VA Testimony of Kenneth W. Kizer, MD, MPH before Congress on June 17, 1998

United States Department of Veterans Affairs

STATEMENT OF
KENNETH W. KIZER, M.D., M.P.H.
UNDER SECRETARY FOR HEALTH
DEPARTMENT OF VETERANS AFFAIRS
ON THE FUTURE OF THE VETERANS HEALTHCARE SYSTEM
BEFORE THE
COMMITTEE ON VETERANS AFFAIRS' SUBCOMMITTEE ON HEALTH
U.S. HOUSE OF REPRESENTATIVES

June 17, 1998

Mr. Chairman and members of the Subcommittee, I am here this morning to continue the dialogue that we have been having over the past several years regarding the future of the veterans healthcare system. Indeed, it is an opportune time to again discuss this issue because much has changed in veterans healthcare since Mr. Hutchinson chaired the last hearing specifically devoted to this subject in June 1996.

I should preface my further remarks by emphasizing that VA healthcare is in rapid evolution, just as American healthcare in the private sector is in rapid transition. Unfortunately, there is not yet in the United States of America, nor in any other country of the world, a healthcare system that fully satisfies all the demands for access, quality, user service and cost. Every day we are reminded of this by stories about problems with managed care or medical treatment errors, and by articles in newspapers, magazines and professional journals that detail the shortcomings of private sector healthcare. I believe it is useful to keep this perspective in mind when we talk about ways of improving veterans healthcare, and especially so for the medically complicated and socially needy persons that fill VA clinics and hospitals.

I should further note in the way of background, or perspective, that the veterans healthcare system is unique in this country and in the world. It is not only the largest fully integrated healthcare system in the U.S., but it is also the most complex healthcare system in the world because of its multiple missions – missions which are at the same time complementary, competing and conflictive.

Missions of VA Healthcare

Today, the veterans healthcare system fulfills five principle roles, four of which are statutory, and the fifth of which underscores the inherently governmental and public benefit nature of the system.

The specific missions of VA healthcare are:

(1) First, to provide medical care to veterans, although for many years these services have been limited to veterans having service-connected disabilities and/or who are poor. These veterans constitute about 37 percent of the U.S. veteran population (about 9.4 million of 25.1 million veterans).

(2) Second, to conduct health professional education and training. Today, the Veterans Health Administration (VHA) is the largest single provider of health professional training in the world. In addition to providing training to half of the nation’s medical students and one-third of postgraduate physicians each year, VHA also provides training for over 54,000 pharmacists, podiatrists, optometrists, nurses and more than 40 other types of healthcare professionals every year. While veterans clearly benefit from this relationship with academic medicine, the public at large gains even more.

(3) Third, to conduct research that benefits veterans. Without question, VA is one of the largest and most productive research institutions in the nation. Many landmark discoveries have been made by VA scientists and medical investigators or have their roots in work done by the VA. Hardly a week goes by that VA research is not published in the nation's top medical journals. Later this week, for example, you will be reading in newspapers across the country about a major VA study concerning the preferred treatment for atherosclerotic heart disease that is published in this week’s New England Journal of Medicine. Again, while VA research certainly benefits veterans, it also greatly benefits everyone else.

(4) Fourth, to provide contingency support to the Department of Defense (DoD) and the Public Health Service (PHS) during times of disaster or national emergency. With the downsizing of the DoD and its ever present readiness needs and with the elimination of the PHS and Indian Health Service hospitals, the simple fact is that VA is the federal government’s principle asset for providing medical assistance for large-scale natural or technological disasters. Once more, the public at large is a principle beneficiary of VA.

(5) Finally, VHA’s fifth mission is to provide medical services and other support for homeless veterans. Today, VHA is the single largest direct care provider for homeless persons in the country, and we are a critically important – although often unrecognized – element in the nation’s public safety net.

These various missions of the VHA have evolved over several decades as a result of myriad public policy and programmatic decisions. And it is no accident that so much of what VA does today is inherently governmental and/or provides a public benefit that goes well beyond providing just for the medical care needs of veterans. Indeed, I am continually struck by the inconsistency in logic of persons who on the one hand lament the vagaries of a market-driven or profit-motivated healthcare system, but who on the other hand advocate turning VA’s healthcare functions over to the private sector.

Need for Change

One of the reasons that some people have advocated turning VA functions over to the private sector is that, for a number of reasons, the veterans healthcare system was not as responsive as it should have been to the changing world throughout the 1970’s and 1980’s. For some people, regrettably, the VA even came to symbolize government at its worst. Notwithstanding the many good things done by VHA, in the early part of this decade a number of different entities independently concluded that VA healthcare needed radical change if it were to have a future.

VHA Reengineering

To address these issues, the veterans healthcare system has been engaged over the past three years in a systemic effort to fundamentally re-invent itself. This effort has involved reengineering VHA’s operational structure, diversifying its funding base, streamlining processes, implementing "best practices," improving information management, reforming eligibility rules, expanding contracting authority, and changing the culture of VA healthcare, among other things.

We have previously discussed many specific aspects of this herculean effort with this Subcommittee, as well as with other committees, and we are grateful for the Congress’ support during this period of great transition.

At this time, many critical actions have been completed or are well underway. In fact, at this time, I can tell you without reservation that no other healthcare system in the U.S. can match the extent of change that has occurred in the veterans healthcare system since our efforts to restructure the system were launched in late 1995.

To exemplify this, let me cite a number of facts and figures that attest to the nature of the improvement that has occurred:

VA’s now approximately 1,100 sites of care delivery have been organized into 22 Veterans Integrated Service Networks (VISNs), and the VISNs are now the system’s basic operating unit. (VA medical care assets include 171 hospitals, 133 nursing homes, about 600 ambulatory and community-based clinics, 40 domiciliaries, 206 counseling centers, 73 home health programs, and various contract treatment programs.)

Beginning with about 10% of patients enrolled in primary care at the end of 1994, universal primary care has been implemented, as well as universal telephone triage or "call centers."
Between September 1994 and May 1998, 48% (24,956) of all VA acute care hospital beds were closed.
Compared to FY 1994, annual VA inpatient admissions in FY 1997 decreased 24% (247,412), while ambulatory care visits increased by 6.6 million (32.6 million outpatient visits in FY 1997).
Between October 1995 and March 1998, VA bed days of care per 1,000 patients decreased 61 percent (nationally) – from 3,530 to 1,403. This rate is now 5-10% lower than the rate for Medicare.
Between December 1994 and March 1998, VHA’s staffing (FTEs) decreased 11% (23,832), while the number of patients treated per year increased by over 10% (approximately 300,000). During this same time, about 8% more psychiatric/substance abuse patients, 19% more homeless patients and 20% more blind rehabilitation patients were treated.
Ambulatory surgeries increased from 35% of all surgeries performed in FY 1995 to about 75% in mid-FY 1998. Associated with this has been increased surgical productivity and reduced mortality.

Since the fall of 1995, the management and operations of 46 hospitals and/or hospitals and clinic systems have been, or are in the process of being, merged into 22 locally integrated systems.

A new capitation-based resource allocation methodology (the Veterans Equitable Resource Allocation system or VERA) has been implemented and validated.

Since 1994, 22% (27 of 121) of PTSD treatment programs have shifted, or are in the process of shifting, from inpatient to outpatient.
Since 1994, 59% (112 of 190) of substance abuse treatment programs have shifted, or are in the process of shifting, from inpatient to outpatient programs.

During the 3-year period FY 1995-1997, over 2,700 (67%) of VHA forms were eliminated, and all remaining forms and directives were put on CD-ROM or other electronic means.

Customer service standards have been implemented, customer satisfaction surveys are being routinely performed, and management is being held accountable for improving service satisfaction. Statistically significant improvements have been documented. (In FY 1997, 65% of all inpatients – including psychiatric patients – reported the quality of their VA care as very good or excellent.)

A pharmacy benefits management program implemented in FY 1995, which includes a national formulary, has produced an estimated cumulative savings of over $347 million on the purchase of pharmaceutical products.

Other elements of a Commercial Practices Initiative are yielding tens of millions of dollars of savings in the acquisition of medical and surgical supplies, prosthetics, equipment and maintenance, renal dialysis and support services.

188 new community based outpatient clinics (CBOCs) have been sited, or are in the process of being sited, from savings achieved in other areas. (Many of these are by contract with private providers.) In addition, 30 counseling centers have expanded their services to include medical and primary care. Approximately 200 more CBOCs are anticipated to be established in the next 24 months.

A new systemwide Decision Support System (cost accounting system) has been fully implemented at 91 VA hospitals and is in the final phases of implementation at the remainder.

Universal pre-admission screening and admission and discharge planning have been implemented, along with many other "infrastructure" and process changes such as a universal semi-smart identification and access card.

"Hoptel" or temporary lodging beds have been established at all VA hospitals.

Each year for the period 1995-97, the VHA’s worker compensation expenses decreased, yielding an aggregate 3 year savings of $8.5 million (5% decrease), and reversing 13 years of consecutive increases. (This contrasts with an increase in the average worker compensation costs for all federal agencies for the same period.)

A new series of specialized mental health centers called "Mental Illness Research, Education and Clinical Centers" (MIRECCs) patterned off the highly successful "Geriatrics Research, Education and Clinical Centers" have been established. Two MIRECCs were designated in FY 1997; another 3 will be opened by October 1999.

Several new graduate medical education programs have been, or are being, inaugurated, including a new health systems quality management fellowship and two new "primary specialist" programs to train specialists to provide primary care. Likewise, special fellowships have been started in medical informatics and palliative care. The commitment to support training in preventive medicine, medical toxicology and occupational and environmental medicine has also significantly increased.

Of the 8,910 postgraduate physician residency positions that VA funded in Academic Year 1996, 250 have been abolished and 750 specialist positions are being redirected to primary care, so that in AY 1999, about 49% of VA funded residency positions will be in primary care (compared to 37% in FY 1996).
VA’s intramural research program has been restructured, and while the program’s funding increased only 4% from FY 1995 to FY 1997 ($251M to $262M), 30% more merit review projects have been funded, 2 additional rehabilitation R&D centers have been established, 15 new cooperative studies were begun in FY 1997, a new nursing research initiative was launched (FY 1996), and many new studies and health services research projects have been initiated.

Quality of Care

In addition to the above, I should also note that a central tenet of VHA’s reengineering effort has been to improve the consistency and predictability of the quality of care that is provided. Again, while progress has not been perfect and problems remain, the quality of VA healthcare has measurably improved in the last three years. In fact, on standard quality of care measures employed in the private sector VA performance is superior across the board.

For example, VHA’s Preventive and Chronic Disease Care Indexes are analogous to the HEDIS instrument used in the private sector (minus measures related to pediatric and obstetrical care), although the indexes evaluate VA’s performance for several important indicators not routinely tracked by private providers. Illustrative of this latter point, VA is setting the national benchmark for all healthcare systems by mandating and monitoring the use of standardized instruments to screen for alcohol abuse and to assess the functional status of substance abusers.

The Prevention Index (Attachment 1) consists of 9 quality outcome indicators that measure how well VA follows national prevention and early detection recommendations for diseases having major social consequences such as cancer, smoking and alcohol abuse. Compliance with these recommendations nearly doubled in FY 1997 (from 34% to 67%). On average, VA outperforms the private sector on all indicators where comparable data exist, ranging from being 5% to 69% better on individual quality indicators. In addition, VA surpassed the U.S. Public Health Service Healthy People 2000 goals for 5 of the indicators. These positive trends have continued in FY 1998.

The Chronic Disease Care Index (Attachment 2) consists of 14 quality outcome indicators that measure how well VA follows national guidelines for high volume diagnoses such as ischemic heart disease and diabetes. Percentages reflect the number of patients who actually receive a required medical intervention. The Chronic Disease Care Index in the aggregate rose 73% in FY 1997. Again, where comparable data exist, VA consistently outperformed the private sector, ranging from being 21% to 124% better on individual quality indicators. Examples of VA versus private sector performance include the rate of aspirin therapy for patients with heart disease (92% vs 76%) and the percentage of diabetics whose blood sugar control is monitored annually by a blood test (85% vs 38%). As with the Prevention Index, continuing VA improvement has been demonstrated in FY 1998.

As part of our reengineering effort we have also been tracking the 1-year survival rates for 9 high-volume medical conditions. These conditions affect some of our most vulnerable patients. FY 1992 data are used as the baseline. Survival rates for several of these important conditions have increased (i.e., congestive heart failure – a 9% increase to 83.5%, chronic obstructive pulmonary disease – a 4% increase to 88%, pneumonia – a 7% increase to 89%, and chronic renal failure – an over 9% increase to 81.4%), while rates for the other conditions have remained stable (i.e., diabetes mellitus – 95%, angina pectoris – 97%, major depressive disorder – 99%, bipolar disorder – 99%, and schizophrenia – 98%).

In this regard, I might also note that a "VA Clinical Programs of Excellence" program has been established. This program recognizes the best practices in American healthcare, as demonstrated by clinical outcomes, processes, resource utilization and service satisfaction; 36 VA clinical programs across the country were designated as Programs of Excellence in October 1997.

In yet another area, morbidity and mortality rates of high volume surgical procedures in the VA have consistently declined in recent years. Mortality rates for colectomy, abdominal aortic aneurysm repair, carotid endarterectomy, cholecystectomy and hip replacement are the lowest, or equal to the lowest, in the country according to a 10 year review of published studies of surgical outcomes done by Dr. Shukri Khuri, Professor of Surgery at the Harvard University School of Medicine.

In the three years since VA’s National Surgical Mortality and Morbidity Program was implemented, the overall 30-day mortality and morbidity rates in VA surgical programs fell by 10% and 28%, respectively. (During this time there was no change in the patient risk profile.) Several articles about these improvements were published in peer-reviewed medical journals last fall, and an editorial by the Chairman of Surgery at Duke University endorsed VA’s approach as one that will improve the quality of surgical care throughout the nation.

VA is also leading the country in defining and measuring care at the end of life. We are using a newly developed instrument known as the Palliative Care Index. This index consists of various quality of care indicators that reflect the adequacy of end of life planning for patients with terminal conditions. It was for remarkable improvement in this area that VHA received the first of its kind commendation from Americans for Better Care of the Dying in December 1997.

Finally, I should note that our Northeast Program Evaluation Center has just completed a comparison of the quality of VA’s mental health services with data from the Medstat Group’s Marketscan^® Data Base, which provides information on the behavioral health performance of over 200 private insurance companies. This comparison was possible because of the Mental Health Program Performance Monitoring System that VA implemented in 1995. In brief, while VA has longer lengths of stay than observed for private sector mental healthcare providers (most likely because of the more severe psychiatric illness and social disadvantage of VA patients), VA’s performance is comparable to or superior to the private sector on most of the measures of coverage, service delivery, efficiency and service satisfaction. Continuity of care was notably superior in VA.

Service Satisfaction

I want to also emphasize that VA’s concern for the consumer is reflected in the emphasis placed on monitoring patient reported outcomes – i.e., the patient’s perspective on VA quality of care. Once more, VA has either improved during the last three years or remained stable on 7 patient-reported quality indicators that were established as VA national standards for customer service. (No such effort to track and improve VA customer service existed prior to 1994.)

Continuing Forces of Change

With the above as a very brief summation of some of the ground that has been covered in VHA’s "Journey of Change," let me now focus on the future.

Just as we have been influenced by multiple forces of change during the past three years, VA will continue to be buffeted by several powerful industrywide and societal forces of change for the foreseeable future. With some exceptions, these are the same forces that are driving the revolution in private sector healthcare.

The four most prominent forces of change bearing on VHA are:

(1) The market-driven restructuring of American healthcare in general, and the rise of managed care in particular, to control healthcare spending.

(2) The explosive growth of scientific and medical knowledge that is dramatically expanding the ability to treat injury and illness. These developments will be particularly profound in the areas of technology (and especially in areas such as limited invasive surgery, information management, imaging and telemedicine), new pharmaceuticals and genetic therapies.

(3) The changing demographics of America, and especially the relatively older age and greater disease burden of the veteran population compared to the overall U.S. population.

(4) The changing views about the role and size of government in general, and the federal government in particular.

The Changing Veteran Population

As we look to the future, we need to be particularly mindful of projected changes in the veteran population.

Assuming no significant military engagements (a possibly tenuous assumption!) the veteran population is expected to decline from 25.1 million in 1998 to 23.1 million in 2003 and to about 20 million in 2010. However, while the absolute number of veterans should decline in the future, the characteristics of the veteran population served by VA will actually result in higher demand for healthcare services. In particular, this because the veteran population is aging, becoming more female and is increasingly mobile.

Current VA patients compared to private health care patients are not only older, but they also generally have lower incomes and no health insurance, and they are much more likely to be disabled and unable to work. These characteristics are expected to continue and to result in even greater differences between VA’s service population and the general public. For example:

The number of older veterans will increase with the aging of the Korean War and the Vietnam War Era veterans. VA expects that the aggregate number of veterans age 65 and older will peak at about 9.3 million in the year 2000 and then gradually decline in subsequent years. However, the number of very old veterans – i.e., those who are age 85 and over – is increasing very rapidly. VA expects that this age group will increase from 327,000 in 1998 to 645,000 by 2003, and then expand several fold in subsequent years.

The number of female veterans will rise as the military continues to recruit more women into the armed services.

There will be considerable regional variation in these trends. Veterans continue to move from the Northeast and Northern Central States to the Southeast, the Southwest, and the Northwest; these veterans are older and increase the demands for healthcare in the receiving areas. Fortunately, we now have a resource allocation system that is patient-based and that will allow funds to move with the veterans.

Future Directions of VA Healthcare

As I look to the future, I believe the veterans healthcare system will continue to evolve along the lines that we have been pursuing for the past three years. I also believe that it will be well positioned to expand its services should policy decisions so dictate. Of course, underlying these policy decisions will be the central issue for healthcare everywhere today – i.e., the need to provide healthcare value.

The essential mandate for healthcare providers today continues to be to demonstrate good value. As we have discussed before, VA has operationalized, or defined, healthcare value as being the composite of achieving easy access, high technical quality, good service satisfaction and optimal patient functionality at a reasonable cost.

With this requirement for demonstrating value in mind, I see the VA healthcare system evolving in three general directions.

First, I see VA getting better at what it now does – i.e., getting better at taking care of service-connected and poor veterans in a system that not only provides current state-of-the-art medical care, but one that also trains tomorrow’s healthcare providers and one that researches and pioneers tomorrow’s healthcare solutions. Finding better ways of caring for VA's population of chronically ill, older and poorer veterans will ultimately result in better care for all Americans.

In pursuing this direction, I believe that VA must adhere to five key principles.

One, VA must continually focus on its core business of providing for the special care needs of veterans. This means treating spinal cord injured veterans, providing prostheses and blind rehabilitation, treating PTSD and environment exposure problems, and otherwise providing services for veterans that are not readily found in the private sector. Likewise, VA must continue to recognize that its business is healthcare, and not hospital care or any other specific type of healthcare. Hospitals, clinics, hospices and other venues are merely the tactics by which we provide healthcare, whether VA owns the facilities or whether they are made available through some other arrangement.

As the VA changes, and as we take on new responsibilities or employ new methods of satisfying longstanding responsibilities, we must never lose site of what is the fundamental reason the system exists.

Two, we must concentrate on managing care, not costs. We must especially concentrate on managing the care of complex chronic conditions.

As we look at the resurgence of double digit inflation in private healthcare, it is becoming increasingly clear that the greatest failure of managed care has been that it has focused on managing cost, without actually improving care. Too often, managed care companies have addressed only the symptoms of the ills that afflict private healthcare; they have not addressed the basic pathology of fragmented care, provider-focused and user-unfriendly services, and redundant and excess capacity. So far, managed care has not done enough to make care more coordinated, more convenient and more coherent – i.e., to manage care so that it actually improves outcomes. If we truly focus on managing care to produce higher quality, then costs will decrease, for higher quality care costs less.

Three, ensuring the consistency and predictability of care is critical. Reducing unexplained or inappropriate variation in service utilization across the system will not only result in higher quality outcomes but also greater cost effectiveness.

Four, better information management is essential to our future. In this regard, VA is no different than other healthcare systems in so far as future success is directly dependent on the ability to manage information – and information that is patient-centered instead of facility-based.

Five, everyone in healthcare has got to get comfortable with continuous rapid change. There is no crystal ball, anywhere, that can tell us what the state of U.S. healthcare will be 3 years from now. And while I would like to be able to tell you where VA healthcare will be in 3, 5 or 10 years, such predictions would be folly on my part – as they would be for anyone else. The rate and pace of change in healthcare is accelerating. The scientific and technological underpinnings of medical care are changing at an unprecedented rate. Consequently, the future of healthcare everywhere will be tumultuous, and one of the biggest challenges of the future will be having organizational management and financial structures that can adapt as rapidly as medical science evolves.

A second general direction I see VA care moving in is in taking care of an increasing number of the military-related family, whether it be more higher income veterans, more active duty military personnel, and/or more military dependents and retirees. In contrast to the past, however, I see this occurring primarily because VA will be seen as providing better healthcare value than alternative healthcare providers. These new users of the system will have options and will, I believe, increasingly choose VA to be their provider because of superior service. This expansion will occur as the natural sequel to actions that have already been taken and/or policy decisions that have already been made, such as VA’s rapidly expanding relationship with DoD and TRICARE. Of course, a particular advantage of doing this is that it will generate revenue that will augment our Congressional appropriation and allow VA to take care of more service-connected and poor veterans.

Finally, a third general direction I see VA healthcare going is having an expanding role in providing for the public’s good by using VA’s existing infrastructure and unique array of resources to address more general public needs. This can, and I believe will, take many forms, whether it be better preparing local public service agencies for terrorist actions involving weapons of mass destruction or in providing services to other publicly funded healthcare beneficiaries.

In contrast to some who might see this direction as a threat to the veterans healthcare system, I see it as helping to ensure the future of VA healthcare.

In the past, the veterans healthcare system has been too insular, too introspective and too isolated. In today’s rapidly changing world isolationism is a prescription for doom. VA’s future viability will be enhanced by forging relationships with others – relationships that will help a population that has had less exposure to, and that has less understanding of, veterans and military issues, appreciate the strengths, value and benefits of maintaining a publicly funded direct care system that has as its primary mission providing care for the men and women who have served this country in the military.

In closing, I would add that I feel much more confident about the future of the veterans healthcare system today than I did 3 years ago, but not because of any notions about the political clout of the infamous veterans lobby. Instead, I am confident about the future of the VA healthcare system because it is a good system that is getting better and because I know what else is out there against which VA has to compete. Knowing this, I believe there is much about VA healthcare that veterans and all taxpayers can be proud of – now and in the future.