VA Health Care: VA Is Adopting Managed Care Practices to Better Manage
Physician Resources (Letter Report, 07/17/97, GAO/HEHS-97-87).

Pursuant to a congressional request, GAO provided information on what
the Department of Veterans Affairs (VA) is doing to manage its physician
resources as well as how health maintenance organizations (HMO) manage
their physician resources.

GAO noted that: (1) VA is in the midst of making fundamental changes in
its health care delivery system because of budgetary pressures and
increasing competition in the health care industry; (2) many of these
initiatives are affecting the entire VA health care delivery system;
they will also affect how VA manages physician resources, including
identifying the appropriate number and skill mix of physicians and
monitoring productivity and quality of care provided; (3) these
initiatives involve changes in physician practice patterns and in
resource allocation to help ensure effectiveness and efficiency; (4) VA
is changing physician monitoring by emphasizing standardized
productivity and clinical care outcome measures, which are increasingly
being used in the private sector to monitor the efficiency and
effectiveness of physician performance; (5) in addition, further
embracing private sector managed care practicers, VA is changing the way
physicians practice by assigning veterans to a primary care physician,
an approach that emphasizes continuity of care, prevention, and the
early diagnosis of disease and allows VA to better attribute clinical
care outcomes to specific provider performance; (6) VA expects to change
physician practice patterns and improve service delivery efficiencies by
distributing health care funding on the basis of workload rather than
according to historic funding patterns, which perpetuated imbalances in
funding, efficiency, and access to care throughout the VA health care
system; (7) VA has not developed a staffing and resource allocation
model that identifies optimal physician staffing levels or the skill mix
of physicians needed to provide health care to eligible veterans, and no
agreed-upon physician workload standards exist either in the private
sector or at VA for most physician specialties, including primary care;
(8) VA faces unique challenges in managing its physician resources; (9)
it must balance multiple congressionally mandated missions, such as
training health care professionals, that reduce physicians' clinical
care productivity relative to that of physicians in private sector HMOs;
(10) in addition, VA performance measurement and allocation systems are
hampered by incomplete and inaccurate data; and (11) moreover, accurate
estimates of workload, and essential element of resource allocation, are
particularly challenging with a patient population that is sicker and o*

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-97-87
     TITLE:  VA Health Care: VA Is Adopting Managed Care Practices to 
             Better Manage Physician Resources
      DATE:  07/17/97
   SUBJECT:  Physicians
             Health maintenance organizations
             Managed health care
             Veterans benefits
             Health care services
             Productivity
             Health centers
             Health resources utilization
             Health services administration
IDENTIFIER:  VA Decision Support System
             VA Veterans Equitable Resource Allocation System
             VA Resource Allocation Methodology System
             VA Resource Planning and Management System
             
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Cover
================================================================ COVER


Report to the Chairman, Committee on Veterans' Affairs, House of
Representatives

July 1997

VA HEALTH CARE - VA IS ADOPTING
MANAGED CARE PRACTICES TO BETTER
MANAGE PHYSICIAN RESOURCES

GAO/HEHS-97-87

VA Physician Staffing

(101483)


Abbreviations
=============================================================== ABBREV

  AIDS - acquired immunodeficiency syndrome
  DSS - Decision Support System
  FTE - full-time-equivalent
  HIV - human immunodeficiency virus
  HMO - health maintenance organization
  IOM - Institute of Medicine
  RAM - resource allocation methodology
  RPM - resource planning and management
  VA - Department of Veterans Affairs
  VHA - Veterans Health Administration
  VISN - veterans integrated service network

Letter
=============================================================== LETTER


B-270579

July 17, 1997

The Honorable Bob Stump
Chairman, Committee on Veterans' Affairs
House of Representatives

Dear Mr.  Chairman: 

The Department of Veterans Affairs (VA) is one of the nation's
largest employers of physicians.  In fiscal year 1996, VA's Veterans
Health Administration (VHA), one of the nation's largest direct
health care delivery systems, operated 173 hospitals, 398 outpatient
clinics, 133 nursing home units, and 40 domiciliaries.\1 That same
year, VA spent $1.7 billion in salaries and benefits for 10,102
full-time-equivalent (FTE) physicians--actually, more than 14,000
part- and full-time physicians\2 --to provide medical care to almost
3 million patients, or approximately 10 percent of all veterans. 

In light of the pressures on the health care industry in general and
on VA in particular to achieve greater efficiencies as they operate
within ever-tighter budgetary constraints, you asked that we provide
information on what VA is doing to manage its physician resources as
well as how health maintenance organizations (HMO) manage their
physician resources. 

To obtain this information, we reviewed VA policies and procedures,
interviewed officials at both VA and selected HMOs, and extensively
reviewed the existing literature.  We also visited four VA medical
centers--at Houston, Texas; San Francisco, California; Spokane,
Washington; and Togus, Maine.  These medical centers represented a
mixture of size; mission; cost per patient treated; and level of
affiliation with medical schools--that is, the size of the patient
case workload, the number of residents in training, and the amount of
research conducted jointly with medical schools.  These facilities
are not, however, statistically representative of all VA medical
centers.  During our site visits, we interviewed a random sample of
physicians and examined all relevant records, including personnel and
performance records for these physicians, to determine how policies
and procedures were applied.  We also interviewed officials at
medical schools affiliated with VA medical centers and other health
care experts.  (See app.  I for more detail on our scope and
methodology.)


--------------------
\1 Domiciliaries provide shelter, food, and necessary medical care on
an ambulatory basis to veterans who are disabled by age or disease
but not in need of skilled nursing care or hospitalization. 

\2 These figures do not include physicians hired on a fee or contract
basis, medical residents, or fellows. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

VA is in the midst of making fundamental changes in its health care
delivery system because of budgetary pressures and increasing
competition in the health care industry.  Many of these initiatives
are affecting the entire VA health care delivery system; they will
also affect how VA manages physician resources, including identifying
the appropriate number and skill mix of physicians and monitoring
productivity and quality of care provided.  These initiatives involve
changes in physician practice patterns and in resource allocation to
help ensure effectiveness and efficiency. 

VA is changing physician monitoring by emphasizing standardized
productivity and clinical care outcome measures, which are
increasingly being used in the private sector to monitor the
efficiency and effectiveness of physician performance.\3 In addition,
further embracing private sector managed care practices, VA is
changing the way physicians practice by assigning veterans to a
primary care physician, an approach that emphasizes continuity of
care, prevention, and the early diagnosis of disease and allows VA to
better attribute clinical care outcomes to specific provider
performance.  VA expects to change physician practice patterns and
improve service delivery efficiencies by distributing health care
funding on the basis of workload rather than according to historic
funding patterns, which perpetuated imbalances in funding,
efficiency, and access to care throughout the VA health care system. 
VA has introduced a capitated, patient-based resource allocation
system using 22 regional networks as the basic allocation unit rather
than individual medical facilities, which will result in resource
shifts among the networks and physician staffing reductions in some
areas of the country. 

VA has not developed a staffing and resource allocation model that
identifies optimal physician staffing levels or the skill mix of
physicians needed to provide health care to eligible veterans, and no
agreed-upon physician workload standards exist either in the private
sector or at VA for most physician specialties, including primary
care. 

VA faces unique challenges in managing its physician resources.  It
must balance multiple congressionally mandated missions, such as
training health care professionals, that reduce physicians' clinical
care productivity relative to that of physicians in private sector
HMOs.  In addition, VA performance measurement and allocation systems
are hampered by incomplete and inaccurate data.  For example,
physician-specific information is not generally available on cost and
utilization.  Although VA is implementing a new cost-based data
system, the system will not be fully operational until fiscal year
1998. 

Moreover, accurate estimates of workload, an essential element of
resource allocation, are particularly challenging with a patient
population that is sicker and older than the general population and
that moves in and out of the VA health care system.  While HMO
patients generally obtain most or all of their medical care from the
HMO, more than half of VA patients receive part of their care from
non-VA providers.  To the extent that veterans reserve VA for their
more costly health care, the success of VA's physicians in using
primary care for prevention and early diagnosis of disease--key
predictors of clinical care outcomes--may be hampered.  Finally,
physician productivity is undermined by insufficient clinical space
and support staff as VA makes the transition to providing primary
care on an outpatient basis. 


--------------------
\3 Standardized performance measures include productivity indicators,
such as the number of specific procedures performed, and clinical
care outcome indicators, such as level of customer satisfaction and
mortality rates. 


   BACKGROUND
------------------------------------------------------------ Letter :2

In 1930, the Congress established VA, including a system for
providing for the rehabilitation and continuing care of veterans
injured during wartime service.  Over the past 65 years, the Congress
has expanded VA's health care mission beyond direct care for
service-connected injuries to include complete medical care for
veterans.  In the 1940s and '50s, the Congress added medical
education and research missions.  The purpose of the medical
education mission was to strengthen the quality of care in VA
facilities and to help train the nation's health care professionals. 
To contribute to the nation's knowledge about disease and disability,
the Secretary of VA is now legislatively required to carry out a
program of medical research in connection with the provision of
medical care and treatment of veterans.\4

Many VA medical centers have affiliated with medical schools since
1946, and today almost 80 percent of VA medical centers are
affiliated with one or more medical schools.  Approximately 70
percent of all physicians employed by VA hold faculty appointments at
these medical schools, and many hold part-time positions at both VA
and the affiliated medical schools.  These affiliations are intended
to aid in the recruitment of highly qualified staff to provide VA
patient care and to meet VA's education and research goals.  VA, in
return, provides clinical experience at its medical centers for over
100,000 health profession students from more than 1,000 educational
institutions every year.  Of these 100,000 students, more than 32,000
are medical residents and about 20,000 are medical students. 

VA employs physicians under title 38 of the U.S.  Code on both full-
and part-time bases.  For those physician services for which demand
or the salary VA is able to offer is insufficient to employ a
physician directly, VA contracts for physician services, often with a
doctor associated with an affiliated medical school.\5 In fiscal year
1993, the latest year for which data are available on FTE employees
for contract and fee-based physician services, VHA obtained physician
services equivalent to the services of about 19,400 full-time
physicians, either directly, as VHA employees, or through contracts
and residencies.\6

Physician salaries and benefits have consumed approximately 10
percent of VHA's total medical care expenditures since 1985, as shown
in figure 1.  In fiscal year 1996, VHA spent $16.6 billion on medical
care,\7 26 percent more than in fiscal year 1985 after adjusting for
inflation, while VA physician salaries and benefits rose 25 percent
over the same period. 

   Figure 1:  VA Medical
   Expenditures, Fiscal Years
   1985-96

   (See figure in printed
   edition.)

Under the Veterans' Health Care Eligibility Reform Act of 1996, all
veterans are eligible to receive comprehensive VA medical care.\8
However, veterans' actual receipt of such care depends on a complex
priority system based on the nature of their military service, level
of disability, and income, as resources permit.\9


--------------------
\4 In 1982, the Congress added another role for VA by authorizing it
to serve as the primary health care backup to the Department of
Defense in the event of war or national emergency. 

\5 These services are acquired on either an hourly or a procedural
basis. 

\6 Residents are physicians who have completed medical school and are
enrolled in a postgraduate medical education program leading to
qualification in a medical specialty or subspecialty. 

\7 Congressional authorizations for fiscal years 1997 and 1998 cap
increases at 4.14 and 3.77 percent. 

\8 Such medical care is discretionary to the extent that the Congress
must pass an annual appropriation for VHA to expend funds. 

\9 The Veterans' Health Care Eligibility Reform Act of 1996, P.  L. 
104-262, which became law on Oct.  9, 1996, eliminates distinctions
in eligibility criteria based on inpatient and outpatient care. 


   VA IS CHANGING HOW IT MANAGES
   PHYSICIAN RESOURCES
------------------------------------------------------------ Letter :3

VA is making fundamental changes in how it manages physician
resources as it adopts private sector methods to ensure the
efficiency and effectiveness of its physician workforce.  VA, like
HMOs, is developing standardized productivity and clinical care
outcome measures to monitor physician performance.  It is also
changing the way physicians practice by moving from providing
episodic, specialized care to a patient-based primary care model,
long embraced by HMOs.  Furthermore, VA is implementing a capitated,
patient-based resource allocation system to provide physicians and
others with incentives for providing the most efficient and effective
care.  Finally, VA has not developed a staffing and resource
allocation model that identifies the optimal physician staffing
levels, and no agreed-upon physician workload standards
exist--including for primary care--either at VA or in the private
sector. 


      VA, LIKE HMOS, IS DEVELOPING
      STANDARDIZED MEASURES TO
      MONITOR PHYSICIAN
      PERFORMANCE
---------------------------------------------------------- Letter :3.1

Both HMOs and VA are increasingly emphasizing the use of performance
measures, such as productivity and clinical outcomes, to manage
physician resources.  Productivity measures, for example, count the
number of specific procedures performed or patients treated, while
clinical care outcome measures reflect the results of care, such as
level of customer satisfaction or readmission and mortality rates. 
HMO officials told us that increased price competition has forced
them to focus on physician productivity in a new way.  VA officials
cited budgetary pressures; hiring restrictions; the deliberations of
the President's 1993 health care reform task force, which included
comprehensive assessment of VHA's role in the delivery of the
nation's health care; and increasing competition in the health care
industry as incentives for innovation in this area. 

VA and HMO officials told us that because monitoring individual
physician productivity is a new issue for health care providers, few
historical data or standards are available to identify acceptable
productivity levels and to set standards for appropriate physician
staffing.  For many years, physicians have predominantly practiced in
independent or small group fee-for-service practices.  Physicians'
individual productivity has been reflected primarily in their
personal income, and data have not generally been collected on their
individual productivity.  Officials that we interviewed at the staff
model HMOs--HMOs that employ their own physicians to provide health
care to enrollees--also stated that physicians have generally not
been accountable for productivity to others within their
organizations.  VA officials reported that they have historically
emphasized holding physicians accountable for working their minimum
hours of work rather than for their individual or collective
performance. 

VHA's 1996 publication, Prescription for Change, identifies
development of a monitoring system that tracks performance and
provides timely feedback to health care providers as necessary to
VHA's goal of improving its effectiveness and efficiency.\10
Standardization within VA will permit it to compare the performance
of its facilities and regions.  VA's plans echo HMO officials' desire
to emphasize performance measures that allow comparison with other
national and local private sector measures.  VA is also designing
performance measures to allow comparison with current trends in
performance evaluation supported by the Joint Commission on
Accreditation of Healthcare Organizations. 

The VA Under Secretary for Health has overall responsibility for
monitoring physicians in VHA.  VA medical center directors are
responsible for monitoring physicians at the medical center level,
which includes ensuring accurate time and attendance reporting.  In
practice, directors typically depend on the clinical service
chiefs--the heads of the different specialty "departments"--to
monitor physician attendance and to ensure that time cards are
accurate.  Service chiefs may do this themselves or they may delegate
these duties to the chiefs of the services' different clinical
sections. 

Service chiefs told us that they were placing less emphasis on such
management tools as monitoring physicians' time and attendance and
emphasizing instead physicians' productivity and accomplishments
during their work hours, including the outcome of the care provided. 
Service chiefs in all four medical centers we visited were
individually creating or adapting automated performance monitoring
systems because no central VA databases provided them with the
information they needed.  Without standardized systemwide data,
service chiefs had begun individually collecting and analyzing
physician-specific productivity data, such as the number of
procedures performed, number of patients seen, and length of time
patients had to wait for an appointment.  The service chiefs
generally saw their individual efforts as temporary.  They were
enthusiastic about VA's implementation of a new systemwide cost-based
data collection system to provide both individually tailored and
systemwide data on physician-specific performance. 

Service chiefs were using the information they collected in multiple
ways.  A service chief at one medical center reported using
productivity comparisons to convince the medical center leadership
council of the need to move physicians from other services, or
specialty areas, into his service.  He also planned to use the data
to encourage competition among primary care teams and to identify
efficient and effective practice patterns.  Many of the service
chiefs we interviewed had used productivity data to identify and
document physician performance problems.  They provided individual
physicians within their service with data on how their performance
compared with that of others to encourage improved performance.  At
all four medical centers we visited, management was using
productivity data in personnel actions involving individual doctors. 

Many service chiefs expressed frustration about their inability to
identify appropriate local and national data to use as benchmarks. 
They had to identify benchmarks by directly contacting their
counterparts in private sector organizations or by using prior
experience in university or private sector hospitals for comparison
purposes. 

Both VA and HMO officials emphasized that productivity has to be
combined with analysis of clinical outcomes to ensure the usefulness
of performance measures.  Service chiefs and HMO officials we
interviewed were still in the process of defining and measuring
productivity and had not yet developed a system to tie clinical
outcomes to performance. 


--------------------
\10 Kenneth W.  Kizer, M.D., M.P.H., Under Secretary for Health, VA,
Prescription for Change:  The Guiding Principles and Strategic
Objectives Underlying the Transformation of the Veterans Healthcare
System (Washington, D.C.:  VA, Mar.  1966). 


      VA IS SHIFTING ITS FOCUS
      FROM SPECIALTY TO PRIMARY
      CARE
---------------------------------------------------------- Letter :3.2

Embracing managed care practices used in the private sector, VA is
also changing how its physicians practice medicine, emphasizing
patient-centered primary care rather than episode-specific specialty
care.  HMOs have long been committed to the concept of primary care,
which focuses on the patient and emphasizes preventing illness and
diagnosing the early onset of disease.  VA, on the other hand, has
historically emphasized injury- or illness-specific medical care
provided by one or more specialists who treat the patient only for
the condition within their specialty. 

VA has now directed that the majority of its patients be assigned to
a primary care physician who is responsible for coordinating all
aspects of the patient's care, whether on an outpatient or inpatient
basis.  To ensure continuity of care, the patient returns to the
primary care physician after any specialist care has been completed. 
Assigning veterans to the care of individual physicians allows VA to
better attribute clinical care outcomes to specific provider
performance because one physician has greater responsibility and
control over the patient's care.\11 As of February 1997, VA reported
that 53 percent of its patients had been assigned a primary care
provider.  This represents 72 percent of all the patients VA has
specifically targeted for primary care:  those who have had two or
more clinic visits within the past year. 


--------------------
\11 In 1993, we reported that assigning patients to primary care
providers decreased unnecessary visits.  See VA Health Care: 
Restructuring Ambulatory Care System Would Improve Services to
Veterans (GAO/HRD-94-4, Oct.  15, 1993). 


         VA STRUGGLES TO PROVIDE
         PRIMARY CARE WITH
         OVERSUPPLY OF SPECIALISTS
-------------------------------------------------------- Letter :3.2.1

VA is attempting to provide primary care with a physician workforce
that is predominantly specialist.  Overall, about one-quarter of VA's
physicians are primary care physicians, and about three-quarters are
specialists; more than half of managed care plans' physicians are
typically primary care physicians. 

The four medical centers we visited were using different methods of
restructuring their physician groups to provide primary care using
the specialist physicians currently on staff.  For example, the chief
of the medical service at one large facility had organized physicians
into two multispecialty group practices, while at a smaller facility
physicians were divided into four teams.  At the large facility, each
clinic had a group of staff physicians representing key specialties: 
one cardiologist, one renal specialist, one pulmonologist, and one
opthalmologist working side by side.  Each specialist was assigned
the primary care of patients whose major problem lay within his or
her area of expertise.  The specialist assumed responsibility for
coordinating the total care of the patient, on both inpatient and
outpatient bases.  The multispecialty group setting provided the
physician easy access to a variety of other specialists for informal
consultation.  The consulting specialist set up a separate
appointment with the patient only when he or she believed the case
warranted special treatment.  The chief described the efficiencies in
the following way: 

     "In the past, we had a cardiology, renal, and pulmonary clinic,
     each of which was extremely narrowly focused.  All the
     specialists paid attention only to the problems the patient had
     that were in their area of expertise.  For example, if you were
     a cardiologist you took care of only the heart.  If [patients]
     also had diabetes you referred them to the diabetes clinic for
     that.  These patients were scattered all over the hospital with
     multiple providers working without any communication among them,
     often providing redundant or conflicting
     care .  .  .  .  [Now patients have] one-stop shopping."

In the smaller facility, 11 of the 13 physicians in the medical
service were divided into three teams, and psychiatrists made up the
fourth.  Two physicians, an oncologist and a gastroenterologist,
remained outside the three medical teams, practicing exclusively in
their area of specialization.  None of the physicians had a training
focus specifically in primary care areas, such as internal medicine,
gerontology, or family medicine. 

Service chiefs at the medical centers we visited told us that they
planned to use clinical practice guidelines in assisting the
specialists' transition to primary care.  VA required its regions to
adopt a minimum of five nationally developed clinical practice
guidelines by the end of fiscal year 1996 to manage
resource-intensive chronic diseases, such as major depressive
disorder and ischemic heart disease.  Clinical practice guidelines
are systematically developed statements that assist practitioners in
making decisions about appropriate health care for specific clinical
conditions.\12

Another means of changing the physician skill mix is to eliminate
specialist positions.  In March of 1996, VA gave facility management
authority for the first time to reduce title 38 physician staffing
levels through terminations without central office approval and
without offering the physicians the opportunity to move elsewhere in
the system.  Some of the service chiefs told us that they anticipated
using this authority to eliminate excess specialist positions, and
officials at one of the regions identified specific specialist
positions they planned to eliminate through the new procedure. 


--------------------
\12 For information on how managed care plans use practice
guidelines, see Practice Guidelines:  Managed Care Plans Customize
Guidelines to Meet Local Interests (GAO/HEHS-96-95, May 30, 1996). 


      VA IS ATTEMPTING TO INCREASE
      PHYSICIAN EFFICIENCY THROUGH
      CHANGING THE WAY IT
      ALLOCATES FUNDING
---------------------------------------------------------- Letter :3.3

VA expects to change physician practice patterns and improve service
delivery efficiencies by distributing health care funding on the
basis of workload rather than using historic funding patterns.  VA is
implementing a capitated patient-based resource allocation system
designed to increase incentives for physicians and others to provide
the most efficient and effective care.  Changes in the allocation of
VA's health care budget will have an impact on the distribution of
physician resources. 

In spite of previous attempts to link funding to the work performed
and the cost to perform it, VA's distribution of resources has
remained almost exclusively related to the amount that each facility
received in the past.\13 The Resource Allocation Methodology (RAM)
system, begun in 1985, was discontinued in 1989 because of concerns
that it provided facilities with inappropriate incentives to expand
workload beyond resource constraints.\14

The Resource Planning and Management (RPM) system, begun in 1994,
defined workload as patients served rather than procedures performed
and was, therefore, less susceptible to attempts to gain resources
through inappropriate performance or recording of workload.  The RPM
system did not, however, encourage cooperation among facilities.  In
addition, VHA officials told us the RAM and RPM systems were too
complex, requiring so many computer algorithms that few VHA officials
understood how the allocation systems worked.  The RPM system was
used to make only minimal changes to facility budgets, on average
less than 1 percent. 

In order to encourage decisions affecting the delivery of patient
care services to be based on collaboration among VA facilities rather
than on the interests of the individual facility, VA decided to
distribute funds on a regional rather than a medical facility basis. 
By June 1996, VA had incorporated its 159 independent medical centers
into 22 veterans integrated service networks (VISN) that report
directly to the Office of the Under Secretary for Health.\15 These
networks are designed to replace the individual facilities as both
the basic planning and budgetary units.  According to the Under
Secretary for Health: 

     "The hospital will remain an important, albeit less central,
     component of a larger, more coordinated community-based network
     of care .  .  .  .  The basic concept of an integrated health
     care organization is that it is one that will be accountable for
     providing a coordinated range of physician, hospital, and other
     medical care services for a defined population, and generally
     for a fixed amount.  The assumption is that it will be easier
     and more efficient to provide for all the needs of the
     population if all the pieces of the health care system needed to
     provide the care are integrated into, and under the control of,
     a single entity .  .  .  .  Under the VISN model, health care
     will be provided through strategic alliances among VA medical
     centers, clinics and other sites; contractual arrangements with
     private providers; sharing agreements with other government
     providers; and other such relationships."\16

This restructuring was also intended to change the relationship
between the central office and the regions.  In recognition of
regional differences in practice patterns, patient characteristics,
and geography, VA is moving more of the daily operational decisions
and oversight to networks, leaving the central office to focus more
on policy development and leadership.  Each network will determine
how funds are distributed to the medical facilities within its
geographic region.  Individual business plans drafted by the 22
networks propose a wide variety of distribution strategies. 

Although the networks were not fully operational until June 1996,
during our May 1996 visit to one small medical center, we were told
about a strategic alliance between medical centers in that network
that was intended to increase efficient and effective use of
physician resources.  This network covers an unusually large and
geographically rugged area with harsh winters, which prevents travel
among some of its medical facilities, except by air.  The network had
initiated a pilot program to test the feasibility of flying a
cardiologist from a large medical center to a small medical center to
provide pre- and postoperative care for patients needing heart
surgery, which was not available at the smaller facility.  Importing
a cardiologist eliminated the need for VA to fly veterans back and
forth several times for preoperative consultation and follow-up care. 
As a result, VA officials saw potential cost savings, increased
physician productivity at the smaller medical center by eliminating
administrative tasks associated with moving sick veterans, and
improved quality of care.  Allocating resources to the network rather
than to the individual medical facilities provides incentive for
changes of this nature. 

In April 1997, VA began implementing a capitated, patient-based
resource allocation process, the Veterans Equitable Resource
Allocation system for distributing funds to the networks.  Capitation
is a risk-sharing reimbursement method used in the private sector
whereby providers in a plan's network receive fixed periodic payments
for health services provided to plan members.  Capitated fees are set
by contract between prepaid managed care plans (typically HMOs) and
providers to be paid on a per-person basis, usually with adjustments
for age, sex, and family size, regardless of the amount of services
provided or costs incurred. 

Under the new allocation system, each network will be able to
allocate funds to its facilities as it deems appropriate, which is
expected to result in physician staffing reductions in some areas of
the country.  Moreover, in anticipation of potential funding
reductions, some networks have already begun to reduce their
physician workforce by eliminating part-time and temporary
physicians, voluntary separations, and terminating some full-time
physicians.  These networks expect still further reductions within
the next few years. 


--------------------
\13 See Veterans' Health Care:  Facilities' Resource Allocations
Could Be More Equitable (GAO/HEHS-96-48, Feb.  7, 1996) and VA Health
Care:  Resource Allocation Methodology Has Little Impact on Medical
Centers' Budgets (GAO/HRD-89-93, Aug.  18, 1989). 

\14 For example, under RAM, a facility could get more workload credit
for hospitalizing a patient than if the same care was provided on an
outpatient basis. 

\15 Until this reorganization, all 173 VA hospitals and most
outpatient clinics, nursing homes, and domiciliaries were part of one
of the 159 medical centers.  Facilities within the medical centers
may have been spread over a wide geographic area, but they were still
managed by the medical center director. 

\16 See Kenneth W.  Kizer, M.D., M.P.H., Under Secretary for Health,
VA, Vision for Change:  A Plan to Restructure the Veterans Health
Administration (Washington, D.C.:  VA, Mar.  1995). 


      VA HAS NOT DEVELOPED A WAY
      TO IDENTIFY OPTIMAL
      PHYSICIAN STAFFING LEVELS
---------------------------------------------------------- Letter :3.4

VA has not developed a staffing and resource allocation model that
identifies optimal physician staffing levels or the skill mix of
physicians needed to provide health care to eligible veterans, and no
agreed-upon physician workload standards exist within either the
private sector or VA for most physician specialties, including
primary care.  VA and the staff model HMOs we visited are struggling
to determine suitable physician staffing levels and to distribute
their physician resources efficiently, effectively, and equitably
given the diversity of health care facility missions, patients, and
community resources.  HMO officials reported that they had not yet
successfully identified a method for staffing physicians but did not
believe that a purely quantitative approach was appropriate. 
Officials of accreditation bodies stated that physician workload
standards were not used because there were none that were appropriate
for the variety of medical care providers and settings. 

In 1987, VA contracted with the Institute of Medicine (IOM), an arm
of the National Academy of Sciences, to create a
mathematical/statistical model to estimate the appropriate physician
staffing levels for individual VA medical centers.  VA officials told
us that they did not adopt the IOM model, published in 1991, because
it was too complicated for physicians and managers to understand.  In
addition, they did not trust the reliability of the data the model
required.\17 IOM noted that VA had published staffing guidelines for
most nonphysician health care provider categories.  IOM acknowledged,
however, that complexities such as clinical, economic, statistical,
administrative, and political issues prevented VA from establishing
similar guidelines for physicians. 


--------------------
\17 The VA Inspector General reported in September 1995 that VA
medical centers still do not have a physician staffing methodology
that would help them determine the number and type of physician
resources needed.  See VA Inspector General, Audit of VHA Resource
Allocation Issues:  Physician Staffing Levels, 5R8-A19-113
(Washington, D.C.:  VA, Sept.  29, 1995). 


   VA FACES UNIQUE CHALLENGES IN
   MANAGING PHYSICIAN RESOURCES
------------------------------------------------------------ Letter :4

As it moves toward managed care, VA differs from private sector
managed care organizations in ways that present unique
challenges--particularly in managing physician resources.  First,
managing physician workload is complicated by the need to balance
VA's primary patient care mission with its education and research
missions.  In addition, automated performance management and resource
allocation systems that could assist in managing the physician
workload lack complete and accurate data.  Third, providing health
care to an older and sicker patient population that moves in and out
of the system complicates estimation of physician workload.  Finally,
VA physician productivity is undermined by insufficient support staff
and clinical space. 

The changes VA is making may improve the efficiency of VA physicians,
but they may also, in the short term, increase the total workload. 
One VA medical center service chief noted the following: 

     "There are efficiencies in these changes, particularly to the
     extent that primary care physicians can reduce the number of
     clinic visits required for individual patients and to the extent
     that expanded outpatient services can more efficiently provide
     care that was previously administered on the hospital wards.  It
     is not at all clear, however, that workload will decrease
     because VA will now provide a service, comprehensive care, that
     was previously not available to most veterans.  Moreover, to the
     extent that this service attracts more veterans to VA,
     efficiencies in the care of individual patients will be offset
     by a rise in the total number of patients.  Also, patients who
     currently receive part of their care outside VA, about 40
     percent of veterans who come to VA, may increase their care at
     VA, especially as charges elsewhere rise."


      VA FACES DIFFICULTY
      BALANCING MULTIPLE MISSIONS
---------------------------------------------------------- Letter :4.1

Unlike HMOs, VA faces the difficult task of balancing its primary
focus, providing clinical care, with its congressional mandate to
contribute to the education of the nation's health care practitioners
and perform medical research.  In particular, VA's attempts to hold
physicians accountable for productivity and to move specialists into
primary care have raised concerns among VA physicians that their
research and teaching activities may be compromised. 

In Prescription for Change, VA's Under Secretary for Health set forth
32 guiding principles for changing VA, including the idea that
"education and research activities should be held accountable to, and
managed with, performance expectations and outcome measures in the
same manner as clinical care."\18

However, VA medical center officials told us that they are struggling
with the specifics of how to accomplish this.  Significantly more
effort has been made by both the public and private sectors to
measure productivity and outcomes for patient care than for teaching
and research.  One result is that VA medical centers and physicians
who perform a significant amount of research or teaching may not
compare favorably with the private sector on patient care
productivity measures, such as number of patients seen or cost per
patient. 

Medical center officials told us that VA's central office had
established a guideline that a maximum of 25 percent of VA physician
resources be devoted to research.  Officials at the medical centers
and networks, however, told us that they were uncertain as to how to
interpret the guideline.  As a result, they interpreted the guideline
in different ways.  For example, one of the two highly affiliated
centers--that is, one of the centers with a large patient caseload, a
large number of residents in training, and significant research
activity--interpreted the guideline to mean 25 percent of physician
resources overall, while the other applied the guideline to each
individual physician. 

Applying this guideline is further complicated by the difficulty of
separating teaching and research activities from patient care.  For
example, at the two medical centers discussed, both service chiefs
and individual physicians provided detailed information about their
professional activities that demonstrated that the majority of the
physicians' patient care time was spent with medical or other health
care students.  Many of the physicians involved in research reported
a similar phenomenon.  For example, as part of his participation in
acquired immunodeficiency syndrome (AIDS) research, a specialist in
infectious disease reported that most patient encounters were
included as part of his participation in clinical trials undertaken
for pharmaceutical companies or the National Institutes of Health. 
He was not able to estimate the extent to which research requirements
reduced his clinical productivity.  He did, however, assert that
participation in the research allowed him to provide veterans
infected with the human immunodeficiency virus (HIV) with the latest
drugs, which were not yet available on the market.  He estimated the
drug savings alone at thousands of dollars per year, per patient. 

The chief of the medical service at one affiliated medical center
stated that: 

     "Our success in expanding outpatient services has come partly at
     the expense of our academic mission, particularly in the
     subspecialties .  .  .  .  Medical service .  .  .  has adopted
     the policy that faculty who commit a substantial portion of
     their time to research should be paid in part by VA and in part
     by grant support.  This increases the direct clinical
     productivity per FTE employee, but it threatens the research
     mission .  .  .  .  Some of our best physician-scientists,
     therefore, are leaving or actively looking elsewhere."

Individual physicians reported that their primary care
responsibilities and the increased emphasis on patient care
productivity were limiting their ability to invest in the
time-consuming process of obtaining research grants.  Some physicians
told us that concerns about cutbacks in research undermined their
commitment to VA, because they had accepted lower salaries than those
offered in the private sector for the unique opportunity to pursue
both research and patient care.  For example, one physician stated
that he came to VA from Harvard Medical School so he could do
research. 

The chief of medicine of another medical center cited as a casualty
of this emphasis the departure of a physician within the past year
who had spent 5 years as a clinical investigator: 

     "In part because we are not able to provide him with a
     [full-time position], he is leaving to assume a position at .  . 
     ., taking with him not only his own expertise but also that of
     four junior faculty, all of whom are paid in full by their
     research support and all of whom have significant clinical
     duties.  He also takes over half a million dollars in research
     support .  .  .  ."

Service chiefs expressed the same concerns about maintaining their
teaching mission.  For example, a service chief at a highly
affiliated facility reported that the service is no longer accepting
medical students because of severe staff shortages. 

While managing physician resources for multiple missions was not a
key issue for the HMOs we visited, officials at the two affiliated
medical schools we visited reported struggles similar to those
reported by VA.  School officials emphasized the increased price
pressure from managed care as driving a new emphasis on physician
productivity in all missions.  In response to this pressure, one of
the schools had developed an outcome-based system for managing
physician resources that included both teaching and research, which
it planned to market as the first of its kind. 


--------------------
\18 Kizer, Prescription for Change, pp.  7-56. 


      VA LACKS APPROPRIATE DATA
      NECESSARY TO MANAGE
      PHYSICIAN WORKLOAD
---------------------------------------------------------- Letter :4.2

VA's automated performance measurement and resource allocation
systems lack complete and accurate data.  According to health care
experts, comparing the costs of providing health care requires data
that incorporate severity of illness and quality of care.  In April
1995, we reported that VA management information systems were not
able to produce reliable cost and utilization data.\19 Without this
type of data, VA cannot determine when to contract for services
rather than provide them directly or set prices for services sold to
other health plans that are adequate to recover its costs.  Major
improvements in both the quality of VA's services and the efficiency
with which they are provided depend on the ability of VA managers to
obtain the right information at the right time.  The medical director
of one medical center we visited stated that: 

     "VA has experienced problems with its information system.  The
     existing information system is good for the use of the past but
     it is not good for measuring productivity.  For example,
     managers cannot know how productive a program or its employees
     are .  .  .  .These data sets can be produced separately from
     the system, but the two [number of procedures and physicians]
     cannot be merged for managers to use in measuring productivity."

The chief of medical services at a medical center said that: 

     "VA does not capture a variety of procedures performed, such as
     cardiac catheterization, so I collect this information myself. 
     VA does not capture this information in any significant way .  . 
     .  .  In the past, this procedural information was collected,
     recorded, and sent to be coded but many procedures were missed. 
     Some of the data is incredibly inaccurate, such as inpatient
     procedures."

VA is in the process of implementing a cost-based medical information
system--the Decision Support System (DSS)--which is currently in use
in the private sector.  DSS has provided hospitals in the private
sector with improved data on patterns of patient care and the cost of
providing health care services.  Such information is equivalent to
data describing the clinical services that are billed to insurance
companies in the private sector.  However, we previously found that
the VA service-specific and cost-related information that DSS
requires to compute the service cost per patient was incomplete,
inaccurate, or inconsistent.\20

DSS has the potential to provide VA with provider-specific clinical
cost and productivity information not currently available on a
systemwide basis.  In using DSS to combine clinical and financial
information from the billing and accounting systems, VA could, among
other things, compare costs incurred for the services of different
physicians and for surgery performed at different locations; evaluate
patient outcomes; and perform analyses on ways to increase the
quality of service, reduce costs, or appropriately price excess
resources offered for sale.  DSS can also facilitate a comparison of
patient care with predefined health care standards. 

The four medical centers we visited were in different phases of DSS
implementation, from the planning phase to the data analysis phase. 
Although VA currently estimates that DSS will not be fully
implemented until fiscal year 1998, one of the medical centers we
visited had recently used the system to make a resource allocation
decision.  Using cost data, it had projected dollar savings from
purchasing a piece of equipment rather than hiring an additional
physician. 

Service chiefs at the facilities we visited told us that successful
implementation of DSS is essential for the appropriate management of
physician resources.  For example, the chief of psychiatry at one
facility stated that: 

     "I would like to have the data system generate information more
     easily.  For example, when I ask for a breakdown of all the
     night and weekend calls for ultrasound, [computerized
     tomography] and [magnetic resonance], the chief technician is
     counting cases and generating this information manually.  This
     information is not generated automatically and [the task] is
     labor intensive because information is pulled from the
     [Decentralized Hospital Computer Program] system.  DSS will
     provide this information."

Another service chief stated that: 

     "The VA system created 20 years ago is not sufficient .  .  . 
     now.  Improvement to the data in the reporting system is in
     process, but it is slow.  The implementation of DSS will be
     great; but it is going to take about 3 years to get it up and
     running.  However, once this system is working, it will make a
     difference in getting reports."

While DSS can provide data on patterns of care and patient outcomes
as well as their resource and cost implications, the ultimate
usefulness of the system will depend not on the software but on the
completeness and accuracy of the data going into the system. 


--------------------
\19 Barriers to VA Managed Care (GAO/HEHS-95-84R, Apr.  20, 1995). 

\20 See VA Health Care Delivery:  Top Management Leadership Critical
to Success of Decision Support System (GAO/AIMD-95-182, Sept.  29,
1995). 


      VA PATIENT ELIGIBILITY RULES
      AND PATIENT MIX CREATE
      DIFFICULTY IN ESTIMATING
      PHYSICIAN WORKLOAD
---------------------------------------------------------- Letter :4.3

Estimating workload is much more difficult in the VA system than in
the private sector because eligibility for VA care is based on
circumstances that may change, while a person's eligibility under a
private health insurance policy is secure for the duration of the
policy.  Eligibility for VA health care is determined by factors such
as veterans' income, the existence or degree of service-connected
disability, and the availability of resources at individual VA
facilities.  As a result, a veteran may be eligible for care from a
VA facility at one time but be denied care at another time because of
a change in the veteran's income, the veteran's disability status, or
the availability of resources in the geographic area where the
veteran seeks care. 

Under the new Veterans' Health Care Eligibility Reform Act, all
veterans have basic eligibility for comprehensive care.  Veterans
with service-connected disabilities rated at 50 percent or
higher--approximately 465,000, or fewer than 2 percent of all
veterans--are automatically eligible for a complete continuum of
care.  All veterans are eligible for treatment of service-connected
illnesses and injuries.  As of October 1, 1998, veterans with less
than 50-percent service-connected disability will be eligible for the
full continuum of care only if enrolled in VA's health care delivery
system.  Veterans will be enrolled on the basis of the availability
of resources and a complex priority system that considers level of
disability, income, and the nature of military service. 

Prior to the passage of the Veterans' Health Care Eligibility Reform
Act, veterans' eligibility for comprehensive outpatient care--the
focus of managed care--was more restrictive than for inpatient care. 
The new law eliminated the distinctions between inpatient and
outpatient care while requiring VA to establish a patient enrollment
system.  Enrollment is permitted on the basis of legislative
priorities up to the number of veterans VA can accommodate within
authorized appropriations. 

It is not clear how much VA's new enrollment system will clarify
veterans' eligibility for care and, hence, facilitate estimating
physicians' workload.  Veterans' priority for enrollment can still
change as level of disability and income change, and their
eligibility can vary with changes in the definitions and diagnoses of
service-connected disabilities.  In addition, conditions may still be
treated in isolation for those patients who do not enroll but who
have service-connected conditions, a circumstance that could limit
treatment effectiveness.  VA officials told us that veterans who
enroll in one network will be able to obtain care in all networks,
but officials have yet to determine how they will shift resources to
accommodate patient shifts among networks. 

VA's new enrollment system will enable VA to more accurately track
the veterans it serves.  However, translating veterans served into
estimates of physician workload will be complicated by the fact that
many veterans receive a significant amount of their care at non-VA
facilities.  A 1992 VA survey of veterans showed that almost half the
veterans who received care in VA facilities also received care
elsewhere.  Once in the VA system, veterans are generally offered a
broader range of services with fewer limitations and less cost
sharing than are available under other public or private health
benefit programs.  This suggests that out-of-pocket costs may
influence veterans' decisions to use VA for health care services even
when they have other options.  The extent to which veterans continue
to choose VA facilities for their care may be affected by changes in
the economy or in the health care environment. 


      VA HAS INSUFFICIENT
      OUTPATIENT CLINIC SPACE AND
      SUPPORT STAFF TO EFFECTIVELY
      USE PHYSICIAN RESOURCES
---------------------------------------------------------- Letter :4.4

VA physician efficiency in providing primary and outpatient care is
hampered by space and resource limitations.  Although some VA
hospitals are relatively new and some have been updated, many present
structural barriers, such as inadequate clinic space, to the patient
care changes VA is initiating.  At the VA primary care clinics we
visited, physicians expressed concern that limited space
significantly reduced the number of patients they could see.  Some of
the clinics had only one examination room for each doctor, while
managed care organizations require three to four rooms per physician. 
The physicians also expressed concern about the inadequate number of
support staff, such as nurses, nursing assistants, and secretaries,
who could provide valuable assistance in the areas of patient triage,
patient preparation, and record retrieval.  Without sufficient
support staff, physicians must perform these tasks themselves, which
limits their effectiveness and efficiency in providing care.  Several
of the service chiefs at the two highly affiliated medical centers we
visited commented on this issue.  One stated: 

     "Physician productivity is affected by the quality of the staff
     that supports the doctor.  For example, VA has not always had
     the ability to hire well-qualified secretaries because of the
     limited pay.  In addition, most doctors would be more efficient
     if they had more nurses to prepare patients in the clinic area. 
     Many of the VA patients are disabled and need assistance to
     dress and undress and get to the examining room.  The doctors
     end up assisting with that when there are not enough nurses."

Another service chief commented: 

     "Waiting time in the outpatient service would improve if there
     were more support services, such as nurses, technicians, and
     medical clerks.  Because of personnel shortages, physicians
     spend time doing tasks other than direct patient care, such as
     answering telephones .  .  .  .  An increase in support
     resources could reduce the turnaround time for laboratory and
     other tests."

Another chief stated: 

     "I see the need for more support staff because physicians spend
     time pulling records while trying to see patients.  There are
     not enough staff in medical administration service to help
     physicians get the information they need."

Another key to effective use of primary care physician resources is
overcoming barriers to patient access.  VA lacks the outpatient
primary care network common in private sector managed care plans that
is needed to maximize the potential for primary care to increase
physician efficiency and effectiveness.  VA does not provide veterans
access to outpatient care that is comparable to the access they would
have under other public or private health benefit programs.  The
geographic inaccessibility of VA facilities for many veterans may
prevent them from seeking care or keeping clinic appointments before
a medical crisis occurs.  Frequently, veterans must travel long
distances for outpatient care, while beneficiaries under other public
and private programs generally have access to a broad range of
providers within a few miles of their homes.  Forty-four percent of
veterans who use VA live more than 25 miles from the facilities
providing acute medical and surgical care, and 32 percent live more
than 25 miles from outpatient clinics that provide such services. 
Veterans' use of VA health care services declines significantly as
distance between veterans and VA facilities increases.\21

In February 1995, VA began encouraging its hospitals to consider
establishing community-based outpatient clinics, which may be
VA-operated clinics or VA-funded or -reimbursed private clinics.  VHA
established a general goal of providing access points within 30
minutes of veterans' residences. 

All four medical centers we visited were taking additional steps to
improve patients' access to physicians.  For example, medical centers
were assigning physicians to evening and weekend clinics, sending
physicians in mobile clinics to treat veterans as far as 200 miles
from VA medical centers, using physician assistants for telephone
triage and consultation programs, and experimenting with
telemedicine.  One of the medical centers we visited was exploring
the use of videoconferencing to enable medical center specialists
such as psychiatrists to more easily reach patients at remote
clinics.  Another facility was using telemedicine to allow
radiologists to read films from other clinics and medical facilities
in their areas. 


--------------------
\21 See VA Health Care:  Improving Veterans' Access Poses Financial
and Mission-Related Challenges (GAO/HEHS-97-7, Oct.  25, 1996). 


   CONCLUSION
------------------------------------------------------------ Letter :5

VA is in the midst of fundamental systemwide changes in both
administration of funds and delivery of care that, when completed,
will have the potential to improve the efficiency and effectiveness
of VA's use of its physicians.  Success will depend on VA's
implementation of a resource allocation system that links resources
to workload while recognizing regional and facility differences, such
as geography and mission.  Performance measures must reflect the full
range of physician activities and VA's service to a unique patient
population.  The resource allocation and performance measurement
systems will require standardized and accurate data not currently
available. 

As VA adopts managed care practices like those of private sector
HMOs, it must balance increased clinical productivity with quality of
care.  For example, the quality of primary care provided by
physicians trained and experienced in other specialties must be
closely monitored.  Unlike HMOs, VA must also maintain equity of
access and fulfill its congressionally mandated education and
research missions.  In addition, VA serves a population with
different health care needs and access to care requirements that
complicate VA's efforts to manage care and to use private sector HMOs
as a model.  Although VA's new allocation system will result in a
shift of health care resources from one network to another, the
distribution of resources within the networks will have the greatest
impact on physician staffing levels.  Refinement of VA data systems
will be critical for all networks to determine the appropriate number
and skill mix of physicians needed to deliver health care to eligible
veterans. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :6

VA's Under Secretary for Health, the head of VHA, reviewed a draft of
this report and said that it was generally a fair and balanced
presentation of the issues influencing management of physician
resources in both VA and private sector HMOs.  In addition, he noted
that the report accurately characterized the challenges VA faces as
it attempts to satisfy congressionally mandated requirements while
moving from a hospital-based specialty care system to a managed care
system emphasizing primary, outpatient-based care. 

The Under Secretary for Health also stated that we should include
more specific descriptions of VA's specialist retraining programs and
trends in private sector HMOs to address the ratio imbalance between
primary care and specialist clinicians.  Our report presents the
views of medical center officials we met with during our review
regarding their plans to address the imbalance between primary care
and specialist clinicians in their locations.  However, when we asked
for more specific information regarding specialist retraining
programs, VA provided only two other locations where such retraining
had been initiated. 

The Under Secretary also suggested that we consider including
information on studies VA has under way on the trending and analysis
of the results of treatment protocols using DSS cost and workload
data.  While such a discussion would provide an indication of the
specific type of information VA is developing, we believe that we
have adequately discussed VA's efforts to implement DSS and the
various potential uses of this information. 

In addition, VA's Under Secretary offered technical comments on our
draft report, which we incorporated as appropriate.  The complete
text of VA's comments appears in appendix II. 


---------------------------------------------------------- Letter :6.1

We are sending copies of this report to the appropriate congressional
committees and other interested parties.  We will also make copies
available to others upon request. 

This work was performed under the direction of George Poindexter,
Assistant Director, who may be reached at (202) 512-7213 if you or
your staff have questions concerning this report.  Other major
contributors include Leonard Hamilton, Lise Levie, and Janice Raynor. 

Sincerely yours,

Stephen P.  Backhus
Director, Veterans' Affairs
 and Military Health Care Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I

To obtain information on what VA is doing to manage its physician
resources, we interviewed VA central office and field officials and
representatives of VA's physician association, reviewed VA
documentation on physician staffing, and conducted a literature
search on this issue.  We interviewed VA officials in the offices of
the Under Secretary for Health, Academic Affiliations, Policy,
Planning and Performance, Research and Development, and Patient Care
Services as well as officials in the Seattle and Chicago offices of
the Inspector General.  We also interviewed VA staffing experts at
the Boston Development Center and the Management Science Group in the
Boston, Massachusetts, area.  In addition, we discussed physician
staffing issues with the staff at medical centers in San Francisco,
California; Togus, Maine; Houston, Texas; and Spokane, Washington,
along with the network officials associated with the selected medical
centers' networks.  We selected these four medical centers on the
bases of level of affiliation with a medical school and cost per
patient treated.\22 We also considered geographic diversity in making
our selections.  Table I.1 shows how the medical centers we selected
met our criteria. 



                               Table I.1
                
                   Selection Criteria for the Medical
                           Centers We Visited

                        High cost per patient   Low cost per patient
Level of affiliation    treated                 treated
----------------------  ----------------------  ----------------------
High                    San Francisco,          Houston, Texas
                        California

Limited or none         Togus, Maine            Spokane, Washington
----------------------------------------------------------------------
At the medical centers, we discussed with officials their methods of
determining staffing needs and reallocating staff on the basis of
those needs as well as their system to monitor physician performance
and account for physicians' time.  We also looked at medical center
personnel documentation on selected physicians.  Our visits to these
sites resulted in interviews with about 100 VA staff and private
sector officials.  But, because of the limited number of VA sites
visited and the unique characteristics of each, we could not
generalize their individual experiences to VA as a whole. 

To determine what HMOs are doing to manage physician resources, we
talked with officials of staff and group model HMOs,\23 officials at
VA medical centers affiliated with medical schools, and experts on VA
and private sector health care.  We interviewed officials with the
Group Health Cooperative of Puget Sound in Seattle, Washington;
Harvard Pilgrim (formerly Harvard Community) in Boston,
Massachusetts; and Unified Medical Group Association and MedPartners
Mullikin in Long Beach, California.  We also interviewed officials at
the Baylor College of Medicine in Houston, Texas, and the University
of California at San Francisco as well as health care experts at the
Joint Commission on Accreditation of Healthcare Organizations in
Chicago, Illinois. 

In addition, we interviewed officials at the National Institutes of
Health in Bethesda, Maryland, to better understand VA's research
mission as it relates to the missions of patient care and teaching. 
We did our work between March 1996 and February 1997 in accordance
with generally accepted government auditing standards. 



(See figure in printed edition.)Appendix II

--------------------
\22 These factors were identified and the medical centers categorized
in Office of the Inspector General, VA, Audit of Veterans Health
Administration Resource Allocation Issues:  Physician Staffing
Levels, report no.  5R8-A19-113 (Washington, D.C.:  VA, Sept.  29,
1995). 

\23 Staff model HMOs employ their own physicians to provide health
care to enrollees; group model HMOs contract with a group of
physicians to provide health care services. 


COMMENTS FROM THE DEPARTMENT OF
VETERANS AFFAIRS
=========================================================== Appendix I



(See figure in printed edition.)

RELATED GAO PRODUCTS

VA Health Care:  Improving Veterans' Access Poses Financial and
Mission-Related Challenges (GAO/HEHS-97-7, Oct.  25, 1996). 

VA Health Care:  Issues Affecting Eligibility Reform Efforts
(GAO/HEHS-96-160, Sept.  11, 1996). 

Veterans' Health Care:  Challenges for the Future (GAO/T-HEHS-96-
172, June 27, 1996). 

Practice Guidelines:  Managed Care Plans Customize Guidelines to Meet
Local Interests (GAO/HEHS-96-95, May 30, 1996). 

VA Health Care:  Opportunities to Increase Efficiency and Reduce
Resource Needs (GAO/T-HEHS-96-99, Mar.  8, 1996). 

Veterans' Health Care:  Facilities' Resource Allocations Could Be
More Equitable (GAO/HEHS-96-48, Feb.  7, 1996). 

VA Health Care:  Exploring Options to Improve Veterans' Access to VA
Facilities (GAO/HEHS-96-52, Feb.  6, 1996). 

VA Health Care:  How Distance From VA Facilities Affects Veterans'
Use of VA Services (GAO/HEHS-96-31, Dec.  20, 1995). 

VA Health Care Delivery:  Top Management Leadership Critical to
Success of Decision Support System (GAO/AIMD-95-182, Sept.  29,
1995). 

VA Health Care:  Challenges and Options for the Future
(GAO/T-HEHS-95-147, May 9, 1995). 

Barriers to VA Managed Care (GAO/HEHS-95-84R, Apr.  20, 1995). 

Veterans' Health Care:  Efforts to Make VA Competitive May Create
Significant Risks (GAO/T-HEHS-94-197, June 29, 1994). 

VA Health Care:  Restructuring Ambulatory Care System Would Improve
Services to Veterans (GAO/HRD-94-4, Oct.  15, 1993). 

VA Health Care:  Resource Allocation Methodology Has Little Impact on
Medical Centers' Budgets (GAO/HRD-89-93, Aug.  18, 1989). 


*** End of document. ***