[Senate Hearing 108-663]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-663

     VA CAPITAL ASSET REALIGNMENT FOR ENHANCED SERVICES INITIATIVE

=======================================================================

                                HEARING

                               BEFORE THE

                     COMMITTEE ON VETERANS' AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 11, 2003

                               __________

       Printed for the use of the Committee on Veterans' Affairs


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                     COMMITTEE ON VETERANS' AFFAIRS

                 ARLEN SPECTER, Pennsylvania, Chairman
BEN NIGHTHORSE CAMPBELL, Colorado    BOB GRAHAM, Florida
LARRY E. CRAIG, Idaho                JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
JIM BUNNING, Kentucky                JAMES M. JEFFORDS, (I) Vermont
JOHN ENSIGN, Nevada                  DANIEL K. AKAKA, Hawaii
LINDSEY O. GRAHAM, South Carolina    PATTY MURRAY, Washington
LISA MURKOWSKI, Alaska               ZELL MILLER, Georgia
                                     E. BENJAMIN NELSON, Nebraska
           William F. Tuerk, Staff Director and Chief Counsel
         Bryant Hall, Minority Staff Director and Chief Counsel



                            C O N T E N T S

                              ----------                              

                           September 11, 2003
                                SENATORS

                                                                   Page
Specter, Hon. Arlen, U.S. Senator from Pennsylvania..............     1
Nelson, Hon. E. Benjamin, U.S. Senator from Nebraska.............     2
    Prepared statement...........................................     4
Hutchison, Hon. Kay Bailey, U.S. Senator from Texas..............     5
Miller, Hon. Zell, U.S. Senator from Georgia.....................     6
Nelson, Hon. Bill, U.S. Senator from Florida.....................    19

                               WITNESSES

Principi, Hon. Anthony J., Secretary, U.S. Department of Veterans 
  Affairs........................................................     8
    Prepared statement...........................................    10
    Response to written questions submitted by Hon. Bob Graham to 
      the Department of Veterans Affairs.........................    14
    Response to written questions submitted by Hon. Patty Murray 
      to the Department of Veterans Affairs......................    15
    Response to written questions submitted by Hon. Jim Bunning 
      to the Department of Veterans Affairs......................    16
Alvarez, Everett, Jr., Chairman, Capital Asset Realignment For 
  Enhanced Services (CARES) Commission, U.S. Department of 
  Veterans Affairs...............................................    25
    Prepared statement...........................................    26

                                APPENDIX

Murray, Hon. Patty, U.S. Senator from Washington State, prepared 
  statement......................................................    35
Bunning, Hon. Jim, U.S. Senator from Kentucky, prepared statement    36
Roswell, Hon. Robert H., M.D., Under Secretary for Health, 
  Department of Veterans Affairs, prepared statement.............    37

 
     VA CAPITAL ASSET REALIGNMENT FOR ENHANCED SERVICES INITIATIVE

                              ----------                              


                      THURSDAY, SEPTEMBER 11, 2003

                                U.S Senate,
                    Committee on Veterans' Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2:18 p.m., in 
room SR-418, Russell Senate Office Building, Hon. Arlen Specter 
(chairman of the committee) presiding.
    Present: Senators Specter, Hutchison, Miller, and Nelson.

           OPENING STATEMENT OF HON. ARLEN SPECTER, 
                 U.S. SENATOR FROM PENNSYLVANIA

    Chairman Specter. Good afternoon, ladies and gentlemen. The 
hearing of the Senate Veterans' Affairs Committee will now 
commence.
    Our hearing today is on the Veterans Administration's 
Capital Assets Realignment for Enhanced Service plan. This is a 
major undertaking by the Department of Veterans Affairs to 
analyze existing health care facilities and make a 
determination what new facilities are necessary; what existing 
facilities are obsolete; and how better care can be delivered 
to our nation's veterans.
    We approach this issue with a good deal of skepticism in 
the veterans' community. I believe that is something that we 
have to face very, very candidly. The budget constraints have 
been restrictive. We have not been able to take care of the 
influx of veterans, as we have an aging World War II 
population; an aging Korean population; the Vietnam War; the 
Gulf War; and now, most recently, the war in Iraq, so that 
there have been very, very heavy demands placed upon the 
Veterans Administration.
    My own experience with the VA goes back to my childhood, 
where my father, Harry Specter, a veteran of World War I, was 
treated at the veterans' hospital in Wichita, Kansas. My dad 
was an immigrant. He came from Ukraine; walked across Europe 
with barely a ruble in his pocket to the United States; did not 
know that he had a round-trip ticket to France, not to Paris 
and the Follies Bergiere but to the Argonne Forest, where he 
was wounded in action; carried shrapnel in his legs until the 
day he died. And in the late thirties, with the tremendous 
economic problems of the Depression, the veterans' hospital was 
a godsend for my father.
    I visited it not too long ago. It is now inside the city. 
When he was there, I had a long bicycle ride out. But it was 
worth the ride, because there was a free pinball machine there 
when I got to the end of the road.
    But my own experience has shown me, including my extensive 
travels as chairman of this committee and, before that, as a 
member of this committee; and earlier this week, I was in 
Pittsburgh, where there is a proposal to close down a large 
facility known as Highland Drive, which is a mental institution 
for 1,000 people. I saw the empty spaces there. Just about 150 
people are there, and there is a plan to buildup a fairly close 
facility on University Drive. But there are very grave concerns 
as to whether the other facility will be completed before the 
first facility is closed down. That is understandable. And that 
is something we have to address.
    The veterans ask questions about will the appropriations be 
there? Last Monday was the day after the President had 
addressed the nation, seeking $87 billion for Iraq. I said to 
the veterans even the President does not know if he is going to 
get the appropriation. But I assured them that I thought that 
our chances of getting that done were good.
    There are many, many facilities. I know the Senator from 
Texas has concerns about Waco. These are matters which we will 
have to take up in some detail, but this committee intends to 
pursue with diligence an analysis as to what this plan is and 
to work with the Veterans Administration. We know you are 
operating with good intentions to try to do the best we can for 
the veterans.
    In the absence of the ranking member, let me turn, on the 
early bird rule, to the Senator from Nebraska, Senator Nelson.

         OPENING STATEMENT OF HON. E. BENJAMIN NELSON, 
                   U.S. SENATOR FROM NEBRASKA

    Senator Nelson. Thank you very much, Mr. Chairman.
    I know that you hail from Kansas, the State just south of 
Nebraska, but you are probably a Penn State fan, and Nebraska 
will wrestle with Penn State Saturday night. So I thought I 
should remind you of that.
    [Laughter].
    Senator Nelson. But I do want to thank, first of all----
    Chairman Specter. You did not have to remind me, Senator 
Nelson.
    [Laughter].
    Chairman Specter. The only part that surprised me was that 
you did not propose a wager.
    [Laughter].
    Senator Nelson. I was very good at wagers until we had a 
seven and seven season, so I----
    [Laughter].
    Senator Nelson. When you learn humility the hard way, the 
lesson is well-remembered.
    However, first of all, I want to thank our panelists and 
the witnesses for being here today. The veterans' issues are 
issues that are on everyone's minds these days, and trying to 
come to terms with the way to match the resources with the 
needs has been part of what our witnesses have been involved 
with for a long period, and I want to commend my good friend, 
Secretary Principi. It is always good to see you, and I know 
how difficult it must be for you at times or for all times to 
hear that people have concerns, some skepticism about the best 
plans that you are proposing, and you are here today to hear it 
again.
    But I do know that you are committed to doing what you 
think will be best for our nation's veterans, both our current 
veterans and, unfortunately, the veterans we are generating 
every day in new engagements. So thank you for being here and 
for the opportunity.
    After the merger of VISN 13 and 14 was announced to form 
VISN 23, you very graciously and honorably came to Nebraska to 
discuss the impact it would have on our veterans, and I know 
everyone there has appreciated that. The merger process was a 
good example of the importance of including the concerns of 
those directly impacted by these decisions, and I appreciate 
the efforts of the VA to incorporate concerns from stakeholders 
such as the veterans service organizations and Network 
Leadership, the VA employees, VA affiliates and collaborators 
under the CARES process.
    I have reviewed both VISN 23 recommendations for enhanced 
care as well as the draft national plan, and I would like to 
take a moment to express some of those concerns that I 
mentioned regarding the community-based outpatient clinics, the 
CBOC's, to the realignment of some small facilities and, three, 
of course, the issue of long-term care needs, which are 
changing daily with the creation of new veterans' needs at the 
present time.
    Currently, only 51 percent of our Nebraska veteran 
enrollees are within the VA driving guidelines for primary 
care, the guidelines being 30 minutes for urban and rural areas 
and 60 minutes for highly rural areas. As you are aware, VISN 
23 is the most rural VISN, as we understand it. In order to 
resolve the gap in access to outpatient care, VISN 23 
established a planning initiative to develop CBOC's in 
Bellevue, Nebraska; Holdridge, Nebraska; O'Neill, Nebraska; and 
Shenandoah, Iowa; and to increase the capacity at the existing 
CBOC in Norfork, Nebraska.
    According to the CARES planning initiatives and market 
plans, the rationale for selection of these sites, the 
rationale was based on the population of enrollees that lack 
access in these areas. By establishing the CBOC's, it would 
increase the access level to 64 percent of enrollees by 2112 
and up to 67 percent by 2022, with the ultimate target being 70 
percent.
    During the network review process, there was wide support 
exemplified, with 80 percent of stakeholder comments agreeing 
and supporting this proposal. So not all is as from the dark 
side as we might have initially been concerned or thought with 
the concerns being taken into consideration.
    Chairman Specter. Senator Nelson, you are past the 5-minute 
mark. Do you intend to be longer?
    Senator Nelson. No, no. I will submit the rest of the 
written statement. But what I wanted to do was indicate that 
there are efforts underway to work with the stakeholders. We 
appreciate that. But we have got such a long direction to go 
with the new veterans and the changing in the demographics as 
time goes by that we need to continue to work together. I will 
submit the rest of my statement, Mr. Chairman, for the record, 
but thank you very much for this opportunity.
      Prepared Statement of Hon. E. Benjamin Nelson, U.S. Senator 
                             From Nebraska
    Good Afternoon. I would like to thank all of the witnesses for 
appearing here today to discuss the services our veterans have earned 
and received. Secretary Principi it is always good to see you again. 
After the merger of VISN 13 and 14 was announced to form VISN 23, you 
came to Nebraska to discuss the impact it would have on our veterans 
that was greatly appreciated. The merger process was a good example of 
the importance of including the concerns of those directly impacted by 
these decisions. I appreciate the efforts of the VA to incorporate 
concerns from stakeholders, such as, Veteran Service Organizations, 
Network Leadership, VA Employees, VA Affiliates and Collaborators into 
the CARES process.
    I have reviewed both VISN 23 recommendations for enhanced care as 
well as the draft national plan, and I would like to take a moment to 
express some concerns regarding: (1) Community Based Outpatient 
Clinic's (CBOC's), (2) Realignment of Small Facilities, and (3) the 
issue of Long-Term Care needs.
    Currently, only 51 percent of Nebraska Veteran enrollees are within 
the VA driving guidelines for Primary Care, the guidelines being 30 
minutes for urban and rural areas and 60 minutes for highly rural 
areas. In order to resolve the gap in access to outpatient care, VISN 
23 established a planning initiative to develop Community Based 
Outpatient Clinics (CBOC) in (1) DOD/Bellevue, NE; (2) Holdrege, NE; 
(3) O'Neill, NE; (4) Shenandoah, IA; and (5) increase the capacity at 
the existing CBOC in Norfolk, NE. According to the CARES planning 
initiatives and market plans, the rationale for selection of these 
cites were based on the population enrollees that lack access in these 
areas. By establishing these CBOC's it would increase the access level 
to 64 percent of enrollees by 2012 and 67 percent by 2022 with the 
target being 70 percent. During the network review process, there was 
wide support exemplified with 80 percent of stakeholder comments 
agreeing and supporting this proposal.
    Therefore, I was concerned when the draft national plan classified 
these CBOC initiatives in the priority 2 category. To qualify as 
priority 1 a market must demonstrate a larger future outpatient 
capacity gap, large access gaps and the number of enrolled who do not 
meet access guidelines is greater than 7,000. According to 2001 VA 
data, Nebraska has 52,022 enrollees and only 51 percent of these meet 
the access guideline, leaving 49 percent or 27,696 total enrollees 
outside of the driving guidelines.
    I believe by placing all of these CBOC proposals effectively in the 
priority 2 category that rural areas of Nebraska will not see 
improvements in the near future and will be penalized in comparison to 
more urban areas with a larger number of enrollees. Once again, 49 
percent of Nebraska enrollees are outside of the driving guidelines; 
meaning the Department of Veterans' Affairs is providing access to 
Primary Care only half of the time for Nebraska's Veterans. I find this 
statistic deeply troubling. Nebraska veterans, who sacrificed just like 
other veterans, should not be penalized because they live in a densely 
populated area. Therefore, I support the network proposal and advocate 
that these 4 CBOC recommendations be included in the priority 1 
category.
    My second concern is in regards to the inclination to transition 
some smaller facilities from Acute Care Hospitals to Critical Access 
Hospitals. I am of the understanding that the VA is currently using the 
Medicare definition of a CAH: (1) must have no more than 15 acute beds, 
and (2) cannot have lengths of stay longer than 96 hours and (3) 
maintain a strong link to their referral network. The national plan 
proposed that the CAH model be implemented at the Cheyenne VA Medical 
Center (VISN 19) and at the Hot Springs VA Medical Center (VISN 23).
    921 Nebraska veterans utilize the Cheyenne Medical Center in 
Cheyenne, Wyoming. In the past fiscal year these veterans were served 
by 3,578 visits with an average length of stay for acute care at about 
130 hours--above the 96 hours threshold for CAH model. The national 
plan's focus for this facility is to maintain acute bed sections, 
develop more restrictive parameters for types of in house surgery 
procedure and close all ICU beds. The recommendation to convert this 
facility to a CAH model however was not included in the network 
proposal. Consequently, I have received a significant amount of 
feedback from local veteran service officers, organizations, facility 
employees and veterans concerned that this recommendation was suggested 
late in the CARES process leaving little feedback time for shareholders 
and many veterans feel they will see a continual decline in services at 
the Cheyenne Medical Center.
    2,590 Nebraskan veterans are registered at the Hot Springs Medical 
with an average length of stay for acute care at about 72 hours--
conforming to the CAH model. The focus for this facility is to decrease 
bed numbers and increase contracts and referrals. Many Nebraskan 
veterans are concerned about downsizing this facility especially when 
there is a clear need for continued inpatient services based on the 
local domiciliary home and State veteran's home both located on the Hot 
Springs Campus.
    And the last concern I would like to address is in relation to Long 
Term Care for our nation's veterans. The VA has acknowledged that 
veteran's age 75 and older will increase from 4 million to 4.5 million 
veterans by 2010. GAO has estimated that veterans 85 and older will 
triple by 2012. Considering this increase, the VA will need all the 
facilities they can build and maintain to plan for this increase. 
Cutting facilities, as the draft CARES plan does, will not make this 
problem go away and will only mean that another Administration is 
forced to deal with it in the very near future. Thank you again for 
appearing before the Committee to address our concerns.

    Chairman Specter. Senator Hutchison.

        OPENING STATEMENT OF HON. KAY BAILEY HUTCHISON, 
                    U.S. SENATOR FROM TEXAS

    Senator Hutchison. Thank you, Mr. Chairman.
    I want to thank you for scheduling this hearing, because it 
has reverberations throughout my State as well as throughout 
the country, I am sure. All of us who serve on this committee 
understand the need for the Veterans Administration to examine 
all of the medical services provided to our veterans and to 
realign the requirements, where necessary, to address the 
greatest need. We also recognize the need for the Veterans 
Administration to make the best possible use of our resources.
    I am concerned, however, that the draft plan, as it impacts 
my state, neither enhances services nor wisely allocates 
resources. I recognize that we are only in the second step of a 
four-step process and that neither the independent commission 
nor Secretary Principi have reviewed these initial 
recommendations. I am confident that the commission and 
Secretary Principi will closely evaluate them.
    The release of the draft plan caught many in Texas by 
surprise. If the draft plan had been adopted as written, many 
in Marlin, Big Spring and Waco, the communities most affected 
by the proposal, fear they will lose access to veterans' 
medical care. The plan would result in a drastic reduction in 
current services. Prior to the release of the draft plan, our 
veterans' organizations and local community leaders worked with 
their respective service network regional directors in 
developing plans to optimize use of their facilities.
    But the draft plan that appeared in August bore almost no 
resemblance to the original recommendations by the service 
network directors in the field. For example, the Veterans 
Integrated Service Network Market Plan recommended establishing 
Waco as a regional psychiatric resource and spoke of an 
enhanced mission for the Waco facility. Considering that the VA 
has spent over $80 million over the past decade building state-
of-the-art psychiatric facilities in Waco and training 
technicians and nurses in this specialized field, the original 
recommendation to consolidate psychiatric services seemed to be 
a good use of taxpayer funds. However, the recommendations were 
disregarded, and closure was recommended.
    Similarly, in Big Spring, and I would like to say that the 
Mayor of Big Spring, Russ McEwen, and the Howard County 
Commissioner, Bill Crooker, are in the audience, if you would 
stand. They are so concerned about this. We appreciate your 
being here.
    Let me tell you the story of Big Spring. They serve a 
veteran population spread over 74,000 square miles in an area 
equal in size to New York, New Jersey, Connecticut, Rhode 
Island, Massachusetts and Delaware combined. Big Spring VA 
Hospital serves 63,000 veterans. It would be inconceivable to 
imagine a recommendation to close a hospital in Delaware and 
send veterans to be treated in Massachusetts, but that is 
comparable to what is being done to Big Spring if that facility 
is closed or severely downsized.
    As was the case in Waco, the veterans' community in Big 
Spring worked with the VISN to make a strong case about the 
central location, and as I said this morning, even the mayors 
of Midland and Odessa, where there would be a proposed new 
facility, have written saying no, it should stay in Big Spring, 
where it is more central. So I think that we can understand 
that there was a shock for the report that came out after 
working with the VISN.
    I recognize the need for the independent evaluation. 
Communities like Big Spring, Waco and Marlin need to have a 
strong justification to keep their facilities in place. But I 
am concerned that we are on such a fast track that maybe these 
communities might not get the full time and have the ability to 
fully prepare their defense. So I hope that we will not make 
mistakes in closing facilities too quickly but that there will 
be a good, solid timeframe for these communities to meet and 
have business plans to say what the community would like to do 
to upgrade the facility and make it more worthwhile.
    The mayors of these cities with whom I have met: Waco and 
Big Spring and Marlin, all say that they are willing to do 
that. My final comment is for Mr. Alvarez. We want to say how 
much we respect you and the record that you have. You have 
undertaken a thankless task and one that really shows the 
American spirit that you have already shown in your service 
career that you would undertake it. I would just ask that you 
look at the original recommendations in addition to the most 
recent ones to see what the regional people brought forward, 
because I think they shed a lot of light on this process.
    Finally, Mr. Chairman, let me say: no secretaries or 
assistant secretaries have been as open to discussion, as 
forthcoming, as accessible as Secretary Principi and Secretary 
Roswell. I have met with both of them. I have talked to them. I 
know that their hearts are in the right place, but they could 
not be more accessible, and I appreciate that. I just hope that 
in the end, there will be an ability by the communities to 
offer things that would be better for the veterans' hospital, 
to make it better and also to look at these original proposals 
that were made from the field where the service is really being 
done.
    With that, I thank you very much.
    Chairman Specter. Thank you, Senator Hutchison.
    Senator Miller.

   OPENING STATEMENT OF HON. ZELL MILLER, U.S. SENATOR FROM 
                            GEORGIA

    Senator Miller. Thank you, Mr. Chairman. Thank you for 
holding this hearing, and I would like to thank Secretary 
Principi and Dr. Roswell and Mr. Alvarez for being here with us 
and for the great job that they do every day.
    I think it is very important and timely that the Veterans 
Administration address health care and other concerns of the 
soldiers, because military service should be a career of 
distinction and honor. I know you believe that as strongly as I 
do and that those who serve should be given the resources they 
deserve.
    With troops still facing danger and a new generation of 
soldiers using VA health care, ensuring access to health care 
services has become paramount. But I also want to say that just 
as important as accessibility is ensuring that veterans receive 
health care in a timely manner as well. We have all heard the 
stories of veterans waiting 6 months to see a VA physician. 
Those delays are too common across this country, and we have 
got to address this problem.
    I applaud the goal of the CARES commission, and I believe 
the result of the commission's hard work will be more 
comprehensive and more accessible health care for all of our 
veterans. I am optimistic. I realize that there are going to be 
changes that are not going to please everyone, but I also 
understand that the Department of Veterans Affairs, just like 
every other department and just like the Senate and Congress 
should get as much bang out of the buck as we possibly can. It 
is not Government money; it is taxpayers' money. We have got to 
operate the most efficient system of veterans' health care 
without compromising our mission.
    We have the best military in the world, and our soldiers 
put their lives on the line for this country every day. As you 
well know, Georgia is home to 770,000 veterans, and it was 
Georgia soldiers that made up the bulk of our troops deployed 
to the Middle East. So it is critically important for the VA to 
guarantee that they will have access to quality health care 
facilities when they return home.
    So as the CARES initiative progresses, it is vital for the 
Veterans Administration to preserve its commitment to veterans. 
I know you understand that. I also want you to know that I will 
continue to work to make certain that the VA remains dedicated 
to improving health care for veterans in Georgia and 
nationwide, and it is my hope that Congress and the 
administration can work together to find solutions to 
adequately address VA's budget concerns while still providing 
the quality health care that we all know our veterans deserve.
    Thank you.
    Chairman Specter. Thank you very much, Senator Miller.
    We now turn to the distinguished Secretary of Veterans 
Affairs Anthony J. Principi. Secretary Principi comes to this 
job with superb qualifications I think never before matched, in 
that he had previously served as Deputy Secretary of Veterans 
Affairs under President George H.W. Bush. He had served as 
chief counsel and staff director for the Senate Committee on 
Veterans' Affairs, which is a tough job and a great learning 
experience, and previous to that, he had been chief counsel for 
the Committee on Armed Services. So he has quite a legislative 
background and quite an executive background.
    A graduate of the U.S. Naval Academy, he had been in the 
private sector when President Bush brought him back to 
government. He was confirmed on January 23, just 2 days after 
inauguration day, and even though Secretary Principi has not 
made judgments in the area, because the recommendations have 
not yet come to him, it is he who started the process on his 
determination, as he saw it, to give the veterans the best 
possible care.
    We customarily set the time limit at 5 minutes, and when I 
start the proceedings with a time limit, I like to point out 
that recently, on the memorial services for Ambassador 
Annenberg, the time limit was set at 3 minutes for President 
Ford and Secretary Powell and Arlen Specter and others. So it 
should be noted that 5 minutes is a large allocation by some 
standards.
    [Laughter.]
    Chairman Specter. Secretary Principi.

    STATEMENT OF HON. ANTHONY J. PRINCIPI, SECRETARY, U.S. 
        DEPARTMENT OF VETERANS AFFAIRS, WASHINGTON, D.C.

    Secretary Principi. Thank you, Mr. Chairman. Thank you for 
your time. Good afternoon, Mr. Chairman and members of this 
Committee. I appreciate the opportunity to discuss the VA's 
Capital Asset Realignment for Enhanced Services initiative, 
usually referred to as CARES.
    CARES is rooted in the answer to the question: how can VA 
and the Congress best allocate the limited resources available 
to support our vast infrastructure--well over 5,000 buildings; 
well over 15,000 acres of land across the country--so as to 
ensure that veterans receive the best possible care over the 
decades to come in this new century? Many of our hospitals were 
built, designed for medicine as it was practiced after World 
War II and, in many cases, even after World War I, when we 
inherited old Army forts from the military, and they became VA 
hospitals in the late 1800's and early 1900's.
    Then, lengthy inpatient admissions were the norm. Today, as 
you well know, new procedures, advances in technology, new drug 
therapies have moved most care to an ambulatory outpatient 
arena and dramatically reduced the length of stay when 
inpatient care is still required. Then, the mentally ill were 
locked away for decades at a time behind closed doors. Today, 
most can be treated in their communities with revolutionary new 
drugs like atypical antipsychotics, where they can live at 
home; they can go to work as long as they have the new drugs 
and the community and non-institutional care support.
    Telemedicine, digital radiology, allow physicians literally 
hundreds if not thousands of miles away from physicians to 
provide the latest diagnostic treatment and care with the 
veteran in their community wherever that might be. Then, many 
facilities were located with little regard to where veterans 
live at the time, much less where they will be living in the 
third decade of the 21st Century.
    As you know, in 1999, GAO testified that maintaining 
obsolete or duplicative structures diverts $1 million a day 
every day, every year, away from the care of veterans. It is 
for those reasons that the last administration initiated the 
CARES process and why I believe it was important to carry it 
forward. My goals are simple: provide our doctors and nurses 
with the facilities they will need to provide 21st Century 
veterans with 21st Century medical care; create a plan for 
managing our capital assets over the next two decades that will 
optimize the practice of modern medicine while acknowledging 
the inevitable changes in veterans' demographics.
    The parameters I set are clear. The plan must ensure that 
VA's capacity to provide care, including our specialized 
services such as mental health and spinal cord injury, is not 
reduced. Nor do I want a plan that does not comply with the 
statutory requirements for long-term care. As you know, we 
initiated the process with a pilot in Network 12, basically 
northern Illinois and Wisconsin. Implementation of the plan for 
that network is underway. We learned a lot about our process in 
that pilot project. It was very expensive. We paid contractors 
and consultants millions to do what we could do for ourselves. 
Veterans and other members of the community said that they did 
not have a chance to provide input, and the process was very 
slow.
    We owe it to our veterans, to our health care providers, to 
our communities as well as to the American people to get our 
capital asset planning house in order quickly. Our 
appropriations committees have made it clear that we must 
produce a well-thought-out and comprehensive capital plan 
before they will entrust us with significant construction 
funding, even for patient safety and seismic protection 
projects.
    In real dollars, the past 5 years have seen construction 
funding at one-tenth the rate we received in the 1980's. That 
will not change until our project proposals reflect a plan for 
21st Century medicine. I addressed this challenge by directing 
the Undersecretary for Health to produce a plan based on 
information developed with data on local facilities and 
demographics and with input at the local level, from the 
veterans we serve, our employees, our affiliates and our 
communities. I further directed him to meld this input into a 
comprehensive plan for an integrated national health care 
system, but I also wanted a reality check.
    To get that check, I commissioned an independent body, the 
CARES Commission, to evaluate the Undersecretary's plan, to 
independently obtain stakeholder input and to provide their 
independent judgment to me on the plan prepared by the 
Undersecretary. To lead the commission, I chose Mr. Everett 
Alvarez, the gentleman to my right, a former VA deputy 
administrator; a veteran whose courage and integrity were 
forged as a naval aviator and tested as a POW for 8 years in 
Hanoi and a man whose commitment to America's veterans is 
absolutely unquestioned.
    Under his leadership, the commission will make such 
modifications as they deem appropriate and present their report 
to me. I will then review this report very carefully; consult 
with Members of Congress; and then accept the plan in its 
entirety or reject it or ask the commission to go back and 
answer further questions, but I will not pick, and I will not 
choose among the recommendations and proposals.
    When the process is completed, I expect that we will have a 
road map for managing VA's capital assets for the next 20 
years. I fully expect the plan to call for significant capital 
expenditures. I do not delude myself that the plan will call 
for leaving every VA facility intact as it exists today. I do 
expect that implementation of the plan will mean better health 
care for more veterans of this nation.
    Thank you, Mr. Chairman for the opportunity to testify 
before you today.
    [The prepared statement of Secretary Principi follows:]
      Prepared Statement of Hon. Anthony J. Principi, Secretary, 
                  U.S. Department of Veterans Affairs
    Mr. Chairman and Members of the Committee:
    I am pleased to appear before the Committee to describe the process 
that produced VA's Draft National CARES Plan, which represents the most 
comprehensive effort to develop a road map that will guide the 
allocation of capital resources within the Veterans Health 
Administration (VHA). With me today is Dr. Robert Roswell, VA's Under 
Secretary for Health, who will discuss the contents of the draft 
national plan itself.
    CARES is a comprehensive, data-driven planning process that 
projects the future demand for health care services in 2012 and 2022, 
compares them against the current supply, and identifies the capital 
requirements and the asset realignments VA needs to improve access, 
quality, and the cost effectiveness of the VA health care system.
    VA initiated CARES to create a strategic framework to upgrade the 
health care delivery capital infrastructure and ensure that scarce 
resources are placed in the types of facilities and locations that 
would best serve the needs of an aging veteran population with 
increased acute and outpatient care needs. The dramatic changes in the 
delivery of VA health care services including the expansion of 
outpatient services, an aging infrastructure with the average age of 
buildings over 50 years, costs associated with the maintenance of 
excess space, and the potential use of underutilized campuses to 
provide revenues to enhance services were powerful factors that 
coalesced into the need for CARES. GAO's 1999 reports, which were 
critical of the management of vacant space within VHA, and 
Congressional reluctance to provide capital without an overall 
assessment of the current and future capital requirements to meet the 
health care needs of veterans have reinforced the importance of a 
comprehensive capital plan.
    The CARES Process was designed to balance the need for a national 
planning process with the recognition that health care delivery is 
local. This was accomplished through the use of national data bases 
that standardized the forecasts of enrollment and utilization, the 
identification of national planning topics, and the use of standardized 
tools in determining how to meet the projected needs. Forecasts of 
enrollment and the need for outpatient and inpatient care were 
developed through the year 2022 for each VISN and market area. Data 
were integrated with Medicare to ensure forecasts reflected Medicare 
utilization. All VHA space was assessed for functionality and safety. 
Based upon these data, a national planning agenda was developed and 
sent to the field for solutions. A standardized costing and decision 
support system assisted in the planning. The agenda included the 
development of cost effective solutions to meet the future space 
requirements, the mission of small facilities, reduction in vacant 
space, consolidations and realignments of services and campuses and 
collaboration with DoD. Stakeholder input was required and occurred at 
the national and field levels. Seventy-four market plans were submitted 
as input to the development of the Draft National CARES Plan.
    CARES was initiated in a Pilot in VISN 12 in 1999. The CARES 
process focuses on markets--or distinct veteran population areas. The 
Phase I pilot identified three market areas: the Chicago area, 
Wisconsin and the Upper Peninsula of Michigan.
    In this initial effort, the contractor assessed veterans' health 
care needs in the test market and then formulated various solutions 
that could meet those needs. Following a detailed review process a plan 
to realign capital assets in the VISN 12 market areas was approved. The 
results of CARES Phase I were announced in February 2002.
    In preparing for CARES Phase II extension of the process to the 
remaining 20 VISN's, I determined that VA personnel, rather than 
contractor staff, would coordinate and carry out the planning process. 
The conversion from a contracted study in one VISN, to a VA-operated 
planning process extended to the entire system, went well beyond the 
scope of the pilot. The use of VA staff was necessary to ensure that a 
process was created that would be ongoing and become part of VA 
strategic planning process rather than a one time study performed by 
outside consultants.
    In effect, CARES Phase II piloted a new process that will be 
integrated into a redesigned strategic planning process. The challenge 
of developing a national process while recognizing that health care is 
delivered through local systems required a new approach that included 
the following elements:
     use of national data bases and methodologies to determine 
current and future needs;
     assessment of all space in VHA for its safety and 
functionality;
     national definition of the planning initiatives to be 
addressed by VISN's. VISN development of plans that address the 
planning initiatives;
     standardized planning support systems and data for plan 
development and costing to ensure consistent results;
     policy and tools that supported local and national 
stakeholder involvement;
     onsite technical support to the VISN's for plan 
development; and
     detailed national review process to create a national plan 
from the VISN plans.
    A major enhancement in the Phase II model was increased commitment 
to the aggressive, systematic inclusion of stakeholders. The 
requirement for in-depth communications with a vitally interested 
public at national, regional, and local levels was integral to the 
process. Multiple modalities and media were designed and used to inform 
stakeholders about CARES in general and to solicit their comments on 
potential changes in respective markets in particular.

                        NINE-STEP PLANNING MODEL

    The enhanced CARES model comprised a nine-step process designed to 
ensure consistency in the development of CARES Market Plans within each 
VISN.

    STEP 1: IDENTIFY MARKET AREAS AS THE PLANNING UNIT FOR ANALYSIS 
                            OF VETERAN NEEDS
    The VISN's identified 74 market areas based on standardized data 
for veteran population, enrollment, and market share provided by HQ. 
Each network also used local knowledge of their unique transportation 
networks, natural barriers, existing referral patterns, and other 
considerations to help select their market areas.

      STEP 2: CONDUCT MARKET ANALYSIS OF VETERAN HEALTH CARE NEEDS
    A national actuarial firm--referred to hereinafter as CACI/
Milliman--that had developed enrollment, workload, and budget 
projections for VA budget development, under VA direction modified the 
model to develop standardized forecasts of future enrollees and their 
utilization of resources from 2002 through 2022 for each market area in 
all VISN's. Translation of the data into the VHA CARES Categories 
listed below facilitated the identification of ``gaps'' between current 
VHA services and the level or location of services that will be needed 
in the future. These were ``high level'' macro categories that would 
enable planning to occur at a level of detail adequate for capital 
needs rather than detailed service-level planning: Inpatient Medicine; 
Outpatient Primary Care; Inpatient Surgery; Outpatient Mental Health; 
Inpatient Psychiatry; Outpatient Specialty Care; Outpatient Ancillary 
and Diagnostic Care.
    The model also projected workload demand in the following 
categories, which were not used to identify gaps because private sector 
benchmark utilization rates were not available to validate results: 
Residential Rehabilitation; Intermediate/Nursing Home Care; 
Domiciliary; Blind Rehabilitation.
Spinal Cord Injury
    Since the statistical model's data validation on these non-private 
sector services was not adequate for objective planning, these 
categories were either removed from the Phase 1/ cycle (Le., held 
constant) or, as in the case of Blind Rehabilitation and Spinal Cord 
Injury, alternative forecasting models were developed by teams of VA 
planners and VHA experts from the concerned special disability 
programs, who collaborated to produce these unique projections.
    Data on the current supply and location of VHA health care services 
were collected for all facilities, markets, and VISN's. In most 
instances, fiscal year 2001 was used as the source year for baseline 
data. A profile was created for each VISN and made accessible to VHA 
staff on a web site established as the repository for all CARES data. 
Baseline data included:
     Space (condition, capacity and current vacant space)
     Workload (fiscal year 2001 bed days of care and clinic 
stops)
     Unit Costs (facility specific in-house and contract unit 
costs)
     Special Disability Population Data
     Access Data
     Facility List
     Research Expenditures and Academic Affiliations
     Clinical Inventory
     Potential DoD, VBA and NCA Collaborations
     Enhanced Use Lease Valuations
     Summary of VISN fiscal year 2003/fiscal year 2007 
Strategic Plans

       STEP 3: IDENTIFY PLANNING INITIATIVES FOR EACH MARKET AREA
    Data collected in Step 2 made it possible to directly compare 
current access and capacity, with quantitative projections of future 
demand. ``Gaps'' were indicated in any market where actual utilization 
in fiscal year 2001 was significantly less than utilization projected 
for fiscal year 2012 and fiscal year 2022. Such gaps in various market 
areas formed the basis for the development of ``planning 
initiatives''--essentially a description of the potential future 
disparity between capacity and need.
    Planning Initiative Selection Teams were formed and selected 
planning initiatives for each VISN and Market Area based on established 
criteria for planning remedial action. Planning Initiatives were 
identified in the following areas:
     Access to Health Care Services
     Outpatient Capacity (Primary Care, Specialty Care, Mental 
Health). Inpatient Capacity (Medicine, Surgery, Psychiatry)
     Special Disabilities (Blind Rehabilitation, Spinal Cord 
Injuries and Disorders)
     Small Facilities
     Consolidations and Realignments (Proximity)
     Vacant Space
     Collaborative Opportunities (DoD, VBA, NCA)
    In addition to the Planning Initiatives, all workload changes that 
resulted in gaps between predicted demand and current supply had to be 
planned for, including in-house provision of services or by 
contracting, sharing, or other arrangements. The requirement to manage 
all projected workload was a significant addition to the planning 
process; it was included in order to assure that all space needs were 
addressed in the National CARES Plan. The Planning Initiatives and 
their data were transmitted to the field in November 2002 to begin the 
market planning process.

     STEP 4: DEVELOP MARKET PLANS TO ADDRESS PLANNING INITIATIVES 
                       AND ALL SPACE REQUIREMENTS
    The selected planning initiatives formed the key elements of the 
VISN CARES Market Plans. All VISN's developed market plans, which 
included a description of the preferred solution selected by the VISN 
for all planning initiatives identified in every market as well as 
potential solutions considered to address each planning initiative.
    VISN planning teams were expected to identify alternative solutions 
for their plan development process. In proposing these various 
alternative solutions, VISN planners were required to assemble specific 
supportive data, which were entered into the IBM-developed market-
planning tool. The standardized algorithms in the market planning tool 
assured a consistent methodology for analyzing each solution's impact 
on workload, space and cost, as well as other CARES criteria such as 
quality, access, community impact, staffing, and others.
    Thus, all VISN's used the same criteria and planning tool (using 
local operating and capital costs) to determine the relative merits of 
meeting future demand via contract, renovation of available space, new 
construction, sharing/joint ventures/enhanced use or acquiring new 
sites of care. VISN's briefed stakeholders on their planning 
initiatives, and presented their proposed solutions. Comments and other 
feedback from stakeholders were duly noted for incorporation into the 
planning process. VISN market plans were submitted to VHA Headquarters 
on April 15, 2003.

       STEP 5: VACO REVIEW AND EVALUATION: DEVELOPING THE DRAFT 
                          NATIONAL CARES PLAN
    The VISN plans served as input to the development of the Draft 
National CARES Plan. The Draft National CARES Plan is not a compilation 
of individual VISN plans. It represents a comprehensive series of 
national decisions made after reviewing the individual VISN Market 
Plans. Each VISN CARES Market Plan was subjected to an extensive tri-
partite review before ultimately being considered by the Under 
Secretary for Health for inclusion in the Draft National CARES Plan. 
The groups conducting the reviews were field and headquarters review 
teams organized by the National CARES Program Office, the Clinical 
CARES Advisory Group (CCAG), and the CARES Strategic Resource Group 
(also known as the ``One VA Committee''). The clinical experts (CCAG) 
provided the most rigorous review and comments on issues with medical 
and other direct care (including mission-related) implications, while 
the Strategic Resource Group took a more generalized management 
approach, looking especially closely at matters concerning 
collaboration with other departments or administrations.
    The National CARES Program Office performed a comprehensive and 
intensive review, assembling review groups to look at similar types of 
planning initiatives from all VISN's, assuring a structured assessment 
that was consistent across the VA system as well as an overall 
assessment of whether the individual solutions within a market added up 
to a sensible market plan.
    The final review was by the Under Secretary for Health, who 
reviewed the key issues and the comments from the diverse review groups 
and stakeholders. As a result of the Under Secretary for Health's 
review of the adequacy of the market plans, selected VISN's were 
required to review the potential realignment of specific facilities/
campuses and to consider the feasibility of conversion from a 24-hour/
7day-per-week operations to an 8-hour-per-day/40-hour-per-week type of 
operation. The rationale for the requested review was to fully assess 
the potential to consolidate space and improve the cost effectiveness 
and quality of VA's health care delivery. The guidance included the 
continuation of all services to veterans as part of the realignment 
review. The results of this initiative were completed in July 2003 and 
incorporated into the draft National CARES Plan.
    The product of the Under Secretary's review process and policy 
decisions formed the draft National CARES Plan that I transmitted to 
the CARES Commission on August 4, 2003.

                 STEP 6: INDEPENDENT COMMISSION REVIEW
    I established the CARES Commission in December 2002 to provide an 
objective and external perspective to the CARES process. It is not 
expected to provide a `de novo' review of the VA medical system. 
Rather, the Commission is charged with reviewing the Under Secretary's 
Draft National CARES Plan so that it can make specific recommendations 
to me regarding the realignment and allocation of capital assets needed 
to meet the demand for veterans' health care over the next 20 years.
    At the first of its monthly meetings, in February, I asked the 
Commission to examine the Draft Plan with a critical and independent 
eye; I also asked the Commission to report to me on the validity of the 
opportunities identified in the Plan for improving our ability to 
provide quality healthcare for veterans by effective deployment of 
physical resources.
    The Commission is made up of 16 individuals from all walks of life: 
doctors and nurses, medical and nursing school professors and deans, 
health care professionals, members of veterans' service organizations, 
former VA officials, business managers and leaders in their 
communities. Each member brings his or her special qualifications and 
experiences to the Commission, as well as sensitivity to the 
Commission's unique mission. Chairing the Commission is the Honorable 
Everett Alvarez, Jr., who is best known as the first American aviator 
shot down over North Vietnam and who was a prisoner of war for 8\1/2\ 
years. Among his other accomplishments, Chairman Alvarez served as 
Deputy Director of the Peace Corps, and as Deputy Administrator of the 
Veterans Administration for 4 years.
    The Commission may accept, modify or reject the recommendations in 
the Draft National CARES Plan. In making its recommendations, the 
Commission will consider information gained through nation-wide site 
visits, written comments from interested parties and formal public 
hearings. The Commission completed 59 of its 65 site visits in July, 
with some scheduled into this month. These informal tours through VA 
facilities and the geographic areas they serve have included meetings 
and conversations with many veterans, individuals inside the VA family, 
and local community leaders. The Commission has completed over half of 
its 36 formal public hearings, with the last one scheduled for October 
3.

             STEP 7: SECRETARY OF VETERANS AFFAIRS DECISION
    I anticipate that the Commission will provide me their 
recommendations and supporting comments regarding the Draft National 
CARES Plan by December 2003. After reviewing their recommendations, I 
will make a determination to accept, reject, or refer back to the 
Commission for additional review or information prior to making a final 
decision.

                         STEP 8: IMPLEMENTATION
    VISN's will prepare detailed implementation plans for their CARES 
Market Plans, which will be submitted to the Under Secretary for Health 
for approval. Approved market plans will be used by VISN's to develop 
capital proposals that will be selected for funding through a capital 
prioritization process that is linked to the CARES process and to 
subsequent strategic planning cycles.

          STEP 9: INTEGRATION INTO STRATEGIC PLANNING PROCESS
    As VISN's proceed with the implementation of their CARES Market 
Plans, the planning initiatives and proposed solutions will be refined 
and incorporated into the annual VHA strategic planning cycle. The 
integration of capital assets and strategic planning will ensure that 
programmatic and capital implementation proposals are integrated into 
current VHA strategic planning and resource allocation. The alignment 
of policy assumptions and strategic objectives will thus form an 
integrated planning process.
    Mr. Chairman, in a recent article in the Washington Post, Dr. David 
Brown commented on VA by indicating that ``VA is the most safety 
conscious, self aware, and in many ways the best run medical system in 
the country.'' This is high praise indeed from a well-respected 
physician, and it is my goal that the VA strategic planning process 
will in every way possible reflect the standards and performance 
implicitly expressed in Dr. Brown's statement. The CARES initiative is 
an important step in that direction. This completes my testimony. I 
will now be happy to answer any questions that you or other Members of 
the Committee might have.
                               __________
   Response to Written Questions Submitted by Hon. Bob Graham to the 
                     Department of Veterans Affairs
    Question 1. In the market plan submitted to the Under Secretary for 
Health by VISN 1, officials stated they had considered ``alternatives 
to consolidate Long Term Care (LTC) (including the Alzheimer's and SCI 
Units) and Psychiatry inpatient beds from the Bedford to Brockton 
facilities'' yet, ``as final projections are not available for LTC 
inpatient beds and earlier projections indicated a substantial increase 
in LTC beds, it was determined to utilize current capacities.'' Despite 
these assessments to the contrary--made by those with firsthand 
knowledge of the situation--VA's draft National CARES Plan proposes 
that Bedford instead convert these facilities into outpatient 
operations only. (a) How do you justify this disconnect? (b) If the 
conversion does take place, what will happen to those patients who rely 
on the Bedford VAMC's 100-bed specialized care unit for veterans with 
Alzheimer's disease? Please explain how VA will ensure that these 
veterans continue to get the long-term care services they so 
desperately need.
    Response. VA's complete response to both questions follows question 
2 below.

    Question 2. In addition to its specialized care unit for veterans 
with Alzheimer's disease, the Bedford VAMC houses a Geriatric Research, 
Education, & Clinical Center (GRECC), which is widely respected for its 
innovative and practical clinical research on dementia care. The GRECC 
is also a recognized leader in providing palliative care to veterans 
with advanced progressive dementia. (a) How will a conversion of the 
Bedford facility impact the ongoing dementia research that is presently 
taking place at the Bedford GRECC? (b) Along similar lines, how does VA 
plan to continue providing palliative care services to the veterans who 
depend on the Center?
    Response. The following response is intended to address all parts 
of both questions.
    The realignment proposal for the Bedford campus contained in the 
draft National Plan provides that outpatient services will be 
maintained at the Bedford campus. Current services in inpatient 
psychiatry, Alzheimer's disease, domiciliary care, nursing home care, 
and other workload from the Bedford campus will be transferred to other 
VISN 1 facilities. The realignment process will also maintain special 
programs such as Alzheimer units, GRECC's (including dementia 
research), and palliative care, though not necessarily at the Bedford 
campus. The preliminary proposal included the possibility of realigning 
these programs to the Brockton campus. The remainder of the Bedford 
campus will be evaluated for alternative uses such as enhanced use 
leasing for an assisted living facility that would be available to 
veterans. Any revenues or in kind services will remain in the VISN to 
invest in services for veterans.
    The realignment proposal is currently being refined and will 
specifically address the needs of all programs, including the special 
programs mentioned above, to ensure that patient care needs are met and 
will be part of the proposal that is reviewed by the CARES Commission 
and the Secretary. In addition, research associated with these programs 
will be considered in the revised realignment proposal.
    The LTC planning model that is currently available does not 
adequately account for changes in the delivery of long-term care 
services and changes in disability among the elderly population. It 
overstates the future demand for Nursing Home beds. This model is 
currently under revision. As a result, in this stage of the planning 
process, the realignment analysis uses current nursing home capacity 
rather than plan for what may be an excessive number of beds. However, 
if the Secretary approves the recommendation, the results of the 
improved forecasting model will be available and used to finalize the 
proposal prior to implementation planning. This will ensure that future 
nursing home needs are accurately assessed both for Bedford and 
throughout the VA health care system.
    Implementation plans to effect the transfer of programs and 
services are not yet developed. However, the transition would take 
place over time and in a manner that is least disruptive to patients 
and their families. The final determination of the future of the 
Bedford VAMC is being made in successive steps to ensure that patient 
care services are maintained for veterans. Both the CARES Commission 
and the Secretary will review the realignment recommendation before the 
Secretary makes a final decision on the draft National CARES Plan 
proposal. It is the Secretary's policy that no services will be closed 
without alternative locations to provide these services to veterans.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Patty Murray to the 
                     Department of Veterans Affairs
    Question 1a. My understanding is that the VISN 20 regional VA 
leaders complied with all the requirements for the CARES market plan. I 
fail to understand why, at the very last minute--before the plans were 
sent on to the Commission--more than two dozen facilities, including 
three in Washington State, were told to re-do their plans. It looks to 
me that after months of reviewing VISN submissions, the VA has decided 
to rewrite the rules to get the response it seeks. This undercut months 
of work and more importantly it seems like a particularly disingenuous 
thing to do to our veterans groups--in Washington State and in the 
dozens of communities which were affected. Why was the decision made to 
undercut the CARES process at the 11th hour?
    Response. The Under Secretary for Health requested changes to the 
market plans as a result of reviews conducted during preparation of the 
draft National CARES Plan. This review was an integral part of the 
design of the CARES process to ensure that the plan was truly national 
in scope and not simply a compilation of the individual VISN market 
plans. Rather than undercutting the CARES process, this review and the 
proposed changes to the market plans were an effort to ensure that 
national, system-wide issues are adequately addressed. The VISN's' 
market plans contain the results of thousands of decisions regarding 
how outpatient and inpatient demand will be managed, i.e., whether 
space will be leased, renovated, or constructed, or whether community 
contracts and 000 sharing will be utilized. Almost all of these 
decisions are included as recommended in the market plans.
    When the Under Secretary reviewed the results of the market plans, 
he concluded that there were opportunities to realign campuses to 
improve the quality, access, and resource use by examining 
opportunities to move these campuses from inpatient to outpatient 
operations, i.e. by converting from 24-hours, 7-days/week to an 8-
hours, 5-days/week operations. He asked the VISN's to determine how 
this could be accomplished at selected sites with the provision that 
there would be no loss of services to veterans. He specified that 
inpatient services must be provided either at other VAMC's through 
sharing agreements or in the local community through contracts. He also 
stipulated that outpatient services were to be maintained on the VAMC 
campus or in the local community through leasing of sites or 
contracting for care.
    The realignments focused on moving long-term care sites to 
locations with an acute care presence because this would also improve 
access to diagnostic and therapeutic services for the long-term care 
population. In addition, the current physical environment in many 
sites, such as Walla Walla and White City, would require significant 
capital investment in older buildings. It would be more expensive to 
renovate such buildings than it would be to build a new nursing home, 
for example. Many patients served by long-term care facilities are 
often more dispersed geographically than those served by acute care 
facilities, and where contracting is combined with relocation of beds 
to other VAMC's, access is likely to be improved.
    With respect to the Vancouver campus, we believe we have an 
opportunity to put the campus to better use. It appears to be 
underutilized for inpatient care services, and we are exploring 
opportunities to improve access to outpatient services at another 
location.
    All of the draft National CARES Plan realignments are proposals 
that are being further reviewed. Additional cost benefit information 
will be available to the CARES Commission and the Secretary prior to 
the final decision on the National CARES Plan. Should the proposals be 
approved, detailed planning would occur as part of implementation 
planning.

    Question 1b. Can you explain to me why headquarters desired a 
significantly redrawn market plan for Washington State and VISN 20?
    Response. The only changes in the VISN 20 market plan involved the 
three facilities indicated in the realignment analysis mentioned above 
in our response to Part A of your question.

    Question 2. The stated CARES mission is to ``realign and enhance VA 
health care to meet veterans' needs now and into the future.'' What I 
keep hearing from the VA is a need to close existing facilities to 
provide better care to our veterans; a promise to use any savings from 
CARES efficiencies to enhance VA healthcare in areas with a growing 
veterans population and expand coverage into currently underserved 
areas. Unfortunately, veterans in my State have no recourse if any 
expected cost savings don't materialize, or are directed for another 
purpose. What assurances do we have that the Administration will 
request enough funding to cover the costs of expanding the coverage and 
enhancing care?
    Response. While there are always budget constraints, the final 
CARES Plan will provide a systematic data-driven assessment of the 
capital requirements to meet the current and future needs of veterans. 
I am committed to developing capital funding requests that will provide 
the improvements and expansion of our infrastructure through the 5-year 
capital planning process. In many, perhaps most, cases the savings 
generated by CARES will require front end capital investments whose 
savings and revenues will not be realized until all the components of 
the realignment are in place and will occur over an extended timeframe. 
In addition, the capital requirements associated with realignments will 
receive the highest priority in developing these budget requests.
    In this regard, we also note that S. 1156, marked up by the Senate 
Committee on Veterans' Affairs on September 30, contains a provision 
(section 402) that would authorize VA to plan and carry out major 
construction as outlined in the final National CARES Plan. It would 
also authorize up to 5-year contracts for these CARES projects and the 
use of any combination of funds appropriated for CARES.

    Question 3a. We know the final CARES plan may include the closure 
of nearly 6,000 beds--hundreds in Washington State. It is my 
understanding that the VA's intention is to reopen these beds in other 
VA facilities or to contract out for the beds. But, I find virtually no 
mention of how this will be accomplished. Are you comfortable telling 
our veterans that their hospitals will be closed but hopefully beds 
will be found later?
    Response. The draft National CARES Plan identifies the need for 
approximately 600 fewer acute care beds by 2022. These beds are spread 
among 20 VISN's and do not significantly impact the future of any acute 
care facilities. The number of beds affected by proposed realignments 
total approximately 3,144. These are primarily Nursing Home, 
Domiciliary, and Long-Term Psychiatry beds. These beds will continue to 
be available either in other VAMC's or through local contracts. If the 
proposed realignments are approved for the final National Plan, further 
study will be required to finalize the exact distribution; however, the 
majority of these beds are currently proposed for transfer to other 
VAMC's.

    Question 3b. How can the VA make the decision to close more than a 
hundred nursing home and psychiatric beds in Washington State without 
having examined the potential demand for such care?
    Response. The proposed realignment maintains services to veterans 
and does not eliminate the nursing home and psychiatric beds to 
veterans. However, the forecasting models for Nursing Home, 
Domiciliary, and long term psychiatry that were available for the VISN 
market planning and the draft National CARES Plan required improvement 
to accurately represent the future needs of veterans. As a result, the 
demand for these beds was maintained at current capacity. This enabled 
the planning process to move forward while recognizing that final 
detailed planning would require projections of future demand. The 
planning models that will provide this information are under revision. 
If the proposals are approved, the revised planning models will be 
available to ensure that final implementation planning is based on the 
most accurate estimates of the expected needs of veterans.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Jim Bunning to the 
                     Department of Veterans Affairs
    Question 1. Dr. Roswell, would you please give me your reasons for 
proposing to close the Leestown Road Medical Center in Lexington? I 
particularly want to hear what benefits you expect to come from that 
and what you plan to do to offset any losses there.
    Response. The CARES Commission recommended that the Lexington-
Leestown campus remain open, and that plans be developed to make the 
footprint of the Leestown campus smaller, making most of the campus 
available for disposition and/or enhanced use leasing. The benefits of 
remaining, on the Lexington Campus, but in modernized facilities, will 
alleviate any additional burden on Cooper Drive. While the mission of 
the Leestown Campus will remain unchanged VA will develop a master plan 
to provide for an appropriate sized footprint and consider enhanced use 
lease partnerships. At the same time, the master plan will provide an 
improved environment for care and maximize reuse potential of 
Lexington. As you know, these actions are consistent with the 
Secretary's May 7, 2004, decision for Lexington-Leestown to pursue 
opportunities to reduce the footprint of the Leestown campus.

    Question 2. Dr. Roswell, the current VA hospital in Louisville is 
very old and the design is not suited to modern health care delivery. 
What other factors made you decide to study moving the hospital and 
what benefits do you expect to gain by a new partnership with the 
University?
    Response. Due to the poor environment of care and overcrowding at 
the current Louisville VA Medical Center (VAMC), the CARES Commission 
recommended that VA study the feasibility of building a replacement 
VAMC for Louisville in proximity to the University of Louisville, 
including the possibility of a shared infrastructure with the medical 
school and the VA Regional Office (VARO). In his May 7 CARES decision, 
the Secretary decided to study the need for a replacement hospital for 
the Louisville VAMC, focusing on access to and quality of care as well 
as referral patterns with other regional medical centers, the potential 
for collaboration with the University of Louisville, and the 
collocation with the VARO. The study is expected to be completed in 
November 2005.

    Question 3. Mr. Alvarez, what information are you looking for to 
decide whether to retain the existing Louisville facility or to build a 
new facility in cooperation with the University of Louisville?
    Response. Due to the poor environment of care and overcrowding of 
the current medical center, the CARES Commission concurred with the 
Draft National CARES Plan proposal to study the feasibility of building 
a replacement medical center for the Louisville VAMC in proximity to 
the University of Louisville, including the possibility of shared 
infrastructure with the medical school and the VBA office. As you know, 
on May 7, 2004, the Secretary announced his acceptance of the 
Commission's recommendation and VA will undertake a comprehensive study 
of the feasibility, cost effectiveness and impact of replacing the 
Louisville VA Medical Center with a state-of-the-art medical center 
with a focus on access to and quality of care. Further, this 
comprehensive study will consider referral patterns from other regional 
medical centers, the potential for collaboration with the University of 
Louisville, and collocation with the Veterans Benefits Administration.

    Question 4. Mr. Secretary, I am glad that the draft proposal 
recommends more clinics in Kentucky like we talked about earlier this 
year. I am not sure the final cares plan can predict all locations 
where clinics will be needed in the future. If the need is shown are 
you willing to consider and support building more clinics even if they 
are not in the final cares plan?
    Response. The CARES Commission recommended that VA prioritize 
community-based outpatient clinics (CBOC's) under a national framework 
and continue to enhance access to care. In my May 7 CARES decision, I 
prioritized 156 of the CBOC's proposed in CARES for implementation by 
2012 pending availability of resources and validation with the most 
current data available. This list reflects VA's priorities for planning 
based upon the most current information. As VA proceeds in implementing 
CARES and engages in future planning, the locations of these CBOC's may 
change, but the priorities will remain constant.
    For example, VA currently has 11 CBOC's in Kentucky located in 
Prestonburg, Whitesburg, Somerset, Morehead, Fort Knox, Dupont, 
Shively, Staniford, Bowling Green, Paducah, and Fort Campbell. Under 
the CARES plan, an additional 9 CBOC's will be implemented by 2012: 
Berea, Hopkins County, Perry County, London, Glasgow, Grayson County, 
Graves County, Davies County, and Carroll County. An additional CBOC in 
Morehead that was previously congressionally approved, but never 
implemented will be opened in 2005.
    VA will enhance access to care in underserved areas with large 
numbers of veterans, enable overcrowded facilities to better serve 
veterans, and continues to support sharing with DOD. These principles 
will remain priorities even if management strategies to meet them 
evolve as new data and information become available.

    Chairman Specter. Thank you very much, Mr. Secretary.
    We will now proceed with a round for 5 minutes for each 
member.
    Mr. Secretary, there has been considerable concern about 
the exclusion of Category 8, which would be veterans with non-
service disabled or veterans who have income generally of less 
than $23,000 a year. Do you foresee a relaxation there so that 
veterans who earn more then $23,000 a year or some other 
combination of non-service connected disability would allow 
others to get the service? $23,000 a year does not signify that 
a person could afford medical care.
    Secretary Principi. Indeed, it does not, Mr. Chairman.
    The answer to the question really depends upon the level of 
resources that the Department receives to provide care to, 
first and foremost, our core constituency, the men and women 
disabled in service; the poorest of the poor, who have few 
other options for health care; and third, those in need of 
specialized services like spinal cord injury and blind 
rehabilitation.
    It is certainly my hope that, whether it be next year or 
the year after, we will be able to once again reopen enrollment 
to Priority 8 veterans, but our focus has been over the past 
year to ensure that those men and women, both in the past and 
returning from Iraq and Afghanistan today who are disabled in 
combat or in training accidents are able to access the VA 
health care system as well as the very, very poor, the 
pensioners, the people at the poverty line. I am sure that once 
we are able to do that, we are able to reduce our waiting list 
to zero, then we will certainly--I certainly will consider 
reopening it up to Priority 8s.
    Chairman Specter. Mr. Secretary, what factors or what 
events--what do you think would have to occur before you would 
reopen Category 8 or at least make a modification to include 
more veterans?
    Secretary Principi. Well, certainly, I think it depends 
directly on the level of appropriations that we receive from, 
you know, requested by the President and appropriated by the 
Congress and a recommendation from my undersecretary that we 
can reopen the doors to Category 8s, because we are able to 
meet the demands that are being placed upon the VA.
    But I might say, Mr. Chairman, members of the committee, 
the demands are unprecedented. Categories 1 through 7 continue 
to grow dramatically in many parts of the country. More and 
more veterans are coming to us for care. A significant number 
are coming to us for prescription drugs, because they simply 
cannot get it, as we all know, in the private sector.
    They have Medicare physicians. They are getting medical 
care, but they cannot get the prescription drugs, and they are 
coming to the VA in record numbers.
    Chairman Specter. Mr. Secretary, there had been a 
preliminary staff review, which suggests that the real focus 
here is on psychiatric institutions like the one at Highland 
Drive in Pittsburgh, which is a facility for 1,000 people and 
is largely vacant, has only about 150 people, and some of those 
are homeless.
    The treatment for psychiatric patients has now changed 
dramatically with drugs, with integration into the community. 
Is a major thrust of the CARES project here the re-evaluation 
plan being directed toward psychiatric hospitals?
    Secretary Principi. Acute psychiatric care is clearly 
considered in our plan. What we are doing in the VA is we are 
developing a new, long-term care psychiatric model to address 
the long-term psychiatric care, institutional care needs of our 
nation's veterans. But as you said, the focus in our Nation has 
been on community reintegration of the mentally ill back into 
the community, and we are able to do that because of 
revolutionary new drugs, but we also have to have the non-
institutional care programs and the community support services 
available to care for these veterans and, you know, all 
Americans who are moved from mental institutions.
    I believe that mental health is a very important core 
mission of the VA. It may not be as glamorous as some of the 
other things that are being done, but it is very, very core; 
very important: PTSD, substance abuse, chronic mental illness--
--
    Chairman Specter. Mr. Secretary, let me interrupt you. I 
have got 16 seconds left.
    Secretary Principi. Sure.
    Chairman Specter. I want to ask one more question, and I am 
going to observe the red light.
    You say you will accept the plan only in its entirety. Do 
you think that the law constrains you to take it all or none?
    Secretary Principi. No, sir.
    Chairman Specter. Or why would you not exercise some 
discretion?
    Secretary Principi. I will exercise----
    Chairman Specter. I will note the red light went on with 
the conclusion of the word discretion.
    Secretary Principi. The law does not constrain me. I just 
did not want to be in a position to politicize this report by 
picking and choosing. I wanted to work closely after the 
commission submitted their report to me to address concerns 
that I might have, questions I might have, with regard to some 
of their recommendations and ask them to go back and to 
reassess it.
    But I felt that politicizing this report would destroy its 
integrity and perhaps doom our entire effort. But I am not 
constrained by law.
    Chairman Specter. Senator Nelson.

   OPENING STATEMENT OF HON. BILL NELSON, U.S. SENATOR FROM 
                            FLORIDA

    Senator Nelson. Thank you, Mr. Chairman.
    Mr. Secretary, as I described, in rural markets, we are 
having problems with veterans who have to drive long distances. 
Do you feel like we are serving our veterans in this area by 
placing the CBOC proposals in the Priority 2 category? It seems 
to me that that is a significant question, and I would be 
interested in what you think about that.
    Secretary Principi. Well, as you know, Senator, over the 
past several years, the VA has moved very dramatically into 
outpatient care. Prior to the mid-1990's, if I am correct, Dr. 
Roswell, the VA had no freestanding community-based outpatient 
clinics, and it has been a dramatic change that today, we have 
close to 700 community-based outpatient clinics; thereby, 
veterans in rural areas do not have to drive 4, 6 hours to a VA 
medical center to get care. They can access it much closer to 
their homes.
    So we have literally gone from 0 to almost 700. This plan--
and Dr. Roswell can comment--it calls for, I believe, another 
48 community-based outpatient clinics. But we have to maintain 
balance. We have to preserve our inpatient care capability and 
our outpatient care. We cannot afford to go too far in one 
direction, because at some point in time, those veterans are 
going to need to get into inpatient care. That is why we have--
Dr. Roswell, you may want to comment.
    Dr. Roswell. Yes. Let me just add, Senator Nelson, that the 
Priority 1 CBOC's recommended in the national plan were those 
CBOC's where 7,000 or more veterans failed to meet the access 
criteria established in the plan. Unfortunately, the CBOC's 
proposed for your State did not meet those criteria. There were 
fewer than 7,000 veterans in those locations who would be 
served by a new CBOC. That is not to say, though, that they are 
taken out of the plan. A very important construct of the 
national plan that I forwarded to the CARES Commission was that 
the recommendations in the national plan augment what is in the 
existing plan. We still recognize all 262 CBOC's proposed in 
each of the VISN market plans as bona fide requests, and 
certainly, the ones from your State are included in that list 
of 262. But the national plan, of necessity, had to identify 
our highest priority, hence, those 48 included only those 
CBOC's where 7,000 or more veterans would now meet access 
standards.
    Senator Nelson. Chairman Alvarez, is the CARES Commission 
considering at the present time changing the priority grouping 
for these CBOC proposals, or are you going with the initial 
recommendations, if you know?
    Mr. Alvarez. At this time, we are not going along with 
anything. We are not sticking with any or making any changes. 
We are in the process of gathering information, and we are 
holding hearings around the country at this time. When we 
finish that, we will take all of the information that we have. 
I must add that we continually, as we go through the hearing 
and the data gathering process, continue to ask for more 
information.
    But I can assure you that this is one area that we have a 
special interest in also. We have noted the large number of 
veterans who have to travel long distances for access to 
primary care, and of course, that is one of the charges I have 
given the members is to take a good look at that, understanding 
the Priority 1, Priority 2 categories, but look at everything 
very closely, so no, we are not following any special standard.
    Senator Nelson. Mr. Secretary, as we were speaking about 
the creation of new veterans every day, are there any studies 
underway right now with respect to the wounded in terms of 
location as to where their future needs may be and how those 
special needs might be met as well as the current needs and the 
changing needs of areas? Perhaps Dr. Roswell would want to 
address that.
    Dr. Roswell. Certainly, with the Secretary's leadership, we 
are working in an unprecedented manner with the Department of 
Defense to identify casualties coming out of Operation Iraqi 
Freedom. To date, there have been 6,000 men and women who have 
been evacuated from that theater of operations. We are working 
very closely with DOD to track all of those.
    Fortunately, the vast majority of them have non-life-
threatening illnesses, and in fact, many of them may return to 
active duty. But where there are serious illnesses, it will 
certainly lead to future health care needs through the 
Department of Veterans Affairs and disability compensation 
benefits. We have established a very comprehensive program to 
identify those veterans and make sure they get their disability 
benefits, the services through the Department as well as the 
health care that is needed.
    Secretary Principi. We have full-time employees up at 
Walter Reed, at Bethesda, participating in the discharge 
planning process, so that we know when they leave Bethesda, 
Walter Reed, and go back to Omaha, wherever, that they do not 
fall through the cracks; that they are enrolled, and when they 
get to the VA, their name is in the computer. I think that is a 
very important step.
    Senator Nelson. Thank you.
    Thank you, Mr. Chairman.
    Chairman Specter. Thank you very much, Senator Nelson.
    Senator Hutchison.
    Senator Hutchison. Thank you, Mr. Chairman.
    Mr. Secretary, I think the most shocking thing that you 
have said here today is what the Chairman picked up on, and I 
did as well, that you do not intend to pick and choose among 
the recommendations. What I am concerned about is that while 
the committee will be charged with looking at the very best way 
to give the best service to veterans, it will be only the 
Secretary and the Department that could put the efficiencies 
and the budgetary issues and also the issues of where different 
services are given together to make a final decision.
    So my question is: how are you going to put the overview on 
the commission findings so that you would be the one who could 
say certain areas could be addressed that perhaps the 
commission would not have the information to even put into the 
system?
    Secretary Principi. Once I receive a report and study it 
very, very carefully, it would be my intention to work closely 
with the members of the commission, the chairman of the 
commission, to address any issues that I believe need further 
refinement or perhaps need to be changed; that I have a 
question about or a concern about, and I will not approve the 
report until such time as I am convinced, in my own mind, that 
from both a local and a national perspective, it is correct.
    I just did not believe it would be appropriate, once I had 
all of those questions asked and answered and my concerns 
addressed to start, you know, picking and choosing. I wanted to 
adopt this plan in its entirety to ensure that, from a national 
perspective, looking at all of the different markets, all of 
the different networks, that this plan promotes the delivery of 
health care, access and quality of health care across the 
nation. But I can assure you, Senator, that I will work very, 
very closely with the Chairman of the Committee to ensure that 
all the issues are addressed.
    Senator Hutchison. Well, I am going to take it from that 
that you will provide the overview within the process before 
there is a final----
    Secretary Principi. Most assuredly.
    Senator Hutchison [continuing]. Plan adopted.
    Secretary Principi. Most assuredly, Senator.
    Senator Hutchison. Second, let me ask you, because I know 
two of my communities have asked this question, and I would 
assume it would probably be throughout the country, but my two 
communities would like to have some ability to offer help to 
make a hospital more effective. What would be the process for 
them to be able to do that? They have the hearings, but if they 
do not know exactly where you and your overview are going, they 
might not know what they could offer that would be helpful. So 
how are you going to accommodate that before the final, final 
decision to actually close a facility?
    Secretary Principi. Well, I would certainly hope that 
communities would make those views known to the members of the 
commission when they testify; certainly submit proposals to the 
commission or to the undersecretary for any collaboration that 
might assist one way or the other in the disposition of what is 
going to happen at that facility and then certainly after the 
report is submitted can submit that to me.
    So I would believe that right now, the commission is in the 
phase of holding hearings, gathering data and input from the 
communities, and community involvement and community impact is 
an important consideration for the commission. So I would 
suggest, Senator, that they make those views known to the 
commission, the commission staff here in Washington, and if 
there is any difficulty in getting that information to us, I 
would be more than happy to assist.
    Senator Hutchison. Well, let me just ask----
    Mr. Alvarez. May I?
    Senator Hutchison. Yes.
    Mr. Alvarez. In addition to what the Secretary just stated, 
what we are finding out is that there are a number of proposals 
that have come forth from the community affecting the plans. 
What we have found is that these people in the communities have 
already worked with the local VA people through the VISN 
director's office and have establishing relationships and are 
working on their portions. So I would offer that as another 
opportunity, because as a reviewing committee, we became aware 
of it and keep an eye out for it when it comes up.
    But I think the bulk of the work can be initiated through 
the undersecretary.
    Senator Hutchison. OK; thank you. I see my time is up. But 
there will be a second round?
    Chairman Specter. No, we are going to have to move on, 
Senator Hutchison. Would you care to ask an additional question 
or two now?
    Senator Hutchison. Well, yes. Let me just ask Mr. Alvarez: 
would you have in your purview also looking at the VISN 
recommendations that did not make it to the final draft plan?
    Mr. Alvarez. Yes, Senator, we have access to all of that 
information.
    Senator Hutchison. And will you look at those----
    Mr. Alvarez. We will look at that plan.
    Senator Hutchison [continuing]. As part of your 
decisionmaking?
    Mr. Alvarez. We are asking questions not only about the 
national plan but also about the market plans that were 
submitted. So that is part of the----
    Chairman Specter. Senator, there will be an additional 
round as to the other witnesses.
    Senator Hutchison. Oh.
    Chairman Specter. I was really referencing that as to 
Secretary Principi.
    Senator Hutchison. Are the other witnesses going to speak 
and then have questions?
    Chairman Specter. Secretary Roswell is not going to be 
offering an opening statement and is prepared to submit to 
questions.
    Senator Hutchison. But Mr. Alvarez will?
    Chairman Specter. Will, too. Mr. Alvarez will, too, so 
there will be another round.
    Senator Hutchison. OK; well, let me just finish, then, with 
Mr. Principi one other question, and that is the one concern I 
have about a community coming forward with some suggestions is 
that you might have, in the back of your mind, a different use 
for the facility that the community could then say we will be 
able to provide, say, a private developer for an extra building 
with a leaseback or something that they might not know is in 
your mind. So will there be some process by which you could say 
we are looking for an opportunity to see what you could put 
forward in this realm, if it is different from what they are 
doing now?
    Secretary Principi. Absolutely. Senator, this is a planning 
process that will result in a series of recommendations and 
from that point becomes a very critical stage of looking toward 
the implementation of this plan. I would highlight here that 
this is a 20-year plan and that some of the changes would take 
place in the first few years, but this is scheduled to be 
phased in over a 20-year period as the demographics of the 
veteran population change. So it is not going to happen all in 
year one or year two.
    The second important point to mention for all members of 
the Committee is that it certainly is my intent not to sell 
this VA property, to excess it, to board it up. It is my intent 
and my hope that through the enhanced lease use authority that 
you have given us by statute that we can convert some of these 
properties that are underutilized into projects such as 
assisted living to meet the long-term care needs, the assisted 
living needs, of our nation's veterans or for other purposes 
that provide services to veterans.
    So I expect that we will be maintaining this property, but 
we will be transforming it in many different ways. Of course, 
the community would play a major role in whatever decision is 
ultimately made.
    Senator Hutchison. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Specter. Thank you, Senator Hutchison.
    Senator Miller.
    Senator Miller. Mr. Secretary, have you received the input 
and participation, are you getting it that you hoped to get 
from the veterans' organizations?
    Secretary Principi. Yes, we have, and we have really----
    Senator Miller. You have probably gotten more than you 
wanted?
    Secretary Principi. Well, we have certainly tried to make 
that an important part of this process, and I think one of the 
criticisms early on, when that first phase was started, was 
that there was little input. When I changed this process 
around, I wanted to ensure, to the degree that we could, that 
the stakeholders had an input. Of course, a lot of that 
information and preliminary plans had to come to Washington for 
a national perspective, and some changes were made by the Under 
Secretary, and he can address those. But clearly, that was an 
important part.
    Senator Miller. I agree.
    This is a question probably for Dr. Roswell. Explain to me 
how the medical facilities on the military installations, how 
are they worked into this process exactly.
    Dr. Roswell. In the formulation of the national plan, we 
had three representatives from the Department of Defense who 
worked very directly with us and considered a large number of 
potential collaborations. In fact, upwards of 70 different 
potential collaborations between VA and DOD were considered. 
Twenty-one were identified as high priority in the national 
plan and went forward as projects to be pursued in 
collaboration with the Department of Defense.
    Senator Miller. I cannot help but wonder, though, what 
would happen if BRAC comes along and closes those that you have 
worked into that.
    Dr. Roswell. Well, certainly, that is a concern that we 
have addressed. That is why we have asked for DOD input. 
Obviously, no one can foretell what the next round of BRAC will 
bring. But I think the collaboration and the highest and best 
use of Government facilities, be they VA or DOD, to better 
serve all Americans, certainly, is a laudable use of Government 
resources that would surely be considered by a BRAC process in 
the future.
    Secretary Principi. I think there is a growing realization, 
Senator, that the military and the VA need each other. You 
know, we are two very large health care systems in this 
country, the largest direct health care providers in America, 
and we are both national resources, in my opinion, to the 
American people. By working together, we can provide more care 
to more people in a more cost-effective manner. That is why 
sharing makes a great deal of sense. We are doing that at 
Kirkland in Albuquerque. We are doing it in Nevada. We are 
doing it in Alaska. We are doing it out at Tripler in Hawaii. 
Across the country, we are finding the military and the VA are 
working closer together than ever before. I think that is good 
news for military people, for veterans and for the American 
people.
    Senator Miller. I share that belief.
    Thank you.
    Chairman Specter. Thank you, Senator Miller.
    Chairman Specter. We are now going to have another round 
with Chairman Alvarez and Secretary Roswell. We had intended 
the first round to be on Secretary Principi, but we are 
flexible, and when the questions have gone to the other 
witnesses, that is fine.
    Dr. Roswell is the deputy undersecretary and, in that 
capacity, heads the Veterans Health Administration. He has an 
excellent background, having directed VA's health care networks 
for Florida and Puerto Rico. He had served in Birmingham, 
Alabama and Oklahoma City. He is a 1975 graduate of the 
University of Oklahoma School of Medicine. I would like to say, 
on a parenthetical personal note, I went to the University of 
Oklahoma for a year myself at the start of my college career. I 
notice that Senator Nelson is not going to touch Oklahoma and 
Nebraska, at least at this point.
    [Laughter.]
    Chairman Specter. Chairman Alvarez is a member of the Bar 
of the District of Columbia. He served as deputy administrator 
of the Veterans Administration from 1982 to 1986 and deputy 
director of the Peace Corps from 1981 to 1982. But I think his 
most remarkable public service occurred on August 5, 1964, 
when, as a young lieutenant, junior grade, he was the first 
American pilot shot down over North Vietnam; 8\1/2\ years in a 
prisoner of war camp in North Vietnam, as described in his 
book, Chained Eagle, the circumstances relating to that. For 
those who have read the book, it is very inspirational. So we 
thank you for your great service, Chairman Alvarez, taking on 
this job. We will start a second round of questions as to both 
Dr. Roswell and Chairman Alvarez.
    Dr. Roswell, as I stated, is only responding to questions; 
does not have an opening statement. If you would care to make 
an opening statement, Chairman Alvarez, we would be pleased to 
hear it.

  STATEMENT OF EVERETT ALVAREZ, JR., CHAIRMAN, CAPITAL ASSET 
  REALIGNMENT FOR ENHANCED SERVICES (CARES) COMMISSION, U.S. 
        DEPARTMENT OF VETERANS AFFAIRS, WASHINGTON, D.C.

    Mr. Alvarez. Thank you, Mr. Chairman. I have submitted a 
statement for the record, and if it is all right with you, I 
will just summarize it.
    Chairman Specter. Fine. The full statement will be made a 
part of the record, and we will welcome your summary.
    Mr. Alvarez. Thank you.
    As stated in the CARES Commission charter, Secretary 
Principi established our commission in December of 2002 to 
bring an objective and external perspective to the CARES 
process. The parameters set for the 16-member commission that 
we have are straightforward. First, we are to review the 
proposed realignment and allocation of capital assets described 
in the undersecretary's draft national CARES plan in order to 
determine whether the proposals reasonably assess and meet the 
demand for veteran health care over the next 20 years, with the 
understanding that the goal is to enhance VA's health care 
services. Then, we will make specific recommendations to the 
Secretary.
    I want to state that our mission is not to provide a `de 
novo' review of the VA medical system or to rebuild the 
proposed plan. In accordance with our charter, we may accept, 
modify or reject the recommendations in the draft national 
CARES plan. We will provide our rationale for any positions 
that we take. Further, in making these recommendations, we will 
consider information that we are gaining from involved parties 
that speak at our meetings and through our nationwide site 
visits; written comments from interested parties and formal 
public hearings that we currently are holding.
    By dividing into groups, our commission was able to visit 
59 VA facilities in July, and we will have visited nine more by 
the end of this month for a total of 68 site visits. These 
informal tours through VA facilities and the geographic areas 
they serve have included meetings and conversations with many 
veterans, individuals inside the VA family and local community 
leaders. In addition, currently, we have completed over half of 
our 36 formal public hearings, with the last one scheduled for 
October 3. The selection of the sites for all of the public 
hearings was made with careful consideration of many factors, 
and this deliberative process included coordination with many 
of the VISN staffs and their directors, reviewing market plans 
and taking into account the public access to the hearings.
    The locations were selected to provide access to concerned 
individuals from all markets covered at each hearing. Where 
appropriate and available, we are also providing video feeds 
from the hearings to medical centers in some locations to 
ensure easier access for attendees who might otherwise not be 
able to personally view the proceedings.
    Thousands of individuals have attended these public 
hearings so far, and we have heard from the local population 
mostly impacted by the draft plan. Oral testimony has usually 
been sought from local veteran service organizations, employee 
organizations, academic affiliates, organizations with 
collaborative relationships and involved local elected 
officials. We have also welcomed Members of Congress who have 
either submitted their views personally or through written 
statements, and we have also received, as of this week, 
comments from over 11,500 individuals.
    Let me conclude by thanking you for the opportunity to 
advise you of the work of our commission. I believe it is a 
deep honor and a responsibility I take very seriously to serve 
as the chairman of the CARES Commission, and I hope that our 
counsel will assist Secretary Principi and the Department of 
Veterans Affairs in its goal to effectively realign and 
allocate VA's capital assets to meet the demand for health care 
services for our well-deserving veterans over the next 20 years 
and beyond.
    Thank you very much.
    [The prepared statement of Mr. Alvarez follows:]
  Prepared Statement of Everett Alvarez, Jr., Chairman, Capital Asset 
 Realignment for Enhanced Services (Cares) Commission, U.S. Department 
                          of Veterans Affairs
    As you know, and as stated in the CARES Commission Charter, 
Secretary Principi established the CARES Commission in December 2002 to 
bring an objective and external perspective to the CARES process. The 
parameters set for the 16-member Commission are straightforward: the 
Commission is, first, to review the proposed realignment and allocation 
of capital assets described in the Under Secretary's Draft National 
CARES Plan in order to determine whether the proposals reasonably 
assess and meet the demand for veterans' health care over the next 20 
years, with the understanding that the goal is to enhance VA's health 
care services. We will then make specific recommendations to the 
Secretary.
    At the first of our monthly meetings, in February, the Secretary 
asked the Commission to examine the Draft Plan with a critical and 
independent eye. He also asked us to report to him on the validity of 
the opportunities identified in the Plan for improving VA's ability to 
provide quality healthcare for veterans by effective deployment of 
physical resources. We intend to fulfill this responsibility.
    Our mission is not to provide a `de novo' review of the VA medical 
system or to rebuild the proposed Plan. In accordance with the 
Commission Charter, the Commission may accept, modify or reject the 
recommendations in the Draft National CARES Plan. We will provide our 
rationale for any positions we will take. Further, in making these 
recommendations, we will consider information gained from involved 
parties speaking at our meetings and through nationwide site visits, 
written comments from interested parties and formal public hearings.
    We will also rely on our own experiences. Over time, and in 
conversations with my colleagues, we have recognized and agreed that, 
in appointing the Commissioners, the Secretary identified and appointed 
individuals whose qualifications, taken together, supply a sound basis 
for fulfilling this mission. The commissioners come from all walks of 
life--doctors and nurses, medical and nursing school professors and 
deans, health care professionals, members of veterans service 
organizations, former VA officials, business managers and leaders in 
their communities. We also have learned to recognize and depend upon 
the special backgrounds and experiences each of us brings to the 
Commission, and have noted each other's deep sense of commitment to the 
Commission's unique mission to benefit America's veterans.
    Before we can make our recommendations to the Secretary, as I 
stated earlier, we will consider information gained through our 
meetings, nation-wide site visits, written comments from interested 
parties and formal public hearings.
    At our monthly meetings, we have heard from and questioned 
representatives from the CARES office and the contractors who developed 
the underlying model to the Draft Plan. We also have heard from others, 
from within and outside VA, such as representatives from Veterans 
Service Organizations, employee organizations, medical affiliates, 
experts in modeling, enhanced use opportunities, and Federal property 
management and from the GAO.
    By dividing into groups, the Commission was able to visit VA 
facilities in 59 locations in July and will have visited 9 more by the 
end of this month, for a total of 68 site visits. These informal tours 
through VA facilities and the geographic areas they serve have included 
meetings and conversations with many veterans, individuals inside the 
VA family and local community leaders.
    In addition, we have completed over half of our 36 formal public 
hearings, with the last one scheduled for October 3. The selection of 
the sites for all of the public hearings was made with careful 
consideration of many factors. This deliberative process included 
coordinating with the many Veterans Integrated Service Networks, or 
VISN's, reviewing market plans, and taking into account public access. 
The locations were selected to provide access to concerned individuals 
from all markets covered at each hearing. Where appropriate and 
available, we also are providing video feeds from the hearings to 
medical centers in some locations to ensure easier access for attendees 
who might otherwise not be able to view the proceedings.
    The CARES Commission's public hearings are formal proceedings where 
invited witnesses submit written testimony and answer the 
Commissioners' questions. Thousands of individuals have attended these 
public hearings, where we heard from the local population most impacted 
by the Draft Plan. Oral testimony has been sought from local Veterans 
Service Organizations, employee organizations, academic affiliates, 
organizations with collaborative relationships and involved local 
elected officials. We have also welcomed Members of Congress, who have 
either submitted their views personally or through written statements. 
We also have received, as of the beginning of this week, comments from 
11,500 individuals.
    Before we begin our deliberations, however, we will hold, in this 
very room, our first National Meeting since the Draft National CARES 
Plan was issued where we will hear from parties outside of the 
Department of Veterans Affairs. This meeting is scheduled for Tuesday, 
October 7. We are inviting, from both the Senate and House of 
Representatives, the Chairmen and Ranking Members from the Veterans 
Affairs Committees and Appropriations VA, HUD and Independent Agencies 
subcommittees. We also are inviting leadership from Veterans Service 
Organizations, the Department of Defense, national Veterans Affairs 
employee organizations and national medical and nursing affiliate's 
organizations. As a final step in the Commission's information 
gathering process, and as we prepare to begin formal deliberations, we 
have asked these leaders to provide a national perspective on the CARES 
process and the Draft National CARES Plan to the entire Commission. We 
believe hearing their opinions provides an essential and valuable 
contribution to the Commission. The meeting is scheduled to begin at 
8:30 a.m.
    Let me conclude by thanking you for this opportunity to advise you 
of the work of the Commission. I believe it is a deep honor, and a 
responsibility I take very seriously, to serve as the CARES Commission 
Chairman. I hope our counsel will assist Secretary Principi and the 
Department of Veterans Affairs in its goal to effectively realign and 
allocate VA's capital assets to meet the demand for health care 
services for our well-deserving veterans over the next 20 years. Thank 
you.

    Chairman Specter. We will now proceed to 5-minute rounds 
for each of the members.
    Dr. Roswell, are you in a position to give categorical 
assurance to the veterans in the Pittsburgh vicinity that 
before the Highland Drive facility is closed that there will be 
a replacement facility opened.
    Dr. Roswell. I cannot give a categorical assurance, 
because----
    Chairman Specter. How about a plain assurance.
    Dr. Roswell. Well, obviously, the University Drive 
division, where those patients are planned to be relocated, 
will require some structural renovations that will be dependent 
upon construction appropriations being available to the 
Department, but I can give you an absolute assurance that we 
will not separate any veteran from care that is currently being 
received unnecessarily.
    Chairman Specter. Not separate them unnecessarily, you say?
    Dr. Roswell. In other words, we will not----
    Chairman Specter. In what context did you use the word 
unnecessarily?
    Dr. Roswell. We will be sure that all care provided to 
veterans is continued throughout this process.
    Chairman Specter. Well, you do not know about the 
appropriations for the other facilities; OK, you do know, you 
do have the power to control not closing down Highland Drive 
until the replacements are there.
    Dr. Roswell. That is correct, and that would be the intent. 
The Secretary spoke of VISN 12. We have had a situation where 
patients could be relocated to an existing facility without the 
need for new construction, although new construction was 
planned as a further enhancement of that campus. In those 
situations, patients were moved.
    Chairman Specter. Well, OK, but what you are saying is that 
Highland Drive is not going to be closed until you can 
accommodate the veterans in the area at the new facility.
    Dr. Roswell. That is correct.
    Chairman Specter. OK. Moving on to Butler and Erie and 
Altoona, Pennsylvania is a fairly popular State on the hit 
list. Does that have anything to do with my being Chairman?
    Dr. Roswell. No, sir, it does not.
    Chairman Specter. OK; I am advised that the network 
director did not recommend the changes as to Butler, Erie or 
Altoona, and I am also advised that it is OK for me to say 
that, not revealing any confidences in making that disclosure. 
It is important to know things; it is also important--not 
important; indispensable to maintain confidences, but we are 
not disclosing any confidences.
    Now, as to Butler, there seems to be a view that because it 
is small, it ought to be closed. I hope you will not make that 
distinction, because there are many facilities which are small. 
I go back to my early days in the State of Kansas where 
everything is small. It might even apply to Nebraska. What is 
the thinking, Dr. Roswell, on closing someplace because it is 
small?
    Dr. Roswell. Well, our first priority is to make sure that 
we provide world-class care to veterans and to do that to an 
increasing number of veterans in the years ahead. Let me point 
out that the CARES plan actually will enhance our ability to 
provide services to----
    Chairman Specter. Dr. Roswell, I have got two more 
questions in a minute and 44 seconds.
    Dr. Roswell. With regard to Butler, there are only a very 
small number of acute beds, just 30 miles away from a world-
class facility at Pittsburgh. That is our recommendation, to 
move that acute inpatient care there. But we would preserve the 
nursing home care and the outpatient care that currently is 
provided with very high quality at Butler.
    Chairman Specter. Let me urge you not to make decisions on 
the basis of size smallness, and let me urge you to travel 
Route 8 from Butler to Pittsburgh before you make the final 
decision.
    As to Erie, the plan is to cease inpatient surgical 
services, and my review and the information I have pretty 
conclusively is that the inpatient surgical services are very 
good, notwithstanding the contention that because they are 
limited, they may lose their skills. What is your thinking on 
Erie?
    Dr. Roswell. Actually, our recommendation in the national 
plan is to discontinue acute inpatient surgery but to maintain 
a surgical observation unit and allow the staff to continue to 
perform outpatient surgeries.
    Chairman Specter. Why the limitation?
    Dr. Roswell. Because the average daily census in 2002 at 
Erie on the surgical service was three patients. We do not 
believe that provides sufficient numbers of patients to justify 
or to provide the high quality of care that is required of our 
patients not only by the surgeon but by the entire 
perioperative team.
    Chairman Specter. Well, I hear those surgeons have access 
to other work to keep their skills sharp.
    My last question in the eight remaining seconds is as to 
Altoona, you talk about a critical access hospital. What does 
that mean?
    Dr. Roswell. A critical access hospital is a hospital that 
basically recognizes that small hospitals are needed, just as 
you have said, Mr. Chairman, in certain locations. The inherent 
danger with quality in a small hospital is if the staff are 
tempted to provide care beyond their capability. In many cases, 
we have part-time physicians who maintain their skills, but let 
me point out that in situations such as Erie, the nursing 
staff, the postoperative staff, are generally full-time VA 
employees, and they need to maintain their skills as well to 
assure that quality care is continued. We believe we can do 
that on an outpatient basis, but on an inpatient basis, we have 
to maintain the integrity of the entire staff.
    A critical access hospital would not normally provide 
surgical care other than limited outpatient care. It would be 
designed to provide inpatient care for less-complicated 
inpatient requirements that normally could be managed 
definitively within a 96-hour period of admission. For patients 
who require inpatient surgical care or more intensive inpatient 
care, including ICU stays, the recommendation would be to 
stabilize those patients and transfer them to a world-class 
tertiary facility such as the one in Pittsburgh.
    Chairman Specter. Senator Hutchison. Pardon me, Senator 
Nelson.
    Senator Nelson. Thank you, Mr. Chairman.
    With respect to changing acute care hospitals to critical 
access hospitals, it is my understanding that the VA uses the 
Medicare definition generally. But in the case of the Cheyenne 
Medical Center, that apparently is not the case, because the 
average stay there is considerably longer than in the case of a 
critical access hospital. But, yet, you want to switch it to 
that.
    It has a great impact on Nebraskans. One thousand 
Nebraskans utilize that center. In the past fiscal year, there 
were 3,578 visits by 1,000 Nebraskans for acute care at about 
130 hours above the 96-hour threshold. Yet, you are in the 
process of apparently recommending changing that category. Can 
you explain to me why that is the case and, also, how that is 
going to improve care for those Nebraskans and others who use 
the hospital?
    Dr. Roswell. Well, ultimately, Senator, we believe that the 
veterans in western Nebraska are entitled to the same standard 
of care as veterans are anywhere in the nation, and we want to 
make sure that that care is high-quality care and accessible. 
Sometimes, that is not possible because of the sparse 
populations.
    In the case of the Cheyenne, Wyoming facility, the level of 
surgical care is somewhat limited, but the level of expertise, 
the imaging support, the technology support for the hospital in 
Cheyenne is less comprehensive than it is, for example, in 
Denver. We still believe that that hospital serves a very----
    Senator Nelson. It is a long way to Denver.
    Dr. Roswell. It certainly is. There is no question about 
that.
    But we believe that we have to assure that patients who 
receive care at that facility receive the very best possible 
care we can provide. The recommendation to make it a critical 
access-like hospital would be to limit complex surgical care 
and to attempt to reduce stays on average to 96 hours.
    Senator Nelson. Well, I applaud the effort at trying to get 
quality care, because the last thing we want is a reduction in 
quality care. But the access issue and the ability of people to 
be able to get that access continues to be in doubt. Would you, 
for example, be able to certify the hospital, which is not a VA 
hospital but could become an approved hospital, in Scottsbluff, 
which is a full-service hospital with regard to everything? I 
mean, I think we have to have a plan other than saying go to 
Denver, and I appreciate the fact that Mr. Alvarez is picking 
up on where I am going, because I think it is not going to be 
unique to Nebraska; obviously, it is going to have implications 
for Texas. The whole VISN 23, a very rural area, is going to be 
affected by very similar decisions.
    Dr. Roswell. I certainly agree with the premise, and let me 
point out that in the national CARES plan, reliance upon 
contract hospitalization, access to tertiary services 
contracted locally in the community, is a key feature, and it 
is a current deviation from VA's existing policy. With me today 
is the acting director of our national CARES program office, 
Mr. Jay Halpern, and he may wish to address that further.
    Mr. Halpern. Senator, we are absolutely committed to 
maintaining services that are accessible. In areas where there 
are those tertiary capabilities that meet those standards, we 
would want to contract with them. In addition, we will be 
developing our own critical access hospital policy. Ninety-six 
hours right now is what Medicare uses. I do not know that we 
are fixed to that length of stay. We have to develop our own 
policy that makes sense for us. But certainly, that is the 
intent.
    Senator Nelson. Well, can you give me a categorical 
assurance that before people are told in Western Nebraska that 
they can no longer go to the Cheyenne Medical Center because of 
the change you will have a contract in place with another 
facility in closer proximity to those veterans? Because I think 
that is the question, and that has to be the goal.
    Dr. Roswell. It is unequivocally the goal, that we enhance 
access to services, including outpatient care, inpatient care, 
surgical care, and all types of care that veterans might need, 
including those in Western Nebraska. We will do everything that 
we possibly can. That is as close of an assurance as I can give 
you.
    Senator Nelson. It is not quite categorical, but it is 
moving in that direction.
    Dr. Roswell. Thank you.
    Senator Nelson. Thank you.
    Thank you, Mr. Chairman.
    Chairman Specter. Thank you, Senator Nelson.
    Senator Hutchison.
    Senator Hutchison. Thank you, Mr. Chairman.
    Let me just ask Dr. Roswell: the VA estimates that the 
number of veterans most in need of long-term care, 85 years of 
age and older, will more than double to about 1.3 million in 
2012. Yet, I am told that the CARES planning process did not 
take into account the long-term care and outpatient mental 
health needs projections. So how are you going to care for 
those people that you are projecting to have such an increase 
in population?
    Dr. Roswell. Well, actually, Senator, we believe that the 
population over 85 will triple by 2012, so your point is 
extremely well-taken. We are very concerned about providing 
long-term care to older veterans, and we will have a 
substantial burden. We have preserved the current long-term 
care capacity in the national CARES plan. We believe, however, 
we need to carefully examine our long-term care policies to 
determine what mix between institutional and non-institutional 
care will be required to meet the future demand.
    We also have been criticized, and understandably so, for 
proposing to close hospitals when we, in fact, might need those 
facilities to provide nursing home care to older veterans if 
institutional care becomes a requirement. We have learned, 
through very painful experiences, that when you convert a 50-
year or older hospital which was designed for hospital care a 
half-century ago to a nursing home, you wind up with a 
substandard nursing home, and the cost of such conversion is 
approximately twice the cost of new construction.
    So we anticipate that, in fact, when we are able to further 
determine the definitive long-term care policy, we may need 
additional long-term care beds. But we believe veterans deserve 
the best long-term care facilities, and that would be new 
construction in lieu of converting a 50-year-old hospital to 
inadequately meet the long-term care needs.
    Senator Hutchison. Thank you, Mr. Chairman. I asked my 
other question of Mr. Alvarez earlier, and I appreciate that 
opportunity. Thank you.
    Chairman Specter. Well, I will return to the questions that 
I asked you that really could not be answered in the course of 
the 8 seconds that we had left, and we will be submitting some 
additional questions for the record. But when we are talking 
about the medical center in Erie, and we are talking about 
enough cases to have adequate competency, you cannot maintain 
sharp surgical care if a surgeon does not have enough cases. 
But it is my understanding that although the surgeons would 
have only a few cases at the VA facility, they would have other 
practices privately where they are maintaining their skills, so 
that there is really no reason to close Erie because the 
doctors do not have adequate surgical skills. Is that not 
correct?
    Dr. Roswell. The premise that you presented is a correct 
premise, that the surgeons, in fact, may maintain their 
surgical skills by practicing in venues other than the VA 
facility. However, just as important if not more important is 
the anesthesia staff, the post-anesthesia recovery staff, the 
surgical nursing care that is provided within the first 24 
hours postoperative and then the continuing surgical care that 
is provided by the nursing staff.
    In those professions, not physicians but still valuable 
members of the health care team, nursing personnel need to 
maintain their skills with regard to surgical care and 
postoperative surgical management, and it becomes more 
difficult to maintain that skill set in that population of 
professionals.
    Chairman Specter. Well, Dr. Roswell, have you analyzed 
those collateral skills and come to the conclusion that they 
are not sufficiently active to maintain those skills.
    Dr. Roswell. We have looked at that both within the 
Department; we have looked at that through our National 
Surgical Quality Improvement Program. We have looked at the 
results of the leapfrog group, which is----
    Chairman Specter. How about at Erie?
    Dr. Roswell. At Erie, I have not personally or specifically 
looked at that.
    Chairman Specter. Well, have your subordinates.
    Dr. Roswell. Again, let me ask Mr. Halpern to address the 
situation at Erie.
    Chairman Specter. Mr. Halpern, we had not expected you to 
testify, so we have not extolled your virtues. But let the 
record show that you are the acting director of CARES; have 
been that since December 2002; that you have 35 years in the 
Federal Government in a variety of health care capacities, and 
we will include your resume in the record. It is very 
distinguished.
    Mr. Halpern. That is very fine. Thank you, Senator.
    Chairman Specter. Now, you may answer, now that you have 
been accredited.
    Mr. Halpern. What I would add to Dr. Roswell's comment is 
that it is not just about today's practice of medicine and 
practice of surgery. It is looking into the future. It is very 
hard for a small facility to acquire the technology, the 
diagnostic and interventional technologies that are 
increasingly a part of modern-day surgery. So it is very 
difficult for staff, in fact, to be skilled in those particular 
areas, particularly support staff, the technical staff. We have 
not specifically site-visited and assessed Erie.
    Chairman Specter. Well, I would like you to take a look at 
that, because the backup facilities identified by Dr. Roswell 
have been functioning there for some time, and we can make a 
determination as to whether they are able to maintain their 
skill level. But I think before you can make a determination 
for closing a facility, you really have to individualize your 
analysis, just take a look at the specific facility, because we 
will. This Committee will. So we are going to be asking you the 
hard questions as to what the facts are upon which you base 
your conclusion that there are insufficient skill levels. So I 
would ask you to take a look at Erie.
    Dr. Roswell. Mr. Chairman, I understand your concern. I 
will share a----
    Chairman Specter. It is not only a concern for Erie. I have 
not had a chance to go to all of the other facilities that are 
on the list, but all of these other Senators will.
    Go ahead, sir.
    Dr. Roswell. I just want to say that I have met with the 
VISN director from VISN 4 and the facility directors. We have 
discussed this in great detail. I sat across from the table, 
much closer than you and I are, with the director of one of the 
smaller facilities, and I said yes or no, if you had a serious 
problem, would you want to get acute care in your hospital? And 
the answer was no.
    Chairman Specter. How is it that you can get yes or no 
answers, and I cannot?
    [Laughter.]
    Chairman Specter. Well, let us go on to Altoona. In more 
than 8 seconds, tell me what a critical access hospital is.
    Dr. Roswell. First of all, let me point out that Altoona 
has a fairly dynamic work load right now. The recommendation in 
Altoona is, and the projections are, that by the year 2012 and 
beyond, the demand for acute inpatient care at that location 
will decline to the point where it really may not be feasible 
any longer to maintain an acute tertiary inpatient----
    Chairman Specter. You are projecting to when?
    Dr. Roswell. 2012, so the recommendation in the national 
CARES plan would actually maintain Altoona----
    Chairman Specter. 2012? How do you project to 2012, Dr. 
Roswell?
    Dr. Roswell. We took the 2000----
    Chairman Specter. I talked about that with Strom about 20 
years ago when he could not do that.
    Dr. Roswell. Well, it is difficult. There is no question 
about it. But we are using the very best health care actuary in 
the nation, in the world, for that matter, to help us project. 
We are extrapolating the veteran population. We look at the 
demand for care, the types of problems treated, and we actually 
come up with what we believe are fairly accurate projections 
that not only look into the future but have been validated by 
back-testing. We believe that they are, in fact, as accurate as 
we possibly can be.
    As the Secretary pointed out, this is a 20-year plan that 
looks at a comprehensive set of resources that must be in place 
for veterans in the decades ahead, and it is imperative that we 
act now to be able to address those needs in the future.
    We may be wrong, though. In the case of Altoona, if we do 
not see the decline in the acute inpatient work load, it will 
not convert to a critical access hospital.
    Chairman Specter. Well, we want to help you not be wrong, 
especially as to Altoona. When you say Altoona is dynamic, it 
is a growing area. It is an area on the move. I will take a 
look at your projections and how you figure it out. But from 
what I see on the ground, Altoona is growing. It is not 
contracting.
    Dr. Roswell. Well, again, this would be a recommendation to 
monitor the actual inpatient census, but we anticipate that 
sometime around 2010, 2012, the census would begin to decline, 
which would then, at that time and only at that time, require 
us to re-evaluate the mission of the Altoona VA Medical Center. 
We will be happy to monitor it concurrently with you and 
certainly will take no actions to reduce the scope of services 
at Altoona unless we actually observe, realize that decline in 
inpatient work load.
    Chairman Specter. Well, all right; that is a good 
assurance, if you are not going to alter the available services 
at Altoona until you see that actual decline. That is not based 
on a projection; that is based on hard facts at hand.
    Dr. Roswell. Exactly.
    Chairman Specter. I also want to thank you, gentlemen, for 
coming in today. There is a lot of interest in this subject 
matter across the country, and that is reflected by a lot of 
interest on Capitol Hill. I know you men and the Veterans 
Administration generally are committed to veterans' care, and I 
conclude with the same admonition on skepticism that I began 
with: wherever I travel extensively in my State and beyond, 
veterans are concerned about the adequacy of the budget. So, 
starting there and the budget constraints, there is just an 
inevitable feeling that changes are being made with regard for 
the continuation of service.
    I think your testimony here is solid on those assurances, 
and we are going to have to back it up, and it is important for 
the veterans to know that there will be Congressional oversight 
and Congressional analysis on what you are doing.
    Thank you all very much, and that concludes our hearing.
    [Whereupon, at 3:30 p.m., the committee adjourned.]


                            A P P E N D I X

                              ----------                              


         Prepared Statement of Hon. Patty Murray, U.S. Senator 
                         from Washington State

    Chairman Specter, I want to thank you for convening the 
Committee, and I want to welcome Secretary Principi and 
Chairman Alvarez.
    As we all know--under the CARES initiative--the Department 
of Veterans Affairs asked its regional offices to study the 
health care needs of local veterans and to develop a plan to 
meet those needs.
    I support the idea behind CARES--to provide a realignment 
of veterans' healthcare services that will enhance care for 
those who fought so bravely for our country.
    However, as this process has moved forward, there have been 
some troubling revelations, and it appears that Chairman 
Alvarez has an unenviable job. It seems CARES is driven more by 
meeting budget targets than by meeting the healthcare needs of 
our veterans. Local experts in my region--which covers 
Washington, Oregon, Idaho and Alaska--submitted a plan several 
months ago that showed dramatic enrollment growth, and 
significant gaps in areas like long term care, primary care and 
specialty care. The VA sat on this report for several months. 
Then, just 8 days before the scheduled release of the national 
report, the VA called up leaders at more than two dozen 
facilities--including three in Washington State--with some 
shocking news. The VA said that it didn't like their 
recommendations. VA headquarters then ordered these regional 
leaders to include a new and troubling recommendation--closing 
these VA facilities. The next day, I sent Secretary Principi a 
letter outlining my objections to the VA's interference with 
the regional market plan and expressing my strong opposition to 
closing any of the three Washington VA facilities.
    The CARES process is supposed to provide an objective, 
external perspective as the VA works to meet the increasing 
demand for veterans healthcare. Veterans deserve more from the 
VA.
    Since that time, Secretary Principi personally pledged to 
me that one of the Washington State facilities--American Lake 
in Tacoma, Washington would not be closed.
    I appreciate the Secretary's admission that the possible 
closure of American Lake was a tremendously flawed proposal. 
Questions remain at the other two facilities in my state--in 
Vancouver and Walla Walla--as well as other facilities around 
the country.
    In Vancouver, instead of the creative community-based 
partnerships that were proposed, the VA will potentially shut 
this facility in the fastest growing area of Metropolitan 
Portland. In fact, patient numbers have risen 17 percent this 
year--more than three times as fast as usual--at the combined 
Portland / Vancouver medical center.
    The city of Vancouver, Clark County and the VA have been 
working for years to create an enhanced use facility that would 
compliment the services at the Vancouver facility. Now, only a 
few months from issuing construction bonds, this plan may be in 
jeopardy.
    In Walla Walla, veterans may lose a facility that was 
shifting to long term care and some other services may be 
contracted out. The Walla Walla VA Medical Center is also one 
of the largest employers in the community and serves a veterans 
population of approximately 69,000.
    Closure of the Walla Walla facility would leave area 
veterans 180 miles from the Spokane VA Medical Center.
    And let's not forget that there is a Federal law--on the 
books since 1987--that prohibits changing the mission of the 
Veterans Administration Medical Center in Walla Walla.
    Veterans in Washington State and across the country are 
having a terrible time getting the care they need, but instead 
of improving services, the VA is exploring closing facilities.
    Another troubling aspect of the CARES process is the 
apparent disregard of veterans long-term care needs.
    While Secretary Principi has stated that CARES includes a 
``commitment to long term care,'' the model used to project 
demand did not include long term care or mental health care.
    The VA said that the modeling for such care ``needed more 
work'' and that ``the Department cannot wait on perfection.'' 
Yet, the VA readily acknowledges that the number of veterans 
age 75 and older will increase from 4 million to 4.5 million by 
2010. And, both the VA and the GAO estimate that the veterans 
population most in need of nursing home care--veterans 85 years 
old or older--is expected to triple to over 1.3 million by 2012 
and remain at that level through 2023. Clearly we've got to do 
more--not less--to meet this growing need.
    A major function of the Vancouver and Walla Walla 
facilities is long term care, and I'm going to continue to 
speak up for the veterans I represent. They deserve better than 
the treatment they're getting from this Administration.
    So Mr. Chairman, I will have more questions for the 
Secretary to answer this afternoon, just as I did when the VA's 
General Counsel testified before this committee.
    I fear that the CARES process is losing its legitimacy, and 
the good work Chairman Alvarez set out to accomplish is being 
driven by budgetary issues within the VA.
    Mr. Chairman, I believe this Committee must increase its 
oversight. We have to ensure that CARES and the work of the 
Department and the Commission are transparent and accessible to 
veterans. The VA's stealth effort to potentially close 
facilities in Washington State--despite the regional 
recommendations and a lack of long-term care data--is a sign 
that the CARES process is a growing problem for the VA and the 
Congress. Our veterans deserve better, and I'm going to hold 
this Administration responsible for the way it's treating the 
veterans of Washington State.
                              ----------                              


   Prepared Statement of Hon. Jim Bunning, U.S. Senator From Kentucky

    Thank you, Mr. Chairman. Kentucky will be heavily affected 
by the CARES Process. The draft proposal now being considered 
by the CARES Commission proposes to close a medical center in 
Lexington and relocate the Louisville Medical Center. I am very 
concerned about that and so are the veterans in Kentucky.
    I Certainly support new and improved facilities that 
improve VA's ability to provide timely and quality health care. 
But any reductions or closures of facilities must be 
accompanied with other means to ensure no veteran is unable to 
get the help he or she needs. Mr. Secretary, Dr. Roswell, and 
Mr. Alvarez, I am counting on you to make proposals that are 
good for all our veterans.
    At hearings earlier this year I talked about the benefits 
of partnerships with university medical schools. The medical 
centers in Lexington and Louisville have strong partnerships 
with the universities there. I support those partnerships and 
encourage you to strengthen those as you move forward. The 
draft proposal does that and I hope that remains in the final 
plan.
    In Lexington there is not much space to expand around the 
medical center at the University of Kentucky. Many veterans 
have trouble going there because of parking. While those issues 
are addressed in the draft proposal, I believe very serious 
thought and planning needs to go into any changes in Lexington 
to ensure enough capacity is added at the hospital and veterans 
are able to get there easily.
    The draft proposal recommends a stronger partnership with 
the University of Louisville, including a possible new facility 
adjacent to University hospital. I support stronger ties with 
the University and an upgrading or replacing the current 
medical center should be a priority. The Louisville Medical 
Center is the oldest in the region. The University of 
Louisville is eager to work with VA to develop an innovative 
proposal to provide better facilities and more access to the 
University's resources.
    I strongly support that. If VA decides to move the current 
hospital, I hope any new facility is built in partnership with 
the University of Louisville.
    Mr. Secretary, earlier this year you and I talked about VA 
clinics in Kentucky. I am very pleased that the draft proposal 
contains several new clinics in the eastern half of the 
Commonwealth. Veterans in Kentucky love the clinics and want 
more of them. I hope the final proposal adds even more clinics 
throughout the Commonwealth, especially in western Kentucky and 
places like Owensboro where the community has stepped forward 
and offered to help by providing facilities and other 
resources.
    One final point I want to make is that I encourage VA to 
work with the Army to share resources at Fort Knox and Fort 
Campbell. Many veterans live around those bases and it only 
makes sense that the two departments should work together in 
those areas.
    Again, I want what is best for our veterans. I urge the VA 
to be careful in making any recommendations and to provide 
Congress and the public strong evidence for making any changes. 
Thank you for coming today. I look forward to hearing your 
answers to my questions.
    Thank you, Mr. Chairman.
                              ----------                              

Prepared Statement of Hon. Robert H. Roswell, M.D., Under Secretary for 
                 Health, Department of Veterans Affairs
    Mr. Chairman and Members of the Committee: The Secretary has 
described the reasons for CARES and the process utilized to develop the 
market plans and the Draft National CARES Plan. My statement today will 
focus on the Draft National CARES Plan itself.
    In preparing the Draft National Plan, VA developed demographic 
projections through the year 2022, conducted a comprehensive capital 
inventory, assessed usage and vacant space, conducted a clinical 
inventory of programs offered at all sites, and developed access 
standards for the use of all VA facilities in evaluating accessibility 
of their services. The Draft National Plan is based on national themes 
such as improving access to high quality health care services, ensuring 
outpatient capacity, enhancing access to special disability programs, 
and prioritizing the capital infrastructure needed to support delivery 
of high quality health care into the future.
    The VISN's market plans contain the results of thousands of 
decisions regarding how outpatient and inpatient demand will be 
managed, i.e., whether space will be leased, renovated, or constructed, 
or whether community contracts and DoD sharing will be utilized. The 
Draft National Plan, however, is not simply a compilation of market 
plans developed at the local level. We also reviewed the plans at the 
national level and in many cases requested additional analysis by the 
VISN's. CARES represents the most comprehensive and objective 
assessment ever completed of the capital infrastructure needed to 
support VA health care.

                       OVERVIEW OF THE DRAFT PLAN
    In total, the draft National CARES Plan includes recommendations 
that would result in the following actions:
     11 million sq. ft. to be renovated
     9 million sq. ft. to be constructed
     3.6 milion sq. ft. of vacant space eliminated
     reduction of 600 acute hospital beds
     projected annual increase of 18.9 to 12.1 million 
outpatient clinic stops (in 2012 & 2022, respectively)
     private sector contracts to meet peak load demand and 
access
     48 new high priority community-based outreach clinics 
(CBOC's)
     2 new hospitals (Orlando, FL, and Las Vegas, NV)
     1 replacement hospital (Denver)
     improved access (in terms of driving time) from 72 percent 
to 84 percent of enrollees meeting guidelines for access to acute 
hospitals; and from 94 percent to 97 percent for tertiary care 
hospitals (2001 vs. 2012 and 2022)
     maintaining enrollee access at 74 percent within primary 
care access guidelines, but improving market-level access from 67 
percent of markets meeting guidelines to 79 percent, if 48 new proposed 
CBOC's implemented
     preservation of current Special Disability Program 
capacity and addition of new locations:
          2 new Blind Rehabilitation Centers (VISN's 16 and 22)
          4 new Spinal Cord Injury & Disorders (SCI/D) Units 
        (VISN's 2, 16, 19, and 23)
          5 expansions of SCI/D LTC beds (VISN's 8, 9, 10, and 
        22) and expanded acute/sustaining beds (VISN 7)
     collaboration within and outside VA:
          VBA: 13 high priority regional benefits office co-
        locations
          NCA: 7 high priority future cemetery use 
        opportunities
          DoD: 21 high priority collaborations/joint ventures

                    REALIGNMENTS AND CONSOLIDATIONS
    I would like to discuss in more detail the decisions I made 
regarding realignments of Division II campuses and changing the mission 
of small facilities. When I reviewed the results of the market plans, I 
concluded that there were opportunities to realign campuses that 
improve the quality, access and resource use by examining opportunities 
to move these campuses from inpatient to outpatient operations, i.e. by 
converting from 24-hour, 7-days/week to 8-hours, 5-days/week 
operations. I asked the VISN's to determine how this could be 
accomplished at selected sites with the provision that there would be 
no loss of services to veterans. I specified that Inpatient services 
must be provided at other VAMC's through sharing agreements or 
community contracts.
    Outpatient services were to be maintained on the campus or in the 
local community through leasing of sites or contracting for care. The 
realignments focused on moving long-term care sites to sites with an 
acute care presence because this would also improve access to 
diagnostic and therapeutic services for the long-term care population. 
The current physical environment in many sites would require 
significant capital investment in older buildings that are more 
expensive to renovate than to build a new Nursing Home for example. In 
addition, since patients served by long-term care facilities are not 
geographically concentrated, i.e. they come from larger geographic 
areas, the relocations do not significantly impact access. Where 
contracting is combined with relocation of beds to other VAMC's or 
where relocation is at a site with a greater concentration of veterans, 
access is improved. The draft National CARES Plan realignments are 
concept proposals that will be further reviewed and additional cost 
benefit information will be provided to the Secretary and the CARES 
Commission prior to the final CARES Plan decision. Should the proposals 
be improved further, detailed planning would occur as part of 
implementation planning. In no case would services be discontinued 
without alternative sites of care available and operational. Any 
savings or revenues realized from enhanced use leasing of sites will be 
used to benefit veterans in the communities where the campuses are 
located.

                            SMALL FACILITIES
    The future of small facilities and their role in the VHA health 
care system were key components of the CARES process. The issues were 
how to ensure that veterans will receive the best diagnostic and 
interventional technologies and whether this is feasible in facilities 
that are already small and show forecasted declines or remain at 
similar bed levels. The trend toward more sophisticated imaging and 
advances in invasive techniques, which shorten hospital stays but 
require the investment in expensive major equipment, has led to a 
further consolidation of care in tertiary care facilities of more 
complex cases. Optimal and efficient functioning of the VA's health 
care delivery system depends upon early referral and transfer of 
patients with complicated conditions and those requiring major surgery, 
where outcomes may be volume-dependent.
    These trends have led to declines in bed days of care in smaller 
facilities to the point at which staff proficiency and outcomes may be 
compromised in low-volume sites. Moreover, economies of scale in 
provision of the latest medical and imaging technology cannot be 
realized. Nevertheless, many small VA medical centers (VAMC's) are 
important providers of health care in their communities. The CARES 
review of small facilities in the VA has proposed a Critical Access 
Hospital (CAH) designation of small facilities, based upon the Center 
for Medicare and Medicaid Services model, requiring that they meet 
certain operational standards and restricting their ``scope of 
practice.'' The intent of this process would be to improve the 
efficiency, effectiveness, and to enhance the level of functioning of, 
small facilities within the context of VA's national system of health 
care delivery. Over the course of the next year, the VA will develop 
and implement policies to govern the operation of acute beds in small 
VA facilities, which may fit into a CAH-like model of health care 
delivery.

                              ENHANCED USE
    Of the top 20 VA facilities identified by the Office of Asset and 
Enterprise Management (OAEM) as having the highest potential Enhanced 
Use Lease opportunities, 18 have Enhanced Use Lease initiatives 
included in the VISN CARES Market Plans. By the end of the CARES 
planning timeframe, approximately 4.5 million square feet of vacant 
space is expected to be available for enhanced use lease initiatives. 
This square footage does not include the acres of land that more than 
half of the 18 facilities propose for enhanced use lease initiatives.

                               CONCLUSION
    Mr. Chairman, the draft national plan is currently under intensive 
scrutiny by the Secretary's CARES Commission. Following review of the 
Commission's recommendations and the subsequent approval of a final 
National CARES Plan by the Secretary, implementation will take place 
over a period of many years. It will be a multifaceted process, 
depending upon whether implementation of specific initiatives requires 
additional capital, recurring funding, primarily policy changes, or 
realignments. In particular, the complexity of realigning clinical 
services and campuses necessitates careful planning in order to ensure 
a seamless transition in services. In no case would services be 
discontinued without alternative sites of care being available and 
operational. And, as I mentioned earlier, savings or revenues realized 
from enhanced use leasing will be used to benefit veterans in the 
communities where the affected campuses are located.
    This concludes my statement. I will now be happy to answer any 
questions that you or other members of the Committee might have.
  

                                  
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