialized services, including SCD medicine,
should be protected and maintained to ensure the integrity of these specialized serv-
ives.

The current VA system of allocating resources to individual medical centers with
spinal cord injury centers has proven inadequate in appropriately recognizing the
costs associated with SCD care. The current Resource Planning and Management
(RPM) model does not fully account for all services provided veterans with SCD. For
example, the cases of outpatient care and long term care reimbursements do not re-
flect the resource utilization frequently required. It is incumbent upon VA to ensure
that the proposed changes in managerial structure are matched with accompanying
changes in their resource allocation methodology assuring that individual centers
are not penalized for the provision of SCD care.

Clinical Practice Guidelines for SCD Medicine:

To demonstrate our faith and commitment to the creation of such standards to
improve our members health care, PVA has embarked on an extensive study process
with other concerned parties, including practitioners, payers and consumers. To-
gether, this group will develop numerous practice parameters for conditions either
caused by or highly associated with spinal cord injury or disease. PVA's goal is to
ensure that these guidelines improve the quality of health care for both veterans
using VA medical care centers for spinal cord injury care and for all Americans with
spinal cord dysfunction regardless of where they receive care. This process is par-
ticularly critical as VA begins its reorganization where the central office’s role will
shift from management to leadership. The field will have more of a role in assessing
the requisite resources and proper protocols for treating veterans with spinal cor
injury and disease, We want to assure our members that all VA medical centers,
with or without spinal cord injury centers have access to these guidelines which
could literally save our members’ lives.

Monitor Performance and Quality:

PVA recommends that VHA designate specific personnel or coordinators to mon-
itor the conduct and quality of SCD medicine and other specialized services at the
VISN and local level.

We also recommend that responsibility for these functions should reside in the Of-
fice of Patient Care Services. In addition, all specialized programs should be rep-
resented in a Specialized Services Unit within the Office of Patient Care Services.

PVA also recommends that VA establish a mechanism that ensures consumer in-
volvement in the reorganized system. Consumers and non-VA experts must be af-
forded the opportunity to provide the Under Secretary with a broad view of how

compares with and compliments similar services outside VA. This will give the
Under Secretary independent assessments of how the new management structures
are affecting service and how veterans with special needs perceive VHA.



31

veterans who served in the Persian Gulf, and not only are we pro-
viding compensation, and that compensation ranges anywhere from
$89 all the way up to $5,000 a month.

Not only are we doing that, we created a presumptive period of
2 years from the time they left the Persian Gulf. So if any of these
symptoms develop within that 2-year period, we can grant com-
pensation for them.

Second, I think it is very important we are providing medical
care. All the Persian Gulf veteran has to do is to walk into any VA
hospital and say, I think I am suffering from something that hap-
pened to me in the Persian Gulf and we will treat him as if it is
service connected unless we find out that it is due to other causes.
But that is the kind of outreach and easy access that we have cre-

ated.

And the third thing, of course, we are moving forward very ag-
gressively on research. We have over 40 research projects out
there. That wasn’t good enough for us, so we developed our own re-
search centers. We have one in East Orange, we have one in Bos-
ton, and we have one in Portland. And they are going to be devoted
exclusively to trying to figure out exactly what is wrong.

And I say to you that we are not going to take anything off of
the table. We are going to look at everything. We are going to look
at leishmaniasis. We are going to look at depleted uranium. We are

oing to look at possible exposure to chemical and biological agents.

e are looking at the toxic problems related to the environment,
such as the burning of oil wells and so forth. Nothing is off of the
table. We think we are ahead of the curve on this.

Of course that doesn’t satisfy our veterans and it shouldn't be-
cause we can’t make them well. But what we can do is we can try
to improve their quality of life and make their life as comfortable
as we can until we find some answers, and find some answers we
will,

Mrs. MoreELLa. Sounds like they are getting some access and
compassion and a look toward further assistance if necessary.

Dr. Kizer. I might just embellish what was said in a couple of
ways. On the medical care side there are three categories basically
of care that are provided. The priority care that the Secretary re-
ferred to. Any veteran who believes he or she has a problem related
to Persian Gulf service can come into any VA medical center, state
their problem, and they will be taken care of on a priority basis.

A second category is what’s being provided through the registry.
We have over 43,000 people who have signed up in the Persian
Gulf Registry. Those are for individuals who have a complaint or
who don’t have a complaint but want to have an evaluation of their
condition so that it is documented in case an issue does arise at
some future time.

Finally, the third category is for those persons who, after an ini-
tial evaluation, has a condition that is not diagnosable. As you
have probably read about 15 or 20 percent of individuals, to date,
have not had a readily diagnosable condition. We have established
a number of referral centers where they may then go for a very ex-
tensive work-up that typically involves a 7 to 14 day stay in the
hospital, during which time they are completely worked up from
head to toe and every place in between.


7

in decision making, keeping a benefit claimant informed of the status of a claim,
and compassionate, courteous treatment.

‘That was a vital step toward providing true customer service. But it is only a first
step in a long journey.

low we must benchmark ourselves against others in the public and private sec-
tors doing similar functions and providing similar services.

We must monitor our performance to ensure that we are meeting the standards
we set for ourselves.

Finally, we will use the results of our surveys and other feedback mechanisms to
revise our standards and provide even better service.

One way to provide better service is by making sure that basic amenities are
available to our inpatient veterans. For example, a new way of improving customer
service is being used to provide patient phones. Until recently, VA patients had no
easy access to telephones.

Phone Home, Inc., a charitable nonprofit service organization, is providing en-
gineering support, cable, supplies, funding and thousands of hours of skilled labor
to install patient phones in VA hospitals.

This is a partnership of business, labor, and veterans service organizations that
is working. The partnership is comprised of the seven regional Bell operating com-
panies, GTE, AT&T, Telephone Pioneers of America, the Communications Workers
of America, the International Brotherhood of Electrical Workers, The American Le-
gion, Veterans of Foreign Wars, and Paralyzed Veterans of America.

‘This endeavor is being done completely on a handshake and a promise of coopera-
tion.

Patient phones have been installed at 83 of 172 VA medical centers, and the re-
mainder will be completed by the end of 1996.

RESTRUCTURING AND STREAMLINING

VA will continue to restructure, streamline and improve operations to provide
even better and more efficient service in the future. This will permit us to redirect
resources from overhead and control functions toward direct service to our cus-
tomers.

To accomplish this, we have two broad goals:

(1) to achieve an overall departmental supervisory ratio of approximately 1 super-
visor to 15 employees, and

(2) to reduce headquarters by approximately 30 percent over the next five years.

The Veterans Health Administration is planning a significant, and fundamental
structural change in both headquarters and its field structure.

Its headquarters will be a less hierarchical, more flexible organization. It will
focus on strategic planning, performance monitoring, and policy support instead of
operational control.

Services will be provided through Veterans Integrated Service Networks. These
will be geographic networks of VA Medical Centers based on patient referral pat-
terns.

This realignment is designed to trim unnecessary management layers, consolidate
redundant medical services, and use available community services.

Networks will place management decisions closer to patients and their needs. Net-
works will also streamline and consolidate services and administrative activities,
and encourage and promote management innovations.

We will eliminate medical center positions such as assistant service chiefs and as-
sistant directors that represent layers of supervision.

We will further combine activities and integrate services such as laundry, person-
nel, finance, and supply among facilities to achieve greater efficiency.

Gur Inspector General will consolidate eight field offices into four, and our Dis-
trict Counsels will be consolidated from 54 to 24 offices.

VA has already eliminated its three supply depots and converted to a just-in-time
system of direct vendor delivery. This wi i save $79 million in recurring costs over
five years.

‘This action also enabled us to reduce our inventory and transfer to the Treasury
$45 million last year and another $44 million this year.

VA is the first federal agency to comply with President Clinton's mandate to im-
plement electronic commerce in procurement having implemented a full business
cycle with the vendor community. Although VA is in the early stages of processin;
purchase orders electronically, it currently receives 22% of its invoices and 99% o!
its receiving reports electronically: more than 3,300 vendors (29%) receive their pay-
ments by this means.


46

Workers Compensation:

With about 230,000 employees and a budget of $38.2 billion, there are many areas
where opportunities exist to enhance program performance and cut costs. One such
area is the Office of Workere Compensation Program (OWCP), also known as the
Federal Employees Compensation Act (FECA) program, In VA, this program is sig-
nificant both in terms of human resource costs, and medical and compensation costs.
FECA costs incurred by VA through the period ending June 1994 exceeded $142
million for over 27,000 injured emp loyees, accounting for over 8 percent of the $1.7
billion in FECA costs Government-wide.

‘An OIG audit of the VA FECA program disclosed that VA employees who were
capable of returning to work after an on-the-job injury continued to receive FECA
benefits because VA was not monitoring injured employees’ fitness for duty. My of-
fice projected that about $11 million of FECA costs could be saved in FY 1995 and
an estimated $194 million in future FECA costs could be avoided by returning work-
capable claimants to work.

ECA program administration recently has been decentralized within VA, with
program responsibilities being carried out at the local level (e.g., VAMCs). During
the first quarter of FY 1995, Program officials informed OIG staff that VA is now
tracking OWCP cases. VA's Office of Management, in cooperation with other VA of-
fices, has established a management information system with the capability of pro-
viding current information about each claimant. This information will come directly
from the Department of Labor. As of now, this remains a pilot program at fourteen
VA sites. If this program is successful, expanding it, to ensure that. all claimants
capable of returning to work do so, is an opportunity for VA to save millions of dol-
jars,

The foregoing comments were made from the perspective of the VA. In a much
larger context, the Congress might want to take a look at the wisdom of one Depart-
ment (i.e., Labor) spending, in effect, other Department’s resources.

Acquisition:

‘Taking advantage of VA’s purchasing power is an area where there are opportuni-
ties for savings. Private sector business practices have long recognized the purchas-
ing power of large quantity buys. Simply put, the more you buy, the better price
you should receive.

Within VA, the limiting factors in achieving cost savings in this area have been
two-fold. One, VA in the past has tried but never been fully successful in imple-
menting an automated tracking system that captures how much of any one item VA
is buying during the year. VA has, however, recently placed a system in operation
that shows considerable promise in resolving this problem. Without reliable histori-
cal data, contracting officers have a difficult time developing solicitations for lai
buys since they do not know how much had been purchased and how much is need-
ed throughout VA and the rest of the Federal government.

Secon y the medical profession has historically been given a free hand in deter-
mining which drugs, supplies, and equipment it prefers to use. This has resulted
in each facility purchasing what it wants without consideration of the economies of
scale that can be realized by consolidating VHA-wide purchasing decisions.

Preserving the flexibility to purchase drugs, supplies, and equipment is advocated
by VA in the name of better patient care. { fully support preserving this flexibility
for individual patient cases when the difference means providing quality care. How-
ever, there is an opportunity for VA to consolidate purchases and negotiate con-
tracts based on known or reasonable anticipated needs.

Consider pharmaceuticals, for which VA spent close to $1 billion in FY 1994. This
level of expenditure provides VA with the leverage to negotiate large purchases at
substantial discount. VA, however, does not always receive the best price and mil-
lions of dollars in annual cost savings are not realized.

VA relies on the Federal Supply Schedule (FSS) contracting process to purchase
the bulk of its drugs, medical supplies, and medical equipment. FSS contracts give
Physicians and nurses a broad choice with some contractual safeguards to ensure

‘A receives the same or better prices than comparable customers. These safeguards,
however, do not always ensure that VA receives the best price. My office recovers
millions of dollars annually from contractors who are overcharging VA. During the
Past 2 years, my office has recovered over $28 million from post-contract award au-

its and investigations.

Notwithstanding the fact that this is a considerable amount of money, represent-
ing almost the OIG’s entire annual appropriation, there-were millions of dollars in
savings that VA was unable to realize because of failure by VA contracting officers
to obtain the lowest Fassible price. As an example, OIG audits of pharmaceutical
contracts found that VA contracting officers routinely chose wholesalers as the cat-



6

lutions that meet our needs. We must develop solutions that fit
their needs.

Mr. Chairman, my comments cover only a small portion of the
changes we have made recently and plan for the future. We wel-
come the opportunity to work with this subcommittee. Thank you
very much, Mr. Chairman, and now I will be pleased to respond to
any questions you or the members of this committee may have.

[The prepared statement of Mr. Brown follows:]

PREPARED STATEMENT OF JESSE BROWN, SECRETARY, DEPARTMENT OF VETERANS
AFFAIRS:

Mr. Chairman, I appreciate this opportunity to testify on the progress being made
by the Department of Veterans Affaire toward our vision of a mere efficient and cus.
tomer-oriented department.

Our Nation must honor its sacred trust with our veterans—a commitment that
America will be there to serve them as they were there to protect us.

T will describe some of the many efforts we are making to improve our ability to
carry out this obligation.

Service to veterans and their families is VA’s primary mission.

Our goal is to deliver veterans benefits and services in a high quality, cost-effec-
tive, and timely manner.

We intend to ensure a dedicated, highly motivated, and well trained work force
empowered with as much authority as possible to make operational decisions in
their day-to-day work activities. We encourage them to contribute their ideas on
ways to creatively improve their work. We also will use advanced technology to the
maximum extent possible.

UNIQUENESS OF VA

VA is different from most federal agencies.

Our mission is the direct delivery of services to veterans and their families.

VA provides health care, service-connected disability and death benefits, home
loan guaranties, vocational rehabilitation, education benefits, life insurance, and
non-service connected pension and disability benefits, and operates and maintains
veterans cemeteries and a headstone and marker program.

VA's health care mission separates it from most other agencies.

VA staffs and manages one of the largest direct health care systems in the world.
We provide more than one million episodes of inpatient care and more than 26 mil-
lion outpatient visits each year.

Managing such a system requires operations on a 24 hour per day basis, 365 days
per year, often under extremely stressful conditions for employees.

The VA health care system is also a national resource for training future health
care providers and has a widely recognized medical research program.

VA has an excellent record of providing high quality, cost-effective care. But, like
the private sector, we are being challenged to meet rapidly changing needs in the
national health care environment.

To meet these challenges, we must continually examine how and why we operate
as we do. Therefore, Reinventing Government is both a tremendous challenge and
@ most worthwhile endeavor for us.

We will, on a Department-wide basis, continue the momentum created by Phase
I of the Reinventing Government initiative. We are looking into many other major
improvements as part of Phase II.

am very proud to report that VA rates best in government in four of the six
categories rated by the National Performance Review.

fe currently lead the government in (1) the ratio of supervisors to employees, (2)
the ratio of headquarters staff to all VA employees, (3) the ratio of nnel sj
cialists to employees, and (4) the ratio of budget specidlists to employees. In this
regard, we are already lean, and we intend to become even more efficient.

CUSTOMER SERVICE STANDARDS.

Last fall, VA issued customer service standards, telling our customers what to ex-
pect from us and allowing them to judge our performance.

The standards are ic to VA’s programs and cover many dimensions of serv-
ice—such as timely delivery of quality service, involvement of the veteran customer



40

PREPARED STATEMENT OF HON. CHRISTOPHER SHAYS, A REPRESENTATIVE IN
ConGRESS FROM THE STATE OF CONNECTICUT

Welcome to all our witnesses. The purpose of today’s oversight hearing is to exam-
ine opportunities for improved efficiency within the Department of Veterans Affairs,
with an emphasis on the department’s health care system.

This is the second oversight hearing on the VA. In the first hearing held March
13, our witness was the VA Secretary, Jesse Brown. His testimony included discus-
sion of VA's mission and his plans for streamlining the department.

To help the Subcommittee identify some of the challenges facing the VA in meet-
ing its important mission, we are pleased to have the VA’s Inspector General, the
General Accounting Office (GAO), and a representative of the Paralyzed Veterans
of America. We appreciate the time, interest and recommendations of each witness.

We anticipate hearing testimony about the VA plan to restructure its health care
system. We need to learn why the VA lags far behind the private sector in improv-
ing the efficiency of its hospitals. We also must evaluate whether its plan would
place the VA in direct, potentially destructive, competition with private sector hos-
pitals for dwindling numbers of patients,

In a recent report on its restructuring plan, the VA stated that “if the veterans
health care system is to remain viable it must fundamentally change its approach
to providing care. The need for structural change is acute.” The GAO, however, is
expected to state that the VA reorganization plan does not fe far enough. The GAO
will conclude that “without intervention, use of VA hospitals will likely continue to
decline to a point where VA’s ability to provide quality care and support its second-
ary missions will be jeopardized.”

jased on today’s testimony, I am calling for an immediate reappraisal of the VA’s
strategic plan. Their plan needs a clearer, more urgent, focus—it needs to put less
emphasis on its hospital facilities and put more resources into developing a first
class outpatient system. The focus needs to be on improving the quality, not the
quantity, of inpatient care and on expanding cost effective outpatient services.

T also believe that the VA should target those patients who are low-income veter-
ans with service connected disabilities. They are the VA’s key constituents who de-
serve the fullest attention and the commitment of most of its resources.

It seems to me that the VA often displays an institutional bias in favor of hospital
care and facilities. Outpatient care, in the opinion of experts, is more cost effective
and it is obviously the direction in which the rest of the health care world is moving.

It’s time for the VA to chart a new course as it moves toward the next century
and 1 call on the department to reevaluate its plan to restructure the VA’s health
system.

Mr. SHays. Before swearing in our witnesses, I invite the rank-
ing member, who has just been a pleasure to work with, Mr.
Towns, to make an opening statement.

Mr. Towns. Thank you very much, Mr. Chairman.

Thank you for providing the committee this occasion to examine
opportunities for improving program efficiencies at the Department.
of Veterans Affairs. I appreciate your leadership on this issue. This
hearing could not be more timely or more critical. As the inter-
national community concludes its commemoration of the 50th anni-
versary of the end of World War II, we here at home are reminded
of the tremendous debt this Nation owes to its veterans, and some-
times I think we forget it.

The Department of Veterans Affairs should embody our national
commitment to honor and support our veterans, their families and
their survivors. However, the VA’s ability to sustain its mission of
providing medical care for veterans and functioning as a safety net
for veterans with low income is faced with increasing pressures.
Without a doubt, this is an agency in urgent need of reform if it
is to fulfill its obligation to the American veterans.

Earlier this year, VA Secretary Brown presented the agency's
1996 budget request, streamlining the reinvention priorities and ef-
forts to correct programs and operational deficiencies. The Sec-


19

in order to respond to all of the due process requirements and all
of the mandates of the court that is pushing this thing.

Now, I think it is going to work its way out in the out years. As
the court develops its case law they won’t be making new decisions
every day, creating new guidelines that we must follow, but in the
meantime I think that we are going to have to continue to do the
best that we can. All of these new initiatives that we spoke about
are going to help us try to continue to manage it so we can get it
level. Once we et it level, then we can begin to force it down.

Mr. Davis. First of all, I appreciate your frank and candid an-
swer and realization that this is a huge problem.

Mr. Brown. Yes, sir, it is.

Mr. Davis. I just wonder if there is anything from a legislative
perspective that we might be able to do that would help that out
where you could get some kind of precedent with these cases? I feel
sorry for the poor people out there who don’t know how they are
going to be dealt with in 2 years to—they have to carry the finan-
cial burden.

Mrs. MorELLA. Would the gentleman yield for just one moment?

Mr. Davis. I would be happy to.

Mrs. MorRELLA. I have situations where people have decided
while their cases are still in court. And I wondered because it has
taken over 2 years, and I wonder, does that mean that if the deci-
sion is made on their behalf, that their survivors would get the
benefits?

Mr. Brown. No, it doesn’t, Mrs. Morella. We have about 400
cases a year where the appellant dies and that is fairly consistent
with what we have observed over the years. And by that, I mean
this, when our caseload was down, when our response time was
down at 139 days, we expected during that period of time for about
154 people to die during that 3 or 4 months, while their cases were
at the Board of Veterans Appeals.

So naturally, if the case remains at the board 1 year, 2 years,
or 3 years, then that multiplies. In addition, there are other com-
plications because many of our veterans now are 3 or 4 years older,
they are in their 70’s so they end up dying. Let us assume in order
to respond to your question that their case is at the board. Been
here 3 years, they die. And the case is allowed.

Well, the law prohibits—and correct me if I am wrong, John—
it prohibits retroactivity more than 1 year on a DIC claim, so even
let us say, for instance, the issue was clear and unmistakable error
and the man would have gotten $500,000, then the max that the
widow could get is 1 year in retroactivity. So that is a matter of
law that we have to comply with. So we are very, very concerned
about all of these issues and we are working very hard to try to
bring that caseload and the backlog and our timeliness standards
into some kind of sense that is normal.

And I would mention to you this, Mr. Davis, we are now under
mandate of law to look at our entire adjudication system. This is
based on a bill that was passed and we have set up this commis-
sion under the direction of Mr. Meladossian, a fine man, spent
many years in the VA system, and I think he is going to be helpful.
We had our own blue ribbon panel that helped us to bring it down
a little bit because, at one time, we had projected as many as 1,600


14

thought of by itself. All we have to do in many cases is just to look
at what is going on in the medical industry itself, and that is what
you see. There is merging taking place, many hospitals are movin,
from inpatient treatment modalities to outpatient treatment modal-
ities. That is the most cost-effective way of providing care.

When we talk about access, we are talking about two types of ac-
cess. We are talking about one is to make sure that our eligibility
rules that allow us to treat someone is consistent with what we
really, really want to do, that we are not still just responding to
a patchwork approach that has been in existence over the last 50

ears.
¥ And then, two, is that we have to respond in a way that we take
advantage of the economies of scale that all of the other facilities
are doing. You take, for instance, many hospitals went out of busi-
ness in the mid-1980’s and the late 1980’s, many of them simply
because they refused to-look at the tea leaves, and the tea leaves
said you cannot stay in business if you are going to continue to
treat people on an inpatient basis when you can do those same pro-
cedures on an outpatient basis.

The last point I want to make in terms of access, which was the
point I was getting at, is that, one, we are talking about eligibility
criteria, and, two, is that we are talking about a facility where peo-
ple physically can gain entry into the system, so that is what we
are trying to do.

Mr. Suays. It strikes me that we are being told that some hos-
pitals will literally go out of business based on the demand of bed
space or the lack of demand. We have a number of hospitals na-
tionwide, which the number is again——

Mr. Brown. 172.

Mr. SHays. 172. I am struck by the fact that if we really want
to improve service to our veterans, we have a Hobson’s choice in
a way, we ideally would want to provide them the service right in
the town they live at their local hospital, yet you have these facili-
ties, 172 of them, that need patients in order to be cost-effective.

Two choices. One, you shut some down and let veterans go to
their hospital in their own area. Another is to begin to allow for
patients who aren't veterans to use some of these facilities, and,
candidly, both are unacceptable to veterans. I am struck by the fact
that we are going to have to wrestle with this issue, that we may
need to bring people into our veterans hospitals who aren’t veter-
ans in order to have the bed demand.

Mr. Brown. I don’t think so. Quite frankly, I don’t see those as
the only options. First of all, let us just talk about that. When I
got out of the military 30 years ago, any veteran that received an

onorable discharge could come to the VA if they were sick and get
taken care of. Today we only treat our service-connected and our
poor veterans. Those are the only People that can get into the hos-
pital. We now, at least in 1996, will treat about 2.9 million pa-

ents.

Now, all of the rest of them have been locked out by design sim-
ply because we did not have the resources to treat them. That was
the bottom line. So if we are talking about filling our beds, all we
have to do is just open that system up to the people that we locked
out—that we actually terminated the benefit for.


3

on the line to protect this country. Including, I should add, our esteemed Secretary
of the Department of Veterans Affairs.

Mr. Secretary, I appreciate your hard work and look forward to hearing your
views on the future of your agency and the population you serve, both as you

lanned, and possibly as a casualty of some more draconian agenda. I am particu-
farly interested in your progress toward restructuring the VA, but invite your com.
ments on how this 104th Congress can better advance your goals.

Mr. GREEN. Thank you, Mr. Chairman. I will be real brief and
submit my opening statement.

I appreciate the VA officials being here. This is the first, I am
not on Veterans Affairs or even now National Security, but { work
well with my local veterans hospital and VA in Houston because
of our constituent service. I want to thank you for that.

Obviously you play a vital role, not just in the Nation, but par-
ticularly in a lot of our individual districts, and I look forward to
hearing the testimony today and continuing to work particularly
from the health side with veterans.

And thank you, Mr. Chairman.

[The prepared statement of Hon. Gene Green follows:]

PREPARED STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF TEXAS

Thank you, Mr. Chairman. Like every other federal department the Department
of Veterans Affairs is undergoing a “reinvention” effort to reduce the size and cost
of government. The reinvention effort at the VA requires special attention because
its customers are those who sacrificed for their country in wartime and in peace-
time. Despite the wide support for the aims of the Department, it has been criticized
in the past for inefficiently handling its programs, particularly health care pro-

grams.

At the VA in Houston, for a long period of time there was no pay phone, so they
had to cart a phone around the hospital on wheels. Mr. Secretary, jow can We pro-
vide better medical care to our veterans during times of limited resources? One of
the perennial complaints at VA hospitals is that there are not enough doctors or
nurses to give the patients the immediate attention they need. I would like to ask
if the VA believes that is a priority or do you believe you can improve service
through other means?

I look forward to hearing the testimony of the Secretary and I appreciate his at-
tendance today.

Mr. Suays. Thank you. Mr. Secretary, I just want to say that you
have been a real pleasure to work with. You have always been
available to Members of Congress. You have been extraordinarily
responsive when Members have come with specific concerns, and
we just thank you fer the work that you are doing and again thank
you for coming before the committee.

I just have to ask so I don’t feel guilty, when I asked you to raise
your right hand, was that causing you any discomfort, I meant
physically? If so, I apologize.

Mr. Secretary.

STATEMENT OF JESSE BROWN, SECRETARY, DEPARTMENT OF
VETERANS AFFAIRS

Mr. Brown. Thank you very much, Mr. Chairman. I am de-
lighted to be here, and } am especially pleased that I have this op-
portunity to discuss our vision for a more efficient and customer-
focused department in the Veterans Affairs.

I think it is important as I take advantage of this window of op-
portunity to state for the record that, in my view, VA is different
from most other Federal agencies. Our mission is the direct deliv-


69

CONCLUSIONS
The VA health care system is at a crossroad—particularly in view of the dramatic
changes occurring throughout the nation’s health care system. These changes raise
many important questions concerning the system:
jould VA hospitals be opened to veterans’ dependents or other non-
veterans as a way of preserving the system?
—Should veterans be given additional incentives to use VA facilities?
—Should some of VA’s acute care hospitals be closed, converted to other uses,
or transferred to states or local communities?
—Should additional VA hospitals be constructed when use of existing inpa-
tient hospital capacity is declining both in VA and in the private sector?
Decisions regarding these and other questions will have far-reaching effects on
veterans, taxpayers, and private providers. We believe that attention is needed to
position VA to ensure that veterans receive high-quality health care in the most cost
efficient manner, regardless of whether that care is provided through VA facilities
or through arrangements with private sector providers.
Mr. Chairman, this concludes my prepared statement. We will be happy to answer
any questions that you or other Members of the Subcommittee may have.

Mr. SHays. We have an opportunity with three Members to real-
ly get into some key issues Tere, and so I'd like to begin the ques-
tions and just ask to start with—do the Inspector General’s and the
GAO’s office work closely with each other in a lot of different de-
partments?

Mr. TRODDEN. We work closely, particularly, Mr. Chairman, in
the area of coordination of work and attempts to understand what
each other is doing and to——

Mr. Suays. Not duplicating?

Mr. TRODDEN [continuing]. Not duplicate. We don’t work particu-
larly close together in terms of outcome. We're both independent
agencies.

Mr. SHays. You both come to your own conclusions, but you just
make sure you're not duplicating efforts and you'll read the report
of the other and try to learn from that and so on.

Mr. TRODDEN. Correct.

Mr. SHAYS. What areas do you both agree on the most? Mr. Trod-
den is the VA program at a crossroads in your judgment?

Mr. TRODDEN. Yes, I think VA is at a crossroads, and I think VA
agrees that it’s at a crossroads.

Mr. Suays. I don’t believe any administration can turn some-
thing around in, you know, 100 days or even 2 years. So our com-
ments are not intended to reflect on this administration versus the
past administration.

This is a major challenge for Members of Congress. Sometimes
we like to think we're objective about it, but veterans carry a lot
of clout, and sometimes we may not always speak as candidly as
we need to speak. I hope we can have a candid dialog here.

Being at the crossroads means what? Put it as succinctly as you
can, what being at a crossroads means.

Mr. Bane. To us, Mr. Chairman, I believe—

Mr. Suays. A little louder. I’m sorry. A little louder.

Mr. BaINeE. Our characterization of VA being at a_crossroad
means that the system, the veterans health care system, has a long
way to go to catch up to the mainstream of American medicine.

‘he veterans health care system is largely hospital based. It’s
deals with episodes of care, rather than dealing with treatment of
the whole person, if you will. It has incentives still in place to re-


24

of what impact it would have, we learned through the media that
$206 million were rescinded from the 1995 budget. And these pro-
posals were based on need. Let me give you a little history about
that, Mr. Green.

They were not actually contained in the 1995 budget. But I felt
so strongly about these proposals that I was willing to use the
money that was set aside in the investment package as part of the
national health care because they were needed. As I travel all
across this country, we see many, many areas where we are not
taking advantage of what is taking place in the private sector in
reaching our people.

You take for instance, one example there in Orlando. There is a
brand new hospital. They closed the base down, it was a naval base
and they closed it down and a brand-new hospital is in existence.
We have determined we need a nursing home and outpatient clinic
because we are really, as a general rule, and contrary to what some
might say, we are not really in the business of building now these
big massive hospitals.

ow, based on the fact that we were able to negotiate transfer-
ring ownership to us—this is government property that was al-
ready paid for by the American people—we were going to take just
$14 million, $7 million for the nursing home, 120-bed nursing home
to take care of our World War II veterans and then we were going
to use the other $7 million to renovate the outpatient arena, so
here again we are using the most efficient form of care.

id now we may not be able to do this. Now, I might have to
go back to the Navy and say, I don’t want this property. I just can’t
envision buying property and somehow paying the maintenance
costs on it and not getting a return. So, each case has the same
kind of anecdote, the same kind of story that is attached to it.

In the chairman’s district, we have one which is a major one.
That is about $45 million. Of the six clinics that we were looking
at, that one is the largest and clearly there is a need. There is a
need to open up this ambulatory care center so we can treat more
people. We don’t need to be putting people in the hospital to take
care of their needs when we can do it in 1 day as opposed to having
them in the hospital for 6 days.

Mr. GREEN. It is obviously cost-effective, and I think it is much
better for the veteran as some of the health care providers have
told me and they have that person. I guessed frustration on our
level is when I asked, well, if we are going to restore those cuts,
because I talked to Congressman Montgomery about it, and I know
there are Members who are looking at it.

The word I had was that Congressman Solomon would cut Na-
tional Service and they are already going to be held under the re-
scission package at this year’s budget or last year’s budget or the
other side and Congressman Volkmer is going to use some NASA
money that they don’t need maybe for this year but they will need
in the future.

So—but when I saw that rescissions come through and it was
going, against what I understood is happening in the private mar-

et of more outpatient care and it just seemed like it was not as
good—well planned as it should have been, and from what you
said, you read about them in the paper so, obviously, you weren’t


10

The extent of cooperation that can be achieved can be seen in the additional joint
ventures we are planning in Anchorage, Alaska, and Travis Air Force Base, Califor-
nia (USAF); Honolulu (Army); and Key West, Florida (Navy).

In Asheville, North Carolina, we provide medical services and are reimbursed by
CAMPUS for treatment of active duty personnel and military retirees. We will con-
tinue looking for other opportunities for sharing and cooperative endeavors with the
Department of Defense.

APPROPRIATIONS,

Several of the recommendations of the National Performance Review are the
elimination of various restrictive provisions in appropriations laws, multi-year fund-
ing, and cessation of management by FTE.

Appropriations laws contain a myriad of ceilings, floors, and restrictions on travel,
training, and personnel funds. VA would be able to improve management and deli
ery of services and benefits if these restrictions were removed or greatly reduced .

tus manage to the “bottom line Give us the flexibility to decide whether it
is more cost effective to perform activities with VA staff or contract for the services
with the private sector.

CONCLUSION

The challenges or obstacles to improvement are diverse. Because VA is unique in
80 many ways, we recommend that all actions taken to improve the federal govern-
ment as a whole should recognize the differences between agencies.

One size does not fit all.

Solutions must include flexibility which accommodates the needs and cir-
cumstances of each individual agency. Agencies that have managed themselves in
a very frugal manner for years should not be penalized. We should change the way
we do business so we build upon our strengths and successes and develop organiza-
tional structures focused on our customers.

In closing, VA is very eager to apply the principles of Reinventing Government
to become even more customer-focused, to streamline our processes, procedures, and
operations, and to be more cost-effective and efficient.

As we work toward these goals of greater efficiency and effectiveness we must
keep one thing in mind.

fe should not ask veterans to fit into solutions that meet our needs. We must
develop solutions that meet the needs of veterans.

We welcome the opportunity to work with this Subcommittee.

Mr. Chairman, thank you very much. I am ready to respond to any questions you
or members of the Subcommittee may have.

DEPARTMENT OF VETERANS AFFAIRS—BUDGET AUTHORITY,

Discretionary/Entitlements
Medial
Entitlements ‘tae Al Other
$19,945 ...... ee a $16.215 —$2.030
1995 Enacted $38.190 Billion.
20.235 an 7 - 16.961 2.284
1996 Reque:
Medical Care
(la Bitions}
1994 1995 1996
162 uv

200,987 201,254



29

Mrs. MorRELLA. I have a very specific question to ask that deals
with what is happening with the renovation of plans for the blind
rehabilitation center at Hines Veterans Center in Chicago.

Mr. Brown. There, we are not really doing anything at this
point. That caused a controversy primarily based on misinforma-
tion. The blind center today is housed in an old, antiquated build-
ing. We have a network there where we have Hines VA Hospital,
West Side VA Hospital, and Lakeside VA Hospital. Then about 20
or 30 miles to the north, we have North Chicago. What we need
to do, since all of them are general hospitals, in order to become
more efficient, we need to look at are we maximizing the use of
those facilities which are closely interrelated.

For instance, do we need five personnel offices there? For in-
stance, do we need each one of them to have their own medical
wards and, for instance, is that hospital—where the blind center is
presently located—is that the best place for it? Should it be closer
to the West Side where there is an international blind center? So
what is happening is that we had a private consultant come in to
take a look at all of these questions and that private consultant
recommended that we move it, I think, to Chicago to the West
Side. But we are not doing anything at this particular point other
than just evaluating the entire question. And before we do any-
thing, we will certainly be consulting with all of our veterans’ orga-
nizations and we will provide this committee with information to
give you an opportunity to state your views on it.

Mrs. MoreE.LA. So you think it is going to be moved—as you
evaluate, moved to the West Side?

Mr. Brown. No. No. I am going to let the facts dictate that. I
would say if my memory serves me correctly, even if we decided to
do something now, we are probably talking about closer to the year
2000 or so before any action could be taken whatsoever. But what
we are trying to do as we manage, and this falls really in line with
Dr. Kizer’s concept, is that we need to look at our resources and
see if we are using them efficiently.

And since Chicago is a magnet with all of these hospitals in the
same general area and many of them with duplicate services, that
it is probably time that we take a look at them and try to figure
out which is the best way to proceed. And the blind center is part
of that and we would certainly keep this committee advised.

Mrs. MorELLA. I think you lost six FTEs in Palo Alto, I under-
stand, in your blind rehabilitation center there, too. I didn’t know
what you were doing to try to restore or what safeguard you may
have in that regard.

Dr. Kizer. As I recall, and I am not as familiar with that particu-
lar situation as I should be, and we can get you a more detailed
answer for the record, but as I ‘understood it, there were about a
half dozen positions that were temporarily redirected because of
some decreased utilization of the service at that point in time.

I don’t believe that those positions were permanently eliminated,
though, from the staffing of that unit; I believe it had to do with
workload adjustment. But, again, I am not as familiar with that as
perhaps I should be, and we will check that and get you some addi-
tional information, if needed.

[The information referred to follows:]


98

because they want to take care of them, they are sick, they are in
need; in order for them to take care of them, they have to put them
in this expensive hospital system.

If you change that venue of care, that’s where the figure that we
are generating of $2 billion can be actually saved and redirected to
bolster up the rest of the system.

Mr. SHays. Thank the gentleman.

Mr. Davis.

Mr. Davis. Mr. Souder was talking about the trust in the medical
community of politicians—I really think there is a certain distrust
about any change that comes from us that’s cost driven, even
though it may result in a better, more efficient system.

It seems to me, in talking to some of the veterans in my district,
that some of them would like the flexibility sometimes to maybe go
into private-sector care as opposed to veterans’ care. But when you
are driven into it by a regulation, I think there is understandably
a certain suspicion. And I think we need to continue this dialog
and work through the money issues on our side and the efficiency
and quality issues from yours. I think there is room for both. I ap-
preciate very much your testimony today.

I wanted to get back to the eligibility issue, if I could, on eligi-
bility reform and ask two questions: First, what kind of changes
might you suggest in that? But, second, what is the backup now?
If there is a question of eligibility and you are going to—and there
are appeals, we have heard testimony before that the appeals proc-
ess for all kinds of veterans’ benefits is significantly backlogged.
Can any of you talk about that experience or things we might do
to remedy that?

Mr. GorMAN. The backlog of claims or the alternative to medical
care?

Mr. Davis. Both.

Mr. Suays, The claims probably.

Mr. Davis. Claims is where I think the huge backlog is.

Mr. GORMAN. There is a lot of practice and I think some of this—
and I am not sure I can speak as expertly to it as others could, but
I think there is a lot of things with the advent of the Court of Vet-
erans Appeals that has been placed on the system. They have di-
rected the VA to, in essence, comply with the law, which, in many
cases when the Board of Veterans Appeals was the only remedy,
they would just sometimes, by fiat, make a decision and they
weren't accountable to anybody.

And accountability comes into play again. The court now has
made them comply with certain things, and they’ve set certain
practice certain precedents that they have to comply with. That

as caused a tremendous amount of the work being done both at
the VA regional offices across the country and the Board of Veter-
ans Appeals to be done much more meticulously, much more time-
consuming. There’s a duty of assist the veteran now that the court
has placed on the VA that was never there before.

So all of these things come into play to really add an extremely
Jong period of time.

Mr. Davis. There are a lot of unintended consequences to that,
because of the backlogs that are created, people not getting an an-
swer.


91

—Ian’t, access to comprehensive outpatient services a critical factor in redue-
ing costs?
eid eligibility requirements change under the VISN approach?
—Is legislation likely to be necessary to restructure the veterans health bene-
fits program?

NoTe.—At the time of printing, Mr. Bollinger had not supplied the subcommittee
with the answers to Mr. Towns’ questions.

Mr. Towns. And let me thank all of you for your testimony. And
I think you have expressed some real concerns that I have that I
think that it’s important that we keep the structure but I think
that we need in some areas to improve it in a lot of ways. And I
think that, in order to do that, we might have to get involved in
some additional legislation in order to make it address some of
those problems.

As I listened to the statement made by Mr. Gorman in terms of
you go in and you get all the needs and all of a sudden you need
crutches to wale out, I think that within itself is sort of ridiculous.
And, at the same time, this is going on in the United States of
America. I mean, I think that that’s just sort of really wild.

So I think these are the kinds of things that we need to take a
very serious look at and begin to address them to see in terms of
what we might be able to do to move these things out of the way
to provide the kind of quality care that is actually needed.

So I want to let you know that I sign on to do what is required
here to make certain that it works, and I think that—I gather from
you that there is support across the board that these facilities
should continue and that, where necessary, should be upgraded,
you know, not eliminated. I guess that’s the general feeling that I
get from all of you.

So, Mr. Chairman, thank you very, very much. I look forward to
working with you.

Mr. Suays. I thank the gentleman, and we will be respectful of
the fact that there is no minority member in this chamber now.

Mr. Buxton, if you wanted to just conclude. Your comments were
helpful and happy to have you conclude.

Mr. Buxton. All right, Mr. Chairman, I just want to comment
on the issue of micromanagement very briefly.

There is micromanagement. Title 38, Congress and the central
office of VA do micromanage what happens in the field. Nobody
knows any better what happens in the field than the people that
are in the field, and we support Dr. Kizer’s ideas about moving re-
sponsibility.

However, moving the accompanying accountability to the field,
we think is also very important. We want to reinforce our position
that we think that eligibility reform would help the VA a great
deal in expanding their population, bringing money in and there-
fore relying less on appropriations.

The special missions I think have been discussed this morning:
VA, PTSD, spinal cord dysfunction, blind rehab, and prosthetics.
Those are types of special missions cannot be delivered in the pri-
vate sector with the quality and with the compassion that they are
delivered in the VA.

I just want to put some support in for the research and education
functions of the VA. Many, many of our doctors in this country re-


ll

Medical and Prosthetic

Tin Mitions)
Research Total Resorcas 1994 1998 19%
om 252 252 257
370 380 391
Grants... . 208 26 23
DoD Reimbursements .. 20 20 0
MAMOE
Un Mitions]
1994 1995 1996
Budget Authority:
TLO rvs 69.8 23
Employment:
827 802 790
VETERANS BENEFITS ADMINISTRATION
Budget Authority
Un Mitions}
1994 1995 1996
TH — 798 820
“Rincludes Credit Relorm
Compensation and Pensions—Budget Authority
Un Bitions]
1994 1995 1996
TIAL one senna : nn 17.622 17.990
[includes Proposed Lexislation (there 1s no supplementad
Readjustment Benefits—Budget Authority
in Miions}
1994 1995 1996
1081 1,287 1,333
‘lncludes proposed legislation
Veterans Housing Programs
(U8 Miions]
Program Accounts Budget Authoity 1994 1995 1996
Direct LO8N en 3 1 1
Loan Guaranty ...-...0cm -60 103 15
Guaranty & Indemnity ...... 198 573 582
National Cemetery System
{in Mithons)
1996 1995 1996
Budget Authority:
IOS oan n6 753
Employment:
13d .. 1340 1,340



97

Mr. VOLLMER. Right. There is an evolving approach to dealing
with how we deliver medicine in this country.

But, beyond that, I think, collectively, the veterans’ organizations
represented here certainly agree that there are better ways to uti-
lize resources at times, not so much competing with the private
sector for patients, but kind of creating a partnership in establish-
ing certain sharing agreements, when you look at a situation where
VA is capable of providing exceptional services and has some addi-
tional capacity, through a sharing agreement where perhaps pri-
vate-sector facilities have some other resources that could benefit
veteran patients, that this could be established.

T think one of the things we have to look at, too, is I think we
have all collectively agreed, is that the VA—when we say we want
to preserve the VA system, it doesn’t have to look in 10 years ex-
actly like it looks today. But I think veterans have come to rely
upon it, both for their health care and it has been put in place and
for 50 years, veterans—certain veterans have been told that’s the
way the government is taking care of your needs.

And there is an innate concern that, suddenly, when somebody
is saying that, eee know, we are going to give you a card and tear
down the buil fing that we have been sending you to for the last
50 years—I have a neighbor that every Saturday morning leans
over the fence and tells me what great care he got at the VA this
time, and he has been going there since he was injured in Korea
in 1952.

And so to change the way 26 million people have been given as-
surances by the government for the last 50 years is certainly going
to cause a lot of dislocation on their part and. consternation.

Mr. Souper. If I may make a brief comment, too, that in Fort.
Wayne they have moved heavily to outpatient services and are
doing much like what the general trend is, unlike the Marion hos-
pital which tends to be more long-term care. So we are seeing some
changes in the system, too.

Thank you, Mr. Chairman.

Mr. GORMAN. Mr. Chairman, I don’t think we got to your original
question, or the one that you raised, too, and that is about the clo-
sure of VA hospitals. And I think you both asked that question,
maybe in different ways.

T don’t think any of us sitting here today are saying that—what
we are talking about is a better way and more efficient way to de-
liver VA health care, and implicit in that is looking at how the VA
does it and where they do it.

If there is a hospital—I don’t think any of us will sit up here—
if there is a VA hospital that is providing minimal care or inferior,
substandard care, that we would sit up here and try to defend that
system or that hospital. We certainly wouldn’t want to do that be-
cause that is not delivering guality care to veterans.

So I think we have to look at mission changes in VA hospitals,
what they’re doing, how they are doing it and where they are doing
it. All we are trying to get to is the best possible service for veter-
ans in the most efficient way.

And I think in the independent budget, which I think Mr. Towns
referenced earlier, and he mentioned the figure of $2 billion, the in-
appropriate ways that VA is providing care right now to patients


65

Only those veterans with service-connected disabilities rated at 50 percent or
more—about 450,000 veterans—are entitled to comprehensive outpatient services.
VA's eligibility rules impede the provision of efficient health care to other veterans
in that they may not be eligible for preventive services or treatment of medical con-
ditions until such conditions, if left untreated, warrant hospital care or specialized
outpatient treatment. This makes it difficult for VA to consistently apply the eligi-
bility rules. As a result, eligibility for treatment depends greatly on what outpatient
clinic the veterans visit.

Although considerable numbers of veterans have migrated to the Western states,
there has been little shift in VA resources and facilities. As a result, facilities in
the Eastern states are more likely to have adequate resources to treat all veterans
seeking care than facilities in Western states, that frequently are forced to ration
care to some or all higher-income veterans as well as many veterans with lower in-
comes.

Using a questionnaire, we obtained information from VA medical centers on their
rationing decisions. The medical centers’ varying rationing practices resulted in sig-
nificant inconsistencies in veterans’ access to care both among and within the cen-
ters. For example, higher-income nonservice-connected veterans could receive care
at 40 medical centers that did not ration care, while 22 other medical centers ra-
tioned care even to veterans with service-connected disabilities. Some centers that
rationed care by either medical service or medical condition turned away lower-in-
come veterans who needed certain types of services while caring for higher-income
veterans who needed other types of services.

Finally, VA does not provide veterans access to outpatient care comparable to
what they would get under other public or private health benefits programs. Veter-
ans must generally travel to one of VA’s 376 outpatient clinics to obtain routine out-
patient treatment. Frequently veterans must travel long distances to obtain out-
patient care. For example, veterans in Charlotte, North Carolina, must travel about
50 miles to the nearest VA outpatient clinic. Under other public and private health
benefits programs, however, beneficiaries generally have access to a broad range of
providers within a few miles of their homes.

OPTIONS FOR RESTRUCTURING THE VA HEALTH CARE SYSTEM

Because of the major challenges facing the VA health care system, VA and the
Congress are at an important crossroad in the evolution of the system. A major re-
structuring of the system appears warranted. Options for such a restructuring
might include
—consolidating hospital services or converting hospital beds to other uses,
—retargeting VA resources to better meet the health care needs of VA’s cur-
rent target populations,
—expanding eligibility to transform VA into a comprehensive health care sys-
tem competing wit private sector providers,
—expanding care for nonveterans,
—strengthening cost sharing for nursing home care, and
—expanding use of private nursing home providers.
Consolidating Hospital Services

VA and the private sector have reacted very differently to declining inpatient
work load. In the private sector, hundreds of hospitals have closed over the last 5
years; more than 10,000 beds were taken out of service in 1994 alone.!° VA, how-
ever, has not closed any hospitals because of declining utilization.!! In fact, VA
plans to add new hospitals in Florida, Nevada, Hawaii, Alaska, and California as
part of joint ventures with the Department of Defense.!?

To survive in such a competitive environment, private sector hospitals have in-
creasingly (1) merged into hospital systems; (2) expanded horizontally to include
such related health care facilities as nursing homes, ambulatory surgery centers,
and home health agencies; (3) joined forces with HMOs to ensure a steady stream

®VA Health Care: Variabilities in Outpatient Care Eligibility and Rationing Decisions (GAO/
HRD-93-106, July 16, 1993)

20Statement of William J. Schuler, President and Chief Executive Officer, Portsmouth Re-
gional Hospital, before the House Committee on Veterans’ Affairs, Subcommittee on Hospitals
and Health Care, April 6, 1995.

11Two VA hospitals, in Martinez and Sepulveda, California, were cloeed because of structural
problems. VA plans to replace the Martinez hospital, but does not plan to replace the Sepulveda

ospital.
wPThe Air Force recently withdrew from the planned joint venture in Brevard County, Florida.


7

adopting what I'll call modern business practices, if you will, to as-
sure itself and the Congress that whatever resources it gets are op-
timally employed to do its mission.

Mr. SHays. What does it say to you, though, when you see a 50
pereent drop in the number of people demanding the service in the
last 25 years? What does it say in terms of whether we should put
more focus on outpatient rather than inpatient? Does it say that
we as a committee should be looking at reducing the number of VA
facilities? We're talking about efficiency; we're talking about serv-
ice. How would you weigh in on those issues?

Mr. TRODDEN. I would weigh in that those are clearly the issues
that should be on the table, that a reasonable set of performance
and cost measures that VA might provide that would illustrate—
for example, if you have got 10,071 medical centers and a declining
enrollment and excess capacity, I would think that a reasonable set.
of performance measures, unit cost measures, for example, would
draw attention to the hospitals that have got a problem with re-
gard to their capacity versus their clientele.

Mr. Suays. And you would contend that, based on the system we
have now, we don’t really highlight——

Mr. TRODDEN. Correct.

Mr. SHays. And so some hospitals run more efficiently than oth-
ers, some have greater demand than others?

Mr. TRODDEN. Correct. And I don’t see a great deal of visibility
into what I'll call the core of VA as to why those issues exist. For
example, as I addressed in my statement, the VA has adopted an
RPM system of deploying its resources. The concept is that VA will
Move resources from what VA calls its high-unit cost outliers to its
low-unit cost outliers, a concept that seems to have some sense in
it to me.

However, if, without the knowledge of what’s in that base and
why that high-unit cost hospital is, in fact, a high-unit cost hos-
pital, you could be doing damage to veteran patients there.

Mr. Suays. You could, but I think it doesn’t take a rocket sci-
entist to know that if you don’t have the demand for the service
and you still have the facility that the appropriation cost is going
to go up significantly.

t me just ask if there isn’t a significant disincentive to go to
outpatient services if you've got a facility that’s totally
underutilized?

Mr. BaIne. Mr. Chairman, I don’t think there’s any question that
there’s a disincentive to go headlong into an ambulatory care set-
ting, if you have a facility that has to be maintained.

And ithink Steve is right when he mentioned the new resource
allocation model. The resource allocation model, like its prede-
cessor, makes some sense. The fact of the matter is that, as a re-
sult of that model and its predecessor, less than 2 percent of VA’s
resources were moved around the system. And part of the reason
for that was that the VA and the Congress, I believe, thought it
had to maintain the base. It had to maintain the 171 medical cen-
ters around the country. And that costs a lot of money. And, there-
fore, a large portion of the $16 billion or $17 billion that the Con-
gress appropriates for veterans health care goes to support that

ase,


16

Mr. BRown. Yes, sir. We have signed 26 memoranda of under-
standing, in fact I personally signed three of them with the South-
ern Ute tribe and the Mountain Ute tribe and the Navajo Nation.
What we see here, while we have these memoranda of understand-
ing in effect, which basically says that we will go ahead and guar-
antee properties on reservations and so forth, we have not actually
seen an effort to take advantage of this program aggressively by
Native Americans, and I think they have some reasons for that.

One is that while the benefit is there, in many of these reserva-
tions, there are simply no jobs. We make the-benefit available, but
there still is a requirement that they are going to have to pay the
loan back, but there are no jobs. I do think, sir, we will be asking
for an extension of this program as it moves toward its expiration
date because we need to continue to try to invest in it, we need to
bring forth that opportunity to those who want to use their entitle-
ment to purchase a home on trust land.
ne am going to ask Mr. Vogel if he has anything else to add to
that.

at.

Mr. VoGEL. We have a number of loans in progress that we will
close in the near future. They are mostly new construction loans
that won't close until the construction is completed. Most of those
are on the Hawaiian homelands where, in fact, there seems to be
more economic vigor, if you will.

The Memorandum of Understanding that the Secretary referred
to that he signed with the Navajo Nation was recent. We haven't
seen any activity there yet. With respect to the Southern Utes and
the Mountain Utes, as an example, we haven’t had an application
yet despite our best efforts. We expect to see more in the way of
construction and remodeling loans.

One of the laws recently closed was for specially adapted housing
for a severely disabled veteran, but it is moving along. We are deal-
ing, too, with another government. Sometimes our government and
their government don’t agree. The bureaucracies in tribal govern-
ments can be just as impeding as some of the things we have in
place. We feel that the program is beginning to take off just a bit
and we would like to see it do so. We ‘ikely would ask for an exten-
sion of authority to make those direct loans. ~

Mr. GREEN. Thank you.

Let me ask an overall question, the Department of Veterans Af-
fairs is the largest Federal civilian employer, and under the
reinvention strategy the number of FTEs, how will the reinvention
strategy affect the number of full-time equivalents? And what staff
reductions would we like to see over the next few years? And let
me explain from a local basis why I think that is important.

We have seen staffing, particularly in nursing, in my hospital in
Houston, cut back, and yet I looked at the budget and we showed
that over the last year that particular facility received about $2
million more for other things, and yet I still continue to hear from
my veterans about, you know, the nursing staff is being cut back
because of the FTEs, I guess, or whatever, but if you could address
that. I am sure it is not just in Houston, I am sure it is around
the country.

Mr. Brown. As yee know, Mr. Green, we have a floor on our
FTE, which I think is misleading because many people seem to


99

Mr. GORMAN. Very much so. Very much so. Maybe Frank can

say I know it’s well over a thousand days from the —

ir, BUXTON. The time for claims adjudication is getting better.
It’s slowly but surely getting better. There still is a backlog. There
was a blue ribbon commission on veterans claims, which came out
with a series of recommendations, and those recommendations are
slowly being put in place.

I would just quickly comment on ability of a veteran to receive
medical care and then appealing that. That is not the most com-
mon claim we would see, of course, and many of those particular
appeals are handled at the VA medical center level.

And in regard to Indiana, I was just in Indianapolis 2 days ago,
and the Indianapolis Veterans Hospital is seeing all veterans that
appear at the door. They are being given care whether they’re dis-
cretionary or not.

So I believe that—I’m not sure that there’s so much of a barrier
that it has to go to the claims process. Although there are some
claims for veterans health care that are before the claims adjudica-
tors.

b Mr. Davis. OK. All right. I thank you all very much. I'll yield
ack.

Mr. SHAYS. Mr. Buxton, how are they able to service someone
who doesn’t meet the criteria? I mean what—do we have flexibility
that medical directors have and so on?

Mr. BUXTON. The medical directors at the hospital can do that.
Getting back to the old adage that we've all said at one point or
another, the health care of the VA is resource driven. If you've got
an astute director who manages his resources well, he can take vet-
erans into the system.

Mr. Suays. I know there’s an army adage that says somehow
there’s a way to get around the bureaucracy.

Mr. Buxton. Well, we think the language is the difference in
Title 38 between shall and may.

Mr. SHays. Mr. Bollinger, you’re kind of the leader of this group,
even if you don’t want to be.

Mr. BOLLINGER. I agree.

Mr. SHays. But you're the leader here. Is there anything that
you would have liked us to have asked that we didn’t? Is there any
comment here that was made that you disagree with or would like
to emphasize?

Mr. BOLLINGER. Well, I would echo one thing Dave said, Mr.
Gorman said, about again—and a couple of you raised the question
about closing VA hospitals and that sort of thing. I think that all
of us would agree that the VA is going to be a different place down
the road sometime. And none of us are saying that 171 hospitals
exist today and, by God, 171 hospitals are going to exist 10 or 15
years from now.

I think over time we've got to, you know, based on veteran demo-

aphics, based on the needs and so on and, obviously, the different

inds of specialties that the VA needs to be involved in, changes
have got to be made to accommodate the veterans who need the
system and perhaps dependents and others as well. That may be
one approach. And we’re certainly willing to sit down at the table
and talk about that.


21

I wanted to ask just a couple of questions. One with regard to
health care eligibility. If the health care eligibility rules forcing vet-
erans to be admitted to hospitals were changed so that outpatient
care could be received, wouldn’t you save a significant amount of
money and how much do you think that might be?

Mr. BRown. Well, I am going to ask Dr. Kizer to respond to that.
But to answer you up front, yes. But I would like to frame it a little
bit differently.

I would not want to see legislation that says that you should
treat on an outpatient basis as opposed to an inpatient basis. I
would like to see legislation which says to our doctors, “you deter-
mine the modality of care. If a person needs to be hospitalized on
an inpatient basis, then do that. If he can be treated efficiently and
competently on an outpatient basis, then you do that.”

And we know that that is exactly what’s happening all through-
out these great United States and the same thing is happening in
the VA. If you look at our numbers, you see outpatient care going
up like this and our inpatient days are going down like that. Ani
that’s happening all across the United States and in between, real-
ly represents a substantial savings.

lam sure Dr. Kizer has some other observations.

Dr. Kizer. I would affirm the basic tenet of your question and
that is that if we were allowed by law to treat patients according
to what their medical condition warranted, as opposed to what
statutory conditions might apply, there are certainly significant ef-
ficiencies that could be achieved.

Exactly what those would be are very hard to quantify because
the rules are so complex and the efforts to deal with them some-
times result in, quote-unquote, gaming of the system to get the vet-
eran the care that he/she needs.

Many people have tried to quantify this. I think all have agreed,
in frustration, that it is exceedingly difficult to quantify what those
savings would be in a precise way.

Mrs. MorELLa. I appreciate your commenting on that so openly,
but I don’t understand when the Secretary says he doesn’t think
legislation would be appropriate. Did I understand that. It seems
to me that if we drafted some legislation and the doctors and all
were sensitized to what it means, you would be achieving it more
significantly and faster.

Mr. BRown. Yes, ma’am. Well, maybe I didn’t make myself clear.
I think we do need legislation, but what Tm saying is that we don’t
need legislation to say that you should treat on an outpatient basis.
You need legislation to give the doctors the flexibility to decide
whether they need to be hospitalized or that they can take care of
their problems on an outpatient basis. That’s how they do it in the
private sector. That’s good medicine.

Mrs. MoRELLA. That makes sense. This is a very provincial—
maybe it is not so provincial a letter—that I got from a constituent.
I understand that there is a study on type H diabetes that the De-
partment of Veterans Affairs has approved called the VA study on
glycemic control and complications in type two diabetes. It would
tell us whether keeping our blood glucose levels near to normal de-
layed complications.


50

VA’s budget process does not provide the performance measurement capabilities
needed to fully achieve the desired degree of accountability for individual and collec-
tive program results and their financial management. As a result, VAMCs report
widely varying estimated costs for the same or similar programs with the same or
similar workload. It is my observation that historical-incremental budget planning
perpetuates these variations and the resulting inefficiencies by assuming that the
reported costs are appropriate and using these costs as the basis for planning future
budgets and allocating resources.

Inherent Conflict Between Political and Fiscal Reality:

VA recognizes that the mix and allocation of health care services provided by
VAMCs will need to change in order to meet the needs of many veterans. The neces-
sity for change in the way VA plans and budgets for health care has become increas-
ingly obvious to most observers during the past several years because of VHA’s in-
ability to reallocate resources to areas of increasing demand and priority need. For
example, a recent system-wide OIG health care inspection found that approximately
one-third of patients housed in beds designated as acute medicine or surgery might
be more appropriately managed at another level of care. The findings of this inspec-
tion make it clear that there is substantial opportunity to reallocate major resources
into areas of greatest need. Correction of the inappropriate designation of acute beds
itself could permit the reallocation of hundreds of millions of dollars to patient man-
agement better matched to actual needs.

Although efforts are being made to reform the budget planning process, historical-
incremental budget planning continues to be the basis upon which VA's health care
programs and facilities are justified and funded. This limits VHA’s ability to effec-
tively allocate resources in keeping with changing veteran demographics,

Programs also are frequently located in areas where veterans’ needs are not the

atest. Once a VA presence is established, any attempt to eliminate it or downsize
fhe activity has beeh met with strong political opposition. For example, the O1G
audit of small, unaffiliated surgical services which recommended realigning
underutilized surgical units in order to reduce costs and improve the quality of sur-
ical care generated letters from over 60 congressional offices attempting to justify
the need to maintain VA surgical presence despite the high costs or insufficient
workload.

For VA to operate effectively and efficiently, it must be allowed to make manage-
ment decisions that are free from excessive political pressures which may not be in
the best interests of the VA, our veterans, or the American taxpayer.

Allocation of Resources Not Tied to Workloads:

One of the most difficult issues facing VHA is how to ensure the equitable dis-
tribution of budget resources to VA medical facilities. As previously mentioned,
VAMCs have received funds based on their historical consumption of resources, with
incremental increases for such factors as inflation and the addition of special treat-
ment programs. However, historical-incremental budgeting has tended to reward fa-
cilities that consumed more resources, even if the care provided was not the most
efficient. For example, medical centers have historically been rewarded for providing
more costly inpatient care and, therefore, have had little incentive to shift to less
costly outpatient care.

has recently improved the management of the budget process by the devel-

opment of the Resource Planning and Management (RPM) system. VHA first used

M in the development and distribution of the FY 1994 and 1995 budgets. RPM

is described as a capitated (per patient), Prospective system which can be used to
forecast VAMC patient care workloads and resource requirements.

While my office has not yet performed a detailed evaluation of the RPM system,
I believe this system offers a more rational basis on which to allocate resources.
However, it may have to be implemented more vigorously. For example, one feature
of the RPM process which is intended to force high cost VAMCs to become more effi-
cient is the unit cost outlier adjustment. In FY 1995 a total of only $20 million was
reallocated from higher unit cost VAMCs to lower unit cost. V, 's. While the con-
cept of reallocating resources from high cost to low cost facilities seems sound, I
question whether these relatively small reallocations ($20 million is only .125 per-
cent of the $16 billion medical care budget) will give VAMCs strong incentives to
improve efficiencies and contain costs.

Staffing and Utilization of Medical Facilities:

I share many of the concerns expressed by members of Congress about how well
VA distributes its available resources and meets the patient care needs of veterans.
As the demographics and needs of the veteran population have changed in recent
years, some disparities in patient care workload and staffing levels among some



95

they know you have to bring health care to the patient, and our
veteran patients have to have the health care brought to them.

That’s not to say that that would diminish the value of the hos-
pital as tertiary care delivery and specialized care delivery hos-
pitals. The integration that’s planned of the various hospitals, and
mission changes—are certainly acceptable. But the VA system hos-
pital has got to stay intact for the very reasons that we heard here
earlier.

Mr. FULLER. Mr. Chairman, if I just could interrupt 1 second—.

Mr. Suays. This won’t be off your time.

Mr. FULLER [continuing]. And add something to that.

We can be very critical of the VA in not being able to practice
medicine in a contemporary fashion where outpatient care is the
rule of the game. The problem is not necessarily the VA’s. It is not
the VA’s at all.

The Congress itself has developed the eligibility criteria which
specifically prohibits VA from providing care in the most efficient
and effective way. Convoluted byzantine eligibility criteria require
VA to provide care on an inpatient basis, whereas providing it on
an outpatient would be much more practical, much more cost effec-
tive and much more applicable to the needs of the veteran.

And, at the same time, we have another example, which has just
arisen in the Congress in the past several weeks. Despite
restructive eligibility criteria, VA has been out there trying to be-
come innovative on its own. Apart from what the Congress has said
you shall not do, it has been out there attempting to set up out-
patient clinics; going to mayor so and so in such and such a city,
saying give me some space; going to the veterans’ associations, give
me some materials to open a clinic.

From what we understand the Appropriations Committee here in
the House at least decided that they can’t let this happen. Because,
they say if you open every clinic more people are going to come,
and it is going to cost more money to care for them.

So the Congress, again, is prohibiting the VA from practicing
medicine in the most efficient and effective way. The only way we
are foing to be able to solve this is to pass legislation requiring eli-
gibility reform.

Mr. Suays. Let me get back to Mr. Souder.

Mr. SoupER. We have a couple core premises we are trying to
deal with. One is that we don’t have money and that we have been
running a deficit that no organization other than the Federal Gov-
ernment could have been allowed to do.

Second, we have contracts with all kinds of people who—they
were basically false contracts. In other words, you were promised
all kinds of things. All types of people in America were promised
all types of things. The government didn’t have the means to de-
liver it, and they should have never made the offer in the first
place. Nevertheless, particularly those who have serious injury—I
Mean, you were put at risk by your government, and we have an
obligation to follow through, and that what I kind of understood
you to be saying earlier, Mr. Fuller—and I want to see if the others
feel this way, too, because it is the general impression that I have
gotten, and the chairman was kind of addressing this a minute
ago—is that, logically, in an economic system when we have


33

certainly consistent with the National Performance Review, and
these efforts should be viewed as complementary.

the Secretary mentioned, there are a number of
underpinnings to this effort. One of the basic conceptual differences
is that we want to look at populations of veterans and how we can
best allocate our resources in a geographic area to serve the needs
of those veterans. This is consistent with the whole concept of inte-
grated health care systems that is being pursued so feverishly in
the private sector. We will look at aggregates of our facilities and
how, working together, they can provide better access to care. Typi-
cally, a service network will have anywhere from six to nine medi-
cal centers, an array of freestanding clinics, long-term care facili-
ties, domiciliaries and other assets. We want to look at how we can
achieve efficiencies in providing the services.

How then can we turn those efficiencies into better access for our
veteran beneficiaries in that area focusing particularly on commu-
nity-based clinics and other facilities of that type? This structure
also provides the benefits of what is also known as a virtual health
care organization. This is another paradigm being pursued in the

rivate sector with considerable vigor. This is-a model in which one
looks at their own assets and then how to complement those by dif-
ferent partnerships, strategic alliances, sharing arrangements with
other providers to meet your particular needs.

For example, we currently have in place 670 sharing agreements
with Department of Defense providers. We have in excess of 300
agreements with different academic partners, and we are looking
at seeing how we can expand those with private providers, with
State and local government, and with others when that will serve
the needs of our veteran beneficiaries better than perhaps we could
with our own particular assets. The key to this, though, is knowing
what it costs to provide those services and then negotiating the
best deal, both fiscally and what will provide the best medical care.

You asked specifically about costs and savings. You asked two
questions, and I don’t recall exactly what they were, but let me try
to lump them together. We have designed the VISN catchment.
areas on the basis of existing patient referral patterns, aggrega-
tions of facilities, et cetera, basically along the lines of what makes
sense having taken the conservative approach to efficiencies, per
se. That is, we did not approach this as an exercise in cutting
FTEs. We do believe, though, that there are significant efficiencies
that can be achieved in the short term as well as in the long term.

Initially, with elimination of what appears to be duplicative ad-
ministrative layers, we would expect to see elimination of 157 FTE,

jielding an annual savings of about $9.4 million on a recurrin;
asis. Because there will be some reallocation of staff and some jol
changes and other things that will be required, we anticipate that
in the first year, i.e., in the year that we implement the plan, the
savings will be offset by the costs of moving people, training and
other things.

On an ongoing basis, though, we expect to see at least $9-plus
million in savings. I think as we implement this plan, and as it
works out, we will be able to achieve some other efficiencies and,
hopefully, will be able to turn those into increased resources di-


17

think, well, you don’t have to take any reductions, but out of that
floor we are going to have to absorb our activations.

Let us say, for instance, the hospital that we are going to acti-
vate this year in Detroit, that may require—how many people in
Detroit? About 1,500. Well, we are going to have to e that out
of our base. We can’t add that to the base. And we want to move
forward with these two new hospitals that we have in the 1996
budget and provide Travis Air Force Base and in Bevard County,
FL, that staffing, too, is going to have to come out of our base.

So what we are doing, as I mentioned to you in my openin;
statement, we are trying to move as many people from our head-
quarters out to the field. We are trying to convert as many of our
support positions to the front line. And one of the things, one of the
commitments we made early on was that the last to suffer in terms
of any type of adjustment would be the folks that are providing
hands-on care, that is what is very important to us.

Now, this is not to say that we can’t use more people out in the
field. I am really concerned about that whenever I travel, I always
stop into our SCL, our spinal cord injury units, where veterans are
suffering from catastrophic disabilities, and I want to know how
long does it take our nursing staff to get them up. They can’t just
lie in bed all day. I don’t want to go into a hospital and it is 2 and
they haven't gotten our veterans up and cleaned them so that they
can get the blood circulating. Those are the kinds of things that we
are concerned about. I am sure Dr. Kizer has some other ideas.

Dr. KizeEr. I would only add that in the little over 4 months that
I have been with the Department, I have visited various facilities
and heard from directors that the issues of nurse staffing, as well
as other staffing, is a universal concern in the system.

Mr. GREEN. Thank you, Mr. Chairman. We will be contacting you
because I know last year we passed a provision that exempted VA
medical from the staff reductions, particularly on the hands-on
care, and I know when you hear something different from your
local hospital or your veterans, local veterans, you need to have an
answer and say, well, we know we exempted it.

Mr. BROWN. One of the things that you might be interested in,
Mr. Green, we elevated the status of our chief nurses in the hos-
pitals to associate directors because they play a critical role. In
fact, they are the managers of the largest component of the hos-
pital, at least in our hospitals, and I suspect that that would hold
true in the private sector. So we want them sitting right there with
the hospital director and the chief of staff as they go about plan-
ning to make sure that we are able to accomplish our mission, that
mission of providing good, strong comprehensive health care.

Mr. GREEN. Thank you, Mr. Chairman.

Mr. Suays. Thank you, Mr. Green. Mr. Davis.

Mr. Davis. Mr. Secretary, thank you for being here. I represent
a district across the river over in Northern Virginia that has a lot
of veterans. I was pleased to see today that the backlog had been
reduced in benefits and claims, it looks like from 530,000 which
was the 1993 figure we saw to 462,000 claims.

I just finished a series of town meetings. It seems everyone with
a veterans claim was there asking questions, but from fooking—I
read your appropriations testimony. It looked like your goal is to


61

—How Jong veterans wait to see a doctor when they go to a VA medical center
without a scheduled appointment and how long they have to wait for an ap-
pointment for specialty care?

—How many VA medical centers have mammography equipment?
—What controls VA medical centers have over the distribution of controlled
substances?

Tn each case, VA’s central office was unable to provide the data, and special sur-
veys of its medical centers were required to obtain basic performance information.

ith a decentralized management structure, managers in VA's central office
should have systems to monitor field facilities to ensure that veterans receive high-
quality services. In cases where the central office has monitored field facilities’ oper-
ations, it has made some progress in ensuring that policies were properly imple-
mented and problems were corrected. For example, system wide improvements re-
sulted when the central office became actively involved in ensuring that medical fa-
cilities propert validated the credentials of their physicians and controlled inven-
tories of addictive prescription drugs. But monitoring is the exception rather than
the rule. Frequently, VA officials indicate that they lack sufficient resources to mon-
itor field facilities’ operations.

Even when monitoring occurs, VA has not held medical center directors account-
able for ensuring that policies are implemented and corrective actions taken. For ex-
ample, problems in improving the oroughness of women veterans’ examinations
persist more than 10 years after they were first identified. VA’s central office re-
quired medical centers to submit corrective action plans for improving the thorough-
ness of the examinations, but even when medical centers submitted inadequate
plans, the central office did not follow through to notify medical centers of its find-

Ings.

Finally, VA's central office should be serving as an information exchange, identify-
ing and evaluating locally developed programs and methods and disseminating best
practices to other medical centers. For example, in our most recent report on women
veterans’ health care, we noted that several medical centers had developed innova-
tive approaches to address the lon; standing problem of inadequate physical exami-
nations. We recommended that VA identify and disseminate information on best
practices, but when we followed up 2 years later, no action had been taken.5 VA
officials said they were not sure what we meant by “best practices.”

Resource Allocation

VA's methods of allocating resources to its medical centers have historically been
based on inpatient work Toad, creating incentives for medical center directors to pro-
vide care on an inpatient rather than outpatient basis, The incomes and service con-
nected status of veterans using the facilities are not considered in making the allo-
cations.

VA could reduce inconsistencies in veterans’ access to care by better matching
medical centers’ resources to the volume and demographic makeup of eligible veter-
ans requesting services at each center. In effect, VA would be shifting some re-
sources from medical centers that have sufficient resources and, therefore, do not
ration care. Such resource shifts could mean, for example, that some higher-income
veterans at those medical centers might not obtain care in the future. But the shift
could also mean that some veterans with lower incomes who had not received care
at other medical centers might receive care in the future.

From a veteran's perspective, VA’s development of a strategy to deal with re-
source shortfalls on a more equitable basis system wide seems preferable. We rec-
ommended in 1993 that VA modify its system for allocating resources to its medical
centers so that veterans with similar economic status or medical conditions would,
to the extent practical, be provided more consistent access to outpatient care.®

Although VA created a new resource allocation system, the Resource Planning
Methodology (RPM), like its predecessor, the Resource Allocation Methodology
(RAM), places limits on the amount of resources that can be shifted between medical
centers, Less than 2 percent of resources has been shifted between medical centers
under VA's resource allocation methods. More importantly, RPM allocates resources
based on prior work load without any consideration of the incomes or service-con-

of equipment. or contracts that require one party to reimburse the other for costs of services
shared. In addition, VA can enter into sharing agreements with military health care facilities
“VA Health Care for Women: Despite Progress, Improvements Needed (GAYHRD-92-23. Jan.

23, 1992).
ova Health Care for Women: In Need of Continued Attention (GAYT-HEHS-94-114, Mar. 9,
1

VA Health Care: Variabilities in Outpatient Care Eligibility and Rationing Decisions (GAO/
HRD-93-106, July 16, 1993).


4

ery of services to veterans and their families. We provide health
care, loan guarantee, educational benefits, vocational rehabilita-
tion, life insurance, pension and disability benefits, and burial serv-
ices. :

VA’s health care mission separates it from most other agencies.
VA staffs and manages the largest direct health care system in the
Nation. We provide more than 1 million episodes of inpatient care
and 26 million outpatient visits each and every year. VA trains fu-
ture health care providers and has a widely recognized medical re-
search program.

VA has an excellent record, contrary to what is reported in some
of our media, of providing high quality, cost-effective service. But
like the private sector, we are being challenged to meet. rapidly
changing needs in the national health care environment. Therefore,
reinventing government is a tremendous challenge and clearly a
worthwhile endeavor. We will continue the momentum created by
Phase I, and we are looking into many other major improvements
as we move toward Phase II.

lam very proud to report that the VA is the best in government
in four of the six categories rated by the National Performance Re-
view—the ratio of supervisors to employees, the ratio of head-
quarters staff to all VA employees, the ratio of personnel specialists
to employees, and the ratio of budget specialists to employees. Nev-
ertheless, VA is moving ahead in many areas to restructure,
streamline and further improve our operations.

We are working hard to provide even better and more efficient
service. Our primary goal is to divert our resources from head-
quarters and administration support to direct service. Here, Mr.
Chairman, are some of our examples of that effort.

The VA’s Veterans Health Administration .is planning a signifi-
cant and fundamental structural change in both headquarters and
its field structure. Its headquarters will be more flexible, focusing
on strategic planning, performance monitoring, and policy support
instead of operational control. VA has eliminated its supply depots
and converted to direct vendor delivery, 1,639 of our 3,500 direc-
tives have been reviewed, 96.5 percent of those reviewed have been
eliminated.

The VA regional office in New York City has completely
reengineered its organizational structure and word processes for
handling compensation and pension claims. By reducing the steps
in processing, the service provided to veterans is better, faster, and
Jess costly. These initiatives received special recognition when Vice
President Gore presented the very first Hammer award to the re-
gional office in March 1994, and these principles are being exported
nationwide.

Under the Government Performance and Results Act, we initi-
ated three performance measurement pilot projects in 1994. They
involve our loan guarantee program, New York regional office
reinvention lab, and the National Cemetery System operation. We
are also looking very hard at our benefit delivery system.

Two special panels were convened to make recommendations for
improvements in processing claims and appeals. The blue ribbon
panel on claims processing made 42 recommendations. Twenty of


93

and we seemed to get back into the same mode of forgetting. The
farther away from conflicts we get, the more we forget; and I think
that’s human nature.

Mr. Suays. So is part of the concern that if you have a hospital
that is for a veteran, you know there is going to be veteran serv-
ices, and your concern is that 10 years down the way, the veteran
will not get unique and special service, that they wil be forgotten?
Is that where you are coming to?

Mr. GoRMAN. That’s one of the points. I think in order to get
those special services, the unique services that have been men-
tioned oftentimes today—the spinal cord injury, the blind rehab,
the PTSD—you need to have with that a complement of acute care
services. You can’t operate a hospital in a vacuum.

There is no one who can convince me—I have received care in
both VA—many VAs, in the private sector, and I am not convinced
yet that I can get first-class care—that VA isn’t first-class care, No.

A veteran probably wouldn’t want to drive or travel X number
of miles to go to a VA oftentimes when he can get care or she can
get care in the local community. However, veterans have some
sense to them, whether it is a fraternalistic type thing or whether
it is just a patriotic thing or whether it is where they can go to be
with their peers, their colleagues.

VAs mean an awful lot to an awful lot of people for reasons that
I can’t explain, even for VA employees. There are many, many em-
ployees in the VA health care system who could be making, if it
was strictly a financial and economic reason, more money on the
outside, but yet for their own reasons, all valid, they have stuck
with the system.

Mr. Suays. I am getting the gist of your comment, and it is very
helpful. We have other Members here who haven’t had a chance to
ask questions, and I am going to come back.

Mr. Souder, be happy to have you.

Mr. Souper. I am interested in the same question. So——

Mr. Says. Well, let’s just all pursue it.

Mr. SouDER [continuing]. In the sense of, I get the feeling—how
widespread do you feel that that is about—your comments about it,
in effect, being somewhat fraternalistic in addition to just medically
driven? Because in northeast Indiana, we have a veterans’ hospital
in Fort Wayne as well as down in Marion, but many people will
travel—have to travel quite a ways whereas they could get that
service elsewhere.

My feeling is—from a lot of veterans is that they don’t feel that
way, yet others feel intensely that way. And it is very confusing to
me, not being a veteran myself, even though my father was and my
uncle and others, why some feel that way so strongly and others
would rather have the card where they could go to their local hos-
pital or to a regular hospital. What would explain the division?

Mr. FULLER. It depends on where you are, who you are, what
services you need, what your health conditions are and that type
of thing, Congressman.

But I think what we are talking about here is the commitment
of the Federal Government to meet a requirement that those who
served in the defense of this Nation expect. I think there is a cer-


38

will be able to offer more services to veterans, bring their care closer to home and
raise the standard of care provided to patients,

Specifically, it is anticipated that veterans served by the facilities will also experi-
ence the following benefits: decreased waiting times for clinical appointmenta due
to improved scheduling, increased primary care clinics and coordination of care be-
tween the integrated facilities; more choices of physicians, care providers and a
wider scope of vervices provided by an integrated a! ter coordination of patient
transfers and referrals between physical locations and timely admissions processing;
potential development of additional clinical services based on savings achieved
through streamlining: and enhanced access to primary care services which would be
initiated with savings generated from reducing or eliminating duplicative activities,



100

I would emphasize the need for eligibility reform, and I would
emphasize that specialized services are indeed the cornerstone of
the VA system. They have been for years. And the specialized serv-
ices and the safety net mission that VA has developed over the
years are going to be—have to be what the VA is all about in the
‘uture.

And we appreciate this opportunity to tell you our views and con-
cerns, and we sure hope to work with you as we help the VA with
their future plans.

Mr. Suays. Well, we look forward to working with all of you; and
your testimony has been very valuable and very helpful.

And we thank you for coming, Mr. Bollinger, and for allowing us
to invite others to participate in what is truly a very important
issue; and the sooner we address it as a team effort, the better it
will be for all of us.

And I just want to emphasize that your point about specialized
services is coming through loud and clear; and I think that all of
us here recognize the value of the veterans facilities and the need
to have them continue and to provide the services that you all have
a need for and totally deserve.

And I'd conclude by thanking you for serving your country in the
military and continuing to serve your country in the capacities
You're doing now. I will adjourn this meeting and thank you all for

eing here.
ereupon, at 12:30 p.m., the subcommittee was adjourned.]

{Additional information submitted for the’ record is as follows.
Due to high printing costs, this information can be found in sub-
committee files.]

Appendix 1.—Selected Section of Dr. Kizer’s reorganization plan
for the VHA “Vision for Change, A Plan to Restructure the Veter-
ans Health Administration.”

Appendix 2.—Selected Sections of the VA Inspector General’s
Five Year Strategic Plan (FY 1995—FY 1999).

Appendix 3.—Selected Sections of the February 6, 1995 Inspector
General Report No. 5R1-A19-026, “Review of the Implementation
of VHA’s Strategic Plan and Performance Measurements.”

Appendix 4.—Selected Sections of the PVA’s “Strategy 2000
Phase II: Meeting the Special Health Care Needs of American Vet-
erans.

Oo


41

retary’s testimony affirmed the commitment of the administration
to confront the challenges to the VA.

Mr. Chairman, in light of the administration’s goal to reform the
VA, I am deeply concerned by the Inspector General’s testimony
that although major portions of the VA have been under reorga-
nization during his 5-year tenure he has seen no significant change
or improvement in the VA operations. This discouraging revelation
underscores ‘the question central to this hearing. What must be
done to ensure that real and meaningful reform is carried out by
this agency? I hope we can come closer to the answer here today.

Today’s meeting allows the committee to consider the rec-
ommendations of the Office of Inspector General and accounting—
and GAO office—as well as the views of one of the major—of two
major, I should say, veteran organizations on initiatives to restruc-
ture the resources and management of the Veterans Health Admin-
istration.

We're all concerned about GAO’s findings critical of the current
structure of the VA health care delivery system. An April GAO re-
port identifies several problems related to access and efficiency of
care and finds that many veterans have health care needs that go
unmet because of these problems.

One major factor appears to be the VA’s complex eligibility re-
uirements which limit the services veterans can get from the VA
facility and prevent the VA from evolving from expensive inpatient

care to less expensive outpatient care settings.

Four of the major veterans service organizations, including the
organization actually, two of the organizations represented here
to ay have called for the Congress to reauthorize the VA to reform
eligibility criteria to allow veteran patients to receive care in the
most appropriate setting. This legislative action, they say, will save
taxpayers $2 billion. That’s B as in boy. I hope to explore the fea-
sibility of this recommendation with all of our witnesses.

Finally, Mr. Chairman, I’m encouraged by the IG’s appraisal that
the organizational shift from regions to veteran integrated service
network is a step in the right direction toward reform of the VA.
However, the IG cautions that the VA must put in place criteria
for performance measurements if the reorganization is to be suc-
cessful.

The IG also raises other concerns regarding opportunities for im-
provement in the construction management, procurement practices
and budgeting and allocation of resources. I look forward to a can-
did discussion of these matters.

Mr. Chairman, I thank you for the opportunity to participate;
and also again may I say, even at the risk of repeating myself, I
appreciate your leadership on this issue.

yiel .

Mr. Suays. I thank the gentleman. It’s wonderful to work with
him, And we welcome Mr. Tom Davis to the hearing. We are going
to be swearing in our witnesses and taking testimony.

Mr. Davis. No statement.

Mr. SHays. I ask unanimous consent that all members of the
subcommittee be permitted to place any opening statements in the
record and that the record remain open for 3 days for that purpose.
Without objection, so ordered.