HOUSE COMMITTEE ON VETERANS’ AFFAIRS
DECEMBER 2, 2009
STATEMENT OF MICHAEL S. FINEGAN
DIRECTOR, VETERANS INTEGRATED SERVICE NETWORK 11,
ANN ARBOR, MI, U.S. DEPARTMENT OF VETERANS AFFAIRS
December 2, 2009
Chairman Filner, Ranking Member Buyer, distinguished members of the Committee: thank you for the opportunity to appear before you today to review the process used to allocate appropriated funds from the Veterans Integrated Service Network (VISN) to our local medical centers. I will share the steps in our process, the rationale supporting it, our monitoring and communications systems used throughout the year, and how we ensure these resources are most effectively used in caring for our Veterans.
Mr. Chairman, most of my 20 years in the Department of Veterans Affairs (VA) have involved resource allocation, whether at a facility and network level as a financial manager, as a medical center director or interim director at three facilities, or as a VISN director conducting financial reviews at several VA medical centers. I have also dealt with this issue during my many years as a member and now co-chair of the Veterans Health Administration’s (VHA) Finance Committee. In each of these assignments, several principles have guided VHA policy and governed my approach to resource allocation: funding should follow workload, support access and quality care, have a component of efficiency, recognize case mix or patient complexity, be easy to understand, and most importantly, should be fair and use thresholds to manage changes. Each year, at all levels of the organization, improvements to the allocation models addressing these principles are debated and enhanced. These principles are reflected today in our VISN 11 model.
Our process begins with the release of the Veterans Equitable Resource Allocation (VERA) allocation from VA Central Office (VACO). Our model of funding to medical centers involves using workload and complexity data to ensure that funding follows the workload and that more complex workload receives greater resources. In any given year, depending on the overall VERA allocation, an adjustment to a facility’s requested funding level might be applied to encourage efficiency or mitigate what might otherwise be a significant change in workload. Research and education support funding is disbursed directly to medical centers to ensure appropriate support of these missions. Specific purpose allocations, such as prosthetics, are allocated from VA CO directly to facilities.
Capital funds (such as high dollar value equipment and facility maintenance or construction projects) are allocated at both the facility and VISN levels. We established a VISN level capital pool to help us invest strategically in expensive high tech equipment and address our top operational priorities. In fiscal year (FY) 2009, this pool represented 3.7 percent of our overall VERA distribution. Over several years, a VISN level clinical expert panel has developed prioritization criteria and a detailed investment plan for imaging equipment. This plan provides a structured schedule for replacing outdated equipment, investing in new technologies, reducing duplication, and leveraging economies of scale and volume discounts. For example, in 2009, VISN 11 was able to save $12 million off retail and $6 million off Federal supply schedule pricing by purchasing physiological monitors in bulk.
The funds for these strategic purchases are held until later in the year, as budget execution is monitored, to ensure that overall funding needs are met. Reserving such funds is necessary to address unforeseen conditions at medical centers, such as increased needs for inordinately complex clinical care, larger than expected workload changes, or facility emergencies. These costs are often above and beyond what medical centers budget, but they do not necessitate supplemental appropriations. For example, in 2009 one facility in VISN 11 experienced an electrical fire in the acute psychiatry wing, resulting in evacuation of patients to other facilities in the VISN and increasing non-VA hospitalization costs for subsequent admissions and substantial repairs. This required an increase to the facility’s budget of just over $1.4 million from the resources held at the VISN level. Another medical center today has two chronic ventilator patients in a specialized facility outside VA; their care costs approximately $1 million each annually and represents an extraordinary expense for the medical center. In a prior assignment as a facility director, I encountered a young woman Veteran with a complex and rare service-connected condition that was beyond our ability to treat. We arranged care for her at a specialized facility with expertise in her condition at a cost of over $64,000 per month. While the VERA allocation to the VISN will be adjusted in future years to account for these extraordinary expenses, we must be able to address such unforeseen expenses when they occur throughout the year. In VISN 11, all funds budgeted, but not expended for such unforeseen events are used to fund our strategic items or are distributed to the medical centers by the end of the fiscal year. If necessary, the VISN can request funds from VA Central Office, from funds held in reserves for such purpose.
Each year our Business Operations Board analyzes this process and the allocation model outcomes. This Board is comprised of associate directors from each medical center and VISN leaders in finance, logistics and capital assets. This Board’s recommendations are submitted to the VISN Executive Leadership Council, which consists of all medical center directors in the VISN, select clinical leaders from throughout the VISN, and the VISN Chief Medical and Quality Officers. The Council’s deliberations are often spirited, and we have made changes to our allocation based on recommendations from various stakeholders.
Our budget process is communicated to stakeholders in numerous ways throughout VISN 11. Medical centers discuss their budgets periodically with congressional members or staff. We also hold facility town halls, community Veterans Service Organization meetings, county service officer meetings, and state level functions. Each of these briefs contains a budget update. At the VISN level, I have established Management Assistance Councils in each state to engage Federal, state and local elected officials, state and county Veteran agencies, Veteran advocates, and community health partners. Invariably these meetings include budget updates and discussion. Finally, our VISN annual report contains information on our budget for our stakeholders.
Upon final approval of the budget, each medical center is required to submit an operating plan describing how the funds will be spent. VA has established several mechanisms to ensure its resources are spent appropriately to meet mission requirements and performance expectations. First, throughout the year, monthly variance reports track overall financial performance to plan. This occurs at the facility, VISN and national levels. If facilities are over or under budget, we can discuss why this has occurred and determine if corrective action is needed. Second, we monitor on a monthly basis clinical and administrative performance measures, including access, quality, patient satisfaction and business metrics. In VISN 11, monthly performance reports are discussed at our Executive Leadership Committee and during my regular site visits to medical centers. I also have a quarterly performance review with the Deputy Under Secretary for Health for Operations and Management to ensure VISN 11 is meeting its targets. Nationally, the VHA Finance Committee tracks monthly financial variance reports and financial indicators to ensure budget execution is appropriate. Finally, each VISN has both required and locally developed performance improvement projects that are tracked and reported nationally and spread through our systems redesign infrastructure to keep the focus on efficiency and effectiveness. VISN 11 is currently involved in national projects concerning the effective use of non-VA care, cancer care, reduced length of stay, non-institutional care alternatives, clinic productivity improvement, and infection control and prevention. These projects will allow us to accomplish our mission more efficiently and effectively.
Mr. Chairman, the allocation process used in VISN 11 is similar to those I have experienced throughout my career in VA. It is a process that assures each medical center is moving in the direction set by VA senior leadership and congressional mandate. It also allows for local action to meet changing patient circumstances and to manage the risk and unforeseen events that occur everyday in health care. At the same time, our performance measures and business metrics ensure quality and access remain consistently high. This allocation process also funds both routine operations and strategic investments that support our mission. I am now available to answer any questions you or other members of the committee may have.
U.S. Department of Veterans Affairs - 810 Vermont Avenue, NW - Washington, DC 20420
Reviewed/Updated Date: August 20, 2010