    VA Health Care: Status of Efforts to Improve Efficiency and Access
    (Letter Report, 02/06/98, GAO/HEHS-98-48).

    GAO reviewed the Department of Veterans Affairs' (VA) efforts to improve
    and monitor veterans' access to health care.

    GAO noted that: (1) VA has taken important steps to improve the
    efficiency of its health care system and veterans' access to it; (2) VA
    medical centers have increased efficiency by expanding the use of
    outpatient care; (3) for example, VA has increased the percentage of
    surgical procedures performed on an outpatient basis from 34 percent in
    fiscal year 1993 to 66 percent by mid-fiscal year 1997; (4) this has
    allowed it to reduce bed-days of care, operating beds, and staff; (5) at
    the Pittsburgh, Pennsylvania, medical center, the increase in outpatient
    surgeries saved more than $7.5 million from October 1995 through May 31,
    1997; (6) preventive care, including health assessments and patient
    education, has also increased, which VA officials told GAO can lead to
    efficiencies because patients can be kept healthier, avoiding expensive
    hospital stays; (7) furthermore, VA is increasing efficiency by
    integrating services both within and among medical centers; (8) VA is
    improving access to health care in several ways; (9) for example, VA has
    begun to emphasize primary care, in which generalist physicians see
    patients initially and coordinate any specialty care that patients may
    need; (10) by increasing the number of primary care teams, VA has
    improved access to routine care and expedited referrals to specialty
    care; (11) VA is also improving access to health care by providing
    outpatient care at additional community-based outpatient clinics,
    expanding evening and weekend hours for clinics, and exploring other
    innovations; (12) these efforts have shortened the time veterans spend
    waiting for an appointment as well as that spent waiting to be seen upon
    arrival for an appointment; (13) all of the medical centers GAO visited
    have established primary care teams and increased the number of veterans
    assigned to primary care; (14) as networks and medical centers continue
    to respond to incentives to improve the efficiency of their operations,
    headquarters' monitoring of the impact of such responses is necessary to
    help ensure that they do not compromise the appropriateness of health
    care veterans receive; and (15) GAO found that although VA has
    implemented health care monitoring mechanisms to assess some of the
    changes networks and medical centers are introducing, these mechanisms
    have not fully succeeded.

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

     REPORTNUM:  HEHS-98-48
         TITLE:  VA Health Care: Status of Efforts to Improve Efficiency and
                 Access
          DATE:  02/06/98
       SUBJECT:  Health resources utilization
                 Veterans hospitals
                 Patient care services
                 Veterans benefits
                 Health care cost control
                 Health care programs
                 Health services administration
                 Community health services
    IDENTIFIER:  VA Veterans Equitable Resource Allocation System
                 VA Veterans Integrated Service Network

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    Cover
    ================================================================ COVER

    Report to the Chairman, Subcommittee on VA, HUD, and Independent
    Agencies, Committee on Appropriations, U.S.  Senate

    February 1998

    VA HEALTH CARE - STATUS OF EFFORTS
    TO IMPROVE EFFICIENCY AND ACCESS

    GAO/HEHS-98-48

    VA Efficiency and Access Improvements

    (406133)

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

      BDOC - bed-days of care
      CBOC - community-based outpatient clinics
      FTEE - full-time employee equivalent
      HUD - Housing and Urban Development
      VA - Department of Veterans Affairs
      VERA - Veterans Equitable Resource Allocation
      VHA - Veterans Health Administration
      VISN - Veterans Integrated Service Network

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

    B-276004

    February 6, 1998

    The Honorable Christopher S.  (Kit) Bond
    Chairman, Subcommittee on VA, HUD,
     and Independent Agencies
    Committee on Appropriations
    United States Senate

    Dear Mr.  Chairman:

    In the mid-1990s, the Department of Veterans Affairs (VA) began to
    fundamentally change the way it delivers health care to veterans to
    increase the efficiency of its health care system and to improve
    access to medical services.  VA receives approximately $17 billion
    annually for delivering health care services to veterans.  Applying
    lessons learned from the private sector's experiences with managed
    health care, VA began emphasizing certain managed care practices,
    such as primary, outpatient, and preventive care, and de-emphasizing
    practices such as inpatient care.  VA implemented two key management
    changes to support its health care reform efforts.  First, it
    decentralized the management structure of its Veterans Health
    Administration (VHA) to coordinate the organization of hospitals,
    outpatient clinics, and other facilities into 22 Veterans Integrated
    Service Networks (VISN).  VA expected the VISNs to improve efficiency
    by reducing unnecessarily duplicative services and shifting services
    from costly inpatient care to less costly outpatient care.  VA
    expected that this reform, along with an emphasis on primary care,
    would also improve veterans' access to care because existing
    resources could then be redirected to serve more patients.  Second,
    VA began phasing in a new national resource allocation method, the
    Veterans Equitable Resource Allocation (VERA) system as part of its
    broader efforts to provide incentives for the networks and medical
    centers to improve operational efficiency and access.

    VA has testified before your Subcommittee that these reform efforts
    have unleashed unprecedented changes in its health care system.  This
    report, which expands upon preliminary information in our May 1997
    statement for the record for a hearing held by your Subcommittee,
    discusses examples of the efficiencies achieved and improvements in
    veterans' access to health care.\1 It also discusses VA's monitoring
    of the health care that its networks are providing.

    For this report, we interviewed officials at VA headquarters,
    networks, and medical centers and reviewed documentation they
    provided.  We visited three networks and seven of the medical centers
    located in them, interviewed officials there, and collected
    information from four other networks.\2 (See app.  I for more detail
    on our scope and methodology.) From our work, we created profiles of
    the seven VISNs we reviewed, which appear in appendix II.  We also
    reviewed policy and planning guidance, monitoring procedures, and
    performance data.  We conducted our work from November 1996 to
    January 1998 in accordance with generally accepted government
    auditing standards.

    --------------------
    \1 VA Health Care:  Assessment of VA's Fiscal Year 1998 Budget
    Proposal (GAO/T-HEHS-97-121, May 1, 1997).

    \2 The networks from which we gathered data include VISN 1 (Boston),
    VISN 2 (Albany), VISN 3 (Bronx), VISN 4 (Pittsburgh), VISN 16
    (Jackson), VISN 18 (Phoenix), and VISN 20 (Portland).  The cities
    indicated in parentheses are the sites of the network offices.

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

    VA has taken important steps to improve the efficiency of its health
    care system and veterans' access to it.  VA medical centers have
    increased efficiency by expanding the use of outpatient care.  For
    example, VA has increased the percentage of surgical procedures
    performed on an outpatient basis from 34 percent in fiscal year 1993
    to 66 percent by mid-fiscal year 1997.  This has allowed it to reduce
    bed-days of care (BDOC), operating beds, and staff.  At the
    Pittsburgh, Pennsylvania, medical center, the increase in outpatient
    surgeries saved more than $7.5 million from October 1995 through May
    31, 1997.\3

    Preventive care, including health assessments and patient education,
    has also increased, which VA officials told us can lead to
    efficiencies because patients can be kept healthier, avoiding
    expensive hospital stays.  Furthermore, VA is increasing efficiency
    by integrating services both within and among medical centers.

    VA is improving access to health care in several ways.  For example,
    VA has begun to emphasize primary care, in which generalist
    physicians see patients initially and coordinate any specialty care
    that patients may need.  By increasing the number of primary care
    teams, VA has improved access to routine care and expedited referrals
    to specialty care.  VA is also improving access to health care by
    providing outpatient care at additional community-based outpatient
    clinics (CBOC), expanding evening and weekend hours for clinics, and
    exploring other innovations.  These efforts have shortened the time
    veterans spend waiting for an appointment as well as that spent
    waiting to be seen upon arrival for an appointment.  All of the
    medical centers we visited have established primary care teams and
    increased the number of veterans assigned to primary care.

    As networks and medical centers continue to respond to incentives to
    improve the efficiency of their operations, headquarters' monitoring
    of the impact of such responses is necessary to help ensure that they
    do not compromise the appropriateness of health care veterans
    receive.  In our prior work, we found that although VA has
    implemented health care monitoring mechanisms to assess some of the
    changes networks and medical centers are introducing, these
    mechanisms have not fully succeeded.\4

    --------------------
    \3 In October 1996, VA integrated two hospitals and an extended care
    facility located in Pittsburgh, creating the Pittsburgh Health Care
    System.  In this report, we refer to this integrated unit as a
    medical center.

    \4 See VA Health Care:  Resource Allocation Has Improved, but Better
    Oversight Is Needed (GAO/HEHS-97-178, Sept.  17, 1997).

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

    With many hospitals, outpatient clinics, domiciliaries, and nursing
    homes, VA is one of the largest direct-delivery health care systems
    in the country.  In fiscal year 1997, VA received a medical care
    appropriation of about $17 billion to provide inpatient, outpatient,
    nursing home, and domiciliary services to 2.6 million of the nation's
    26 million veterans.  VA services include care to veterans with
    special needs such as spinal cord dysfunction, blindness,
    post-traumatic stress disorder, substance abuse, and serious mental
    illness.

    In 1995, VA shifted management authority from its headquarters to new
    regional management structures--VISNs.  VA created 22 VISNs, each led
    by a director and a small staff of medical, budget, and
    administrative officials.  (See fig.  1 for a map of the VISNs.) The
    VISNs have been configured around historic referral patterns to VA's
    tertiary care medical centers.\5 These networks have substantial
    operational autonomy and now perform the basic decision-making and
    budgetary duties of the VA health care system.  The network office in
    each VISN oversees the operations of the medical centers in its area
    and allocates funds to each of them.  VISNs vary in several ways,
    including

      -- geographic size, ranging from about 10,000 square miles in VISN
         3 (Bronx) to 885,000 square miles in VISN 20 (Portland);

      -- the number of hospitals in each, ranging from 5 in VISN 5
         (Baltimore) and VISN 10 (Cincinnati) to 11 in VISN 4
         (Pittsburgh); and

      -- the extent of services provided, reflecting, for example,
         historically longer inpatient and nursing home stays in the
         Northeast.

       Figure 1:  Veterans Integrated
       Service Networks

       (See figure in printed
       edition.)

    Source:  VA.

    --------------------
    \5 Tertiary care medical centers provide highly specialized clinical
    care and technical support.

          VA ESTABLISHED INCENTIVES TO
          ENCOURAGE EFFICIENCY AND
          ACCESS
    ---------------------------------------------------------- Letter :2.1

    When VA reorganized its health care system into 22 VISNs, it gave
    network and medical center directors the authority to realign
    services to increase efficiency and improve access.  One aspect of
    VA's reorganization was establishing two incentives to encourage
    network and medical center directors to reach these objectives.
    First, VHA established organizationwide goals for improving
    efficiency and access and created performance measures to hold
    network directors accountable for achieving them.  Second, it
    implemented VERA, a new workload-based allocation system that
    encourages networks to identify and implement efficiencies and serve
    more veterans.

    The performance measures emphasize organizational priorities, such as
    increasing outpatient surgeries and reducing inpatient care, and they
    enable VA to gauge each network's performance.  VA has incorporated
    these measures into each network director's performance contract and
    required each VISN to have a strategic plan explaining how it intends
    to improve efficiency and access.

    VERA, introduced in fiscal year 1997, allocates budget resources to
    the networks and provides them incentives for achieving cost
    efficiencies and serving more veterans.  VERA is intended to improve
    the equity of resource allocations to networks.  It provides more
    comparable levels of resources to each network for each high-priority
    veteran served than the system it replaced, which allocated resources
    primarily on the basis of facilities' historical budgets.\6

    Networks that increase their patient workload compared with other
    networks gain resources under VERA; those whose patient workloads
    decrease compared with other networks lose resources.  More efficient
    networks (that is, those whose patient care costs are below the
    national cost) have more funds available for local initiatives.  Less
    efficient networks (whose patient care costs are above the national
    cost), however, must increase efficiency to have such funds
    available.

    By directly funding the networks, rather than the medical centers as
    in the past, VERA clearly conveys that each facility is a part of a
    larger regional network that must facilitate veterans' equitable
    access to services.  VERA recognizes that networks are responsible
    for fostering change, eliminating duplicative services, and
    encouraging cooperation among medical facilities.  Network officials
    have the authority to tailor their VERA allocations to facilities and
    programs within parameters set by national policy and guidelines and
    to integrate services among facilities for achieving equitable access
    to care and other purposes.\7

    --------------------
    \6 High-priority veterans--commonly referred to as Category A
    veterans--are those with service-
    connected disabilities, low incomes, or special health care needs.

    \7 See GAO/HEHS-97-178 for a discussion of issues concerning
    networks' allocation of resources to their facilities.

       VA'S EFFORTS HAVE INCREASED
       EFFICIENCY
    ------------------------------------------------------------ Letter :3

    In the mid-1990s, VA, recognizing that its health care system was
    inefficient and in need of reform, followed the lead of
    private-sector health care providers and began reorganizing its
    system to improve efficiency and access.  Like other federal health
    programs, such as Medicare and Medicaid, that are adopting managed
    care practices to control program expenditures, VA recognized that it
    could improve its health care system by adopting selected managed
    care practices.\8 Consequently, in 1995, VA introduced substantial
    structural and operational changes in its health care system to
    improve the quality and efficiency of and access to care by reducing
    its historical reliance on inpatient care.  VA shifted its focus from
    a bed-based, inpatient system emphasizing specialty care to one
    emphasizing primary care provided on an outpatient basis.  In
    addition, the Congress enacted legislation in October 1996
    eliminating several restrictions on veterans' eligibility for VA
    outpatient care, which allowed VA to serve more patients on this
    basis.\9

    These actions accelerated VA's shift in delivery of health care
    services from expensive hospital-based inpatient care to less costly
    outpatient care.\10 VA has begun to increase its use of outpatient
    surgery and nonhospital care settings, reduce and reassign staff, and
    integrate services.  As a result, VA has achieved efficiencies by
    reducing personnel costs.

    --------------------
    \8 Vision for Change:  A Plan to Restructure the Veterans Health
    Administration, VA (Washington, D.C.:  Mar.  1995) and Prescription
    for Change:  The Guiding Principles and Strategic Objectives
    Underlying the Transforming of the Veterans Health Care System, VA
    (Washington, D.C.:  Mar.  1996).

    \9 The Veterans Health Care Eligibility Reform Act of 1996 (P.L.
    104-262) eliminated the restrictions that limited certain veterans'
    eligibility for outpatient care to instances when it was necessary
    (1) to obviate the need for hospitalization or (2) in preparation
    for, or to complete, inpatient care.

    \10 Such outpatient care may take place in physicians' offices,
    hospital or freestanding outpatient diagnostic and surgical centers,
    urgent care centers, outpatient rehabilitation centers, or outpatient
    drug and alcohol rehabilitation centers.

          OUTPATIENT VISITS HAVE
          INCREASED
    ---------------------------------------------------------- Letter :3.1

    From fiscal years 1993 to 1997, VA increased the number of outpatient
    visits nationwide by about 27 percent.  VA estimates that in fiscal
    year 1997, it will provide nearly 32 million outpatient visits, an
    increase of 6.2 percent from fiscal year 1996.\11 From fiscal years
    1993 to 1997, the number of hospital admissions for inpatient care
    decreased about 23 percent.  (See fig.  2.) VA documentation shows
    that the seven networks we reviewed increased the number of
    outpatient visits from fiscal year 1995 to fiscal year 1996 by about
    590,000 visits--an increase of 5.8 percent.  They decreased inpatient
    episodes in fiscal year 1996 by over 22,000 from fiscal year 1995--a
    decrease of 6.2 percent.

       Figure 2:  VA Inpatient
       Episodes Compared With
       Outpatient Visits, Fiscal Years
       1993-97

       (See figure in printed
       edition.)

    Source:  VHA Office of the Chief Financial Officer.

    According to data obtained from the medical centers we visited, the
    number of outpatient visits increased between fiscal years 1995 and
    1996.  For example, the Jackson, Mississippi, medical center
    increased outpatient visits by about 4,000 (about 2 percent); the
    Pittsburgh medical center increased these visits by about 20,000
    (about 7 percent).  At the Brockton/West Roxbury, Massachusetts,
    medical center, the number of outpatient visits increased by about 5
    percent from fiscal year 1995 to fiscal year 1996.

    Medical center officials told us that they increased outpatient
    visits by shifting resources from inpatient to outpatient care,
    increasing marketing and conducting outreach efforts, extending
    clinic hours to evenings and weekends, and reassigning staff.
    Outreach efforts included health fairs conducted at various community
    locations, flu vaccinations, and cancer screenings.  In VISN 4
    (Pittsburgh), medical center officials said that when appropriate,
    they move patients to outpatient locations.  They also use
    educational programs to inform people of alternatives to expensive
    inpatient care.

    --------------------
    \11 During an outpatient visit, a veteran may receive several medical
    services such as primary care, laboratory tests, and an
    electrocardiogram.  Outpatient services received by a veteran on the
    same day count as one outpatient visit.

          VA IS EMPHASIZING PREVENTIVE
          CARE
    ---------------------------------------------------------- Letter :3.2

    As part of its emphasis on outpatient care, VA has promoted
    preventive measures to keep veterans healthier and out of the
    hospital to improve efficiency, access, and quality of care.
    Preventive measures consist of periodic health assessments that
    provide screening, counseling, risk assessment, and patient
    education.  To encourage preventive care, VA assesses network and
    medical center directors on their facilities' progress in
    implementing nationally recognized health prevention standards for
    eight diseases with major social consequences.\12

    All of the medical centers we visited provided preventive care
    services and education programs.  An example of a preventive measure
    is VA's guideline for examining the feet of diabetic patients during
    an outpatient visit to detect circulatory problems.  In addition, the
    centers conduct classes in smoking and alcohol abuse cessation,
    stress management and hypertension reduction, and a wide variety of
    other disease prevention measures.

    Prevention efforts vary by medical center.  The Pittsburgh medical
    center is piloting a prevention clinic in conjunction with one of its
    primary care teams.  Clinic visits involve patients arriving 1 hour
    early for appointments with their primary care provider.  During this
    time, a nurse or nurse practitioner discusses prevention issues with
    the patient and writes orders for prevention activities that will
    then be reviewed and signed by the patient's primary care provider
    during the scheduled appointment.  The Brockton/West Roxbury medical
    center offers smoking cessation clinics, which are held in the
    evenings to improve veterans' access to them.  Beginning in fiscal
    year 1997, nurses at the Clarksburg, West Virginia, medical center
    started making follow-up telephone calls to recently treated patients
    to answer questions and ensure that patients are following
    post-treatment instructions, taking their medications, and following
    dietary instructions.  As a result, the medical center expects fewer
    return visits by these patients.

    --------------------
    \12 The eight diseases are influenza and pneumococcal diseases;
    tobacco consumption; alcohol abuse; and cancer of the breast, cervix,
    colon, and prostate.

          OUTPATIENT SURGERIES HAVE
          INCREASED
    ---------------------------------------------------------- Letter :3.3

    Consistent with the changes in other health care sectors, VA has used
    advances in diagnostic, therapeutic, surgery, and rehabilitative
    services to increase its use of outpatient surgery.  VA's goal is for
    its medical centers to perform at least 65 percent of selected
    surgical procedures on an outpatient basis.  Outpatient surgical
    units require less extensive staffing levels because patients are
    typically discharged in less than 12 hours and do not need
    around-the-clock nursing care.  In addition, because patients spend
    less time in the hospital, costs for housekeeping, nutrition, linens,
    medical, and administrative services are lower.

    Most VA medical centers now have outpatient surgery capability, and
    the percentage of such surgeries has increased nationwide from 34 to
    66 percent between fiscal year 1993 and mid-fiscal year 1997.\13
    During this same time period, each of the seven networks we reviewed
    increased the percentage of outpatient surgeries.  (See fig.  3.)

    Each of the medical centers we reviewed that performed surgery
    increased the number of outpatient surgeries performed.  Officials at
    four of the six medical centers we reviewed that had inpatient
    surgery reported that increasing outpatient surgeries has lowered
    hospital admissions, reducing costs.\14

    Clarksburg medical center officials reported an increase in the
    percentage of outpatient surgeries between fiscal year 1995 and
    mid-February of fiscal year 1997 from 62 to 83 percent.  Furthermore,
    the number of both inpatient and outpatient procedures increased from
    about 2,130 to more than 2,276 between fiscal years 1995 and 1996.\15

       Figure 3:  Change in Percentage
       of Outpatient Surgeries
       Nationwide and for Seven VISNs
       Reviewed (as of March 1996 and
       March 1997)

       (See figure in printed
       edition.)

    Source:  VHA Office of Policy, Planning and Performance.

    The medical centers we visited use a variety of practices to support
    outpatient surgery.  At the Pittsburgh medical center, for example,
    patients requiring care following surgery, but not needing
    hospitalization, receive that care in an observation unit.\16 The
    Clarksburg, Jackson, and Lebanon medical centers also use observation
    units.  In addition, the medical centers in Jackson, Lebanon, and
    Pittsburgh reduce costs by providing local accommodations or "Hoptel"
    beds\17 for veterans who live far from the medical center on the
    night before scheduled outpatient surgery rather than admit them to
    the hospital.  Following are other practices medical centers reported
    using to support outpatient surgery:

      -- Improved scheduling helps support outpatient surgery.  One
         example of this is keeping time slots available in specialty
         clinics to ensure that patients with multiple conditions be
         scheduled for timely evaluations before surgery--patients such
         as those with heart problems who are seen in a cardiology clinic
         before having noncardiac surgery.  Another example involves
         scheduling patients with similar diagnoses for simultaneous
         treatment in a clinic, allowing VA to better manage workload and
         staff assignments and also reducing the time veterans spend
         waiting to get an appointment.  In addition, some facilities are
         contacting patients before surgery to reduce the no-show rate.

      -- Medical centers are educating patients to improve compliance
         with preoperative guidelines, precluding the need to reschedule
         surgery due to patients' failure to follow such guidelines.

      -- Preoperative clinics are being used to perform lab tests, X
         rays, medical histories, and physical assessments of patients
         before surgery, precluding the need for overnight hospital
         stays.

      -- Medical centers use nationally developed guidelines to improve
         patient health outcomes.  These guidelines allow VA to
         standardize treatment by using appropriate and cost-effective
         medical practices.

    --------------------
    \13 The surgeries and invasive diagnostic procedures most frequently
    performed by VA on an outpatient basis include extraction of
    cataract, insertion of prosthetic lens following cataract surgery,
    repair of hernia, examination of knee with arthroscope, examination
    of small intestine with endoscope, examination of large intestine
    with endoscope, examination of large intestine and polyp removal with
    endoscope, and examination of bladder with cystoscope.

    \14 The remaining two medical centers we contacted could not provide
    comparable information.

    \15 An additional efficiency owing to the successful shift to
    outpatient surgery, according to Clarksburg officials, is a reduction
    in hospital-acquired, surgery-related infections--from 4 to 2
    percent.  Medical center officials in Brockton/West Roxbury and in
    Lebanon and Pittsburgh, Pennsylvania, also attributed reduced
    infection rates to outpatient surgery.  Hard-to-treat bacteria are
    often found in hospitals, and patients may stay longer or be
    readmitted if they contract postsurgical infections.

    \16 Observation units provide full access to medical and nursing care
    for individuals whose need for care is short, for example, after
    outpatient surgery, or when the decision whether to admit a patient
    to the hospital requires a testing and observation period to
    determine the severity of the illness or injury.

    \17 VA's Temporary Lodging Program (Hoptel) is intended to provide
    free or reduced-cost temporary lodging to outpatients and their
    family members when medically necessary or when travel distances are
    extreme.

          BDOC AND OPERATING BEDS HAVE
          DECREASED
    ---------------------------------------------------------- Letter :3.4

    VA's efforts to decrease BDOC as well as the number of operating beds
    reflect its goal of becoming an outpatient care-based system and more
    efficient.\18 In fact, VA establishes BDOC performance goals for each
    network that are comparable with or lower than VA's projections of
    the local Medicare region's data for short-stay hospitals.

    VA has reduced BDOC, decreasing the amount of inpatient care
    provided.  By the end of June 1997, each of VA's 22 VISNs had reduced
    its BDOC to a number below its BDOC at the end of fiscal year 1996;
    nationally, VA's BDOC per 1,000 unique users dropped from 2,959 in
    August 1995 to 1,651 in August 1997--a 44-percent decrease.  In
    fiscal year 1997, BDOC for all of the VISNs we contacted in our study
    were lower than VA's projections of Medicare data for the regions
    with which they were compared.

    BDOC decreased at each of the medical centers we reviewed.  From
    August 1995 through August 1997, BDOC decreases ranged from a low of
    577 (22 percent) at the Jackson medical center to a high of 2,237 (62
    percent) at the Pittsburgh medical center.  (See table 1.)

                                             Table 1

                              BDOC per 1,000 Unique Veterans Served

                                                                                   Percentage
                                                                 Difference    change (August
                           August      August      August    (August 1995 -       1995-August
    Medical center           1995        1996        1997      August 1997)             1997)
    -----------------  ----------  ----------  ----------  ----------------  ----------------
    Brockton/West           3,168       2,448       2,130            -1,037               -33
     Roxbury, Mass.
    Northampton,            2,842       1,669       1,507            -1,335               -47
     Mass.
    Clarksburg, W.          3,495       2,766       1,475            -2,020               -58
     Va.
    Lebanon, Penn.          3,608       2,283       1,544            -2,064               -57
    Pittsburgh, Penn.       3,593       2,631       1,356            -2,237               -62
    Fayetteville,           1,552       1,195         936              -616               -40
     Ark.
    Jackson, Miss.          2,678       2,614       2,101              -577               -22
    =========================================================================================
    National                2,959       2,366       1,651            -1,308               -44
    -----------------------------------------------------------------------------------------
    Note:  Totals may not add due to rounding.

    Source:  VHA Office of Policy, Planning and Performance.

    Consistent with its goals of becoming an outpatient care-based system
    and increasing efficiency, VA has also decreased operating beds,
    which are hospital beds staffed for delivering a specific type of
    care.  VA's average number of medical, surgical, and psychiatric
    operating beds decreased nationwide from about 51,000 in fiscal year
    1995 to 46,000 in fiscal year 1996--a decrease of 9.8 percent.

    VA data on the seven networks we contacted show that the average
    number of operating beds decreased between fiscal years 1995 and
    1996, ranging from a 95-bed decrease (6.5 percent) in VISN 20
    (Portland) to a 546-bed decrease (14.3 percent) in VISN 16 (Jackson).
    (See table 2.)

                              Table 2

                  Operating Beds in Seven Networks
                   Reviewed, Fiscal Years 1995-96

                                Operating beds
                ----------------------------------------------
                    Fiscal      Fiscal              Percentage
    VISN         year 1995   year 1996  Difference      change
    ----------  ----------  ----------  ----------  ----------
    1 (Boston)       2,918       2,560        -358       -12.3
    2 (Albany)       1,880       1,713        -167        -8.9
    3 (Bronx)        3,789       3,350        -439       -11.6
    4                3,215       2,777        -438       -13.6
     (Pittsbur
     gh)
    16               3,824       3,278        -546       -14.3
     (Jackson)
    18               1,371       1,239        -132        -9.6
     (Phoenix)
    20               1,456       1,361         -95        -6.5
     (Portland)
    ==========================================================
    Total           18,453      16,278      -2,175       -11.8
    ----------------------------------------------------------
    Source:  VA annual reports.

    Similarly, the medical centers we visited reduced their collective
    operating beds by 375 or 12.8 percent between fiscal years 1995 and
    1996.  The Pittsburgh medical center, a tertiary care facility, had
    the largest decrease in beds--114 beds or 11.9 percent; the
    Fayetteville, Arkansas, medical center, a primary care facility, had
    the largest percentage decrease of the medical centers we
    reviewed--27.7 percent (38 beds).  The Northampton, Massachusetts,
    medical center, however, which has a larger proportion of its
    workload in inpatient psychiatry, had the smallest decrease--21 beds
    or 6.4 percent.  Furthermore, data provided by the seven medical
    centers we reviewed showed an additional reduction of 542 operating
    beds through mid-fiscal year 1997.

    --------------------
    \18 VA calculates a network's BDOC by dividing the number of days of
    acute inpatient care by the number of unique patients receiving any
    care from the network in a fiscal year.

          INPATIENT STAFF HAVE BEEN
          REDUCED AND REASSIGNED
    ---------------------------------------------------------- Letter :3.5

    VA has targeted staff reduction as a major part of its effort to
    improve efficiency because medical staffing costs exceed $10 billion
    annually--
    about 60 percent of VA's medical care budget.  By closing beds and
    integrating medical center services, VA decreased full-time employee
    equivalents (FTEE) by 8.1 percent between the beginning of fiscal
    years 1996 and 1998--a reduction of almost 16,114 FTEEs.  (See app.
    II for details of FTEE reductions in the seven networks contacted.)

    VISN 3 (Bronx) has aggressively addressed staffing reductions.  For
    example, from October 1995 through March 1997, the Brooklyn, New
    York, medical center closed 65 beds and reduced physician staff by 26
    FTEEs, registered nurses by almost 90 FTEEs, nursing assistants and
    licensed practical nurses by over 40 FTEEs, and administrative and
    other workers by about 252 FTEEs.  According to network officials,
    during this time period, networkwide staffing was reduced by almost
    2,124 FTEEs.  In VISN 4 (Pittsburgh), the Lebanon medical center
    reduced staff by approximately 117 FTEEs since fiscal year 1995 with
    its shift to outpatient care.  The Brockton/West Roxbury medical
    center in VISN 1 (Boston) reduced FTEEs by 200 in fiscal year 1996
    and 137 in fiscal year 1997.

          INTEGRATING SERVICES HAS
          ACHIEVED EFFICIENCIES
    ---------------------------------------------------------- Letter :3.6

    Service integrations are part of VA's nationwide strategy to
    restructure its health care delivery system to improve efficiency as
    well as access to care and quality of care.  Integrations involve the
    combining of administrative units of multiple facilities as well as
    the elimination of unnecessarily duplicative services within and
    among facilities.\19 Integrations produce efficiencies through staff
    reductions or economies of scale that enable facilities to serve more
    patients.  Integrations can significantly benefit veterans mainly
    because VA can reinvest the money it saves to enhance veterans'
    access to care and improve service and quality.

    VISNs and medical centers we visited have completed several
    integrations and have others in progress.  In fiscal year 1997, for
    example, the two VA hospitals in Pittsburgh--the University Drive
    hospital (a tertiary care referral center) and the Highland Drive
    hospital (a psychiatric facility)--
    integrated to form the Pittsburgh Health Care System under a single
    medical director.  This integration also eliminated duplicate service
    units, resulting in the closing of one acute and two intermediate
    care units at Highland Drive.  As part of this integration, the
    medical center identified excess staff positions and reduced the
    number of FTEEs by 232 during fiscal year 1997.  In another case,
    VISN 1 (Boston) is proposing a large-scale integration of two
    tertiary care centers located within 7 miles of each other in the
    Boston metropolitan area.  The resulting integration, if approved,
    could change the mission of the Brockton/West Roxbury medical center
    to one focusing on outpatient care, while the other center, the
    Boston medical center, could retain its tertiary care status.  Not
    all networks are planning facility integrations, however.  VISN 16
    (Jackson) officials told us that they did not plan any facility
    integrations because of the distances between hospitals in this
    geographically large network.

    In addition, VA has integrated medical and support services within
    hospitals.  For example, VISN 1 (Boston) has integrated the
    laboratory and laundry services of eight medical centers.  The
    Brockton/West Roxbury medical center now processes all mail-out
    laboratory tests for the network.  Furthermore, the Northampton
    medical center integrated its medical service and ambulatory care
    into primary care and integrated engineering and environmental
    management services into one facilities management service unit.  In
    VISN 4 (Pittsburgh), the Lebanon medical center merged five support
    and resources management units into two new departments in fiscal
    year 1997.  In fiscal years 1996 and 1997, the Clarksburg medical
    center integrated several services, including surgical service with
    supply processing and distribution, which distributes surgical
    supplies and sterilizes equipment.  In VISN 16 (Jackson), the Jackson
    medical center integrated environmental and engineering services into
    a new facility management service unit and created a diagnostic
    service by combining radiology, pathology/laboratory, and nuclear
    medicine.

    --------------------
    \19 As of July 1997, networks had initiated the mergers of management
    structures at 38 facilities in 18 geographic areas.  For a discussion
    of issues related to facility integrations, see VA Health Care:
    Lessons Learned From Medical Facility Integrations
    (GAO/T-HEHS-97-184, July 24, 1997) and VA Health Care:  Opportunities
    to Enhance Montgomery and Tuskegee Service Integration
    (GAO/T-HEHS-97-191, July 28, 1997).

          IMPROVED EFFICIENCIES HAVE
          PRODUCED SOME SAVINGS
    ---------------------------------------------------------- Letter :3.7

    Efficiencies from increased outpatient care, staff reductions and
    reassignments, and integrations at the medical centers we reviewed
    have resulted in savings.  In some cases, efficiencies did not save
    money because hospitals reinvested funds to enhance existing services
    or to offer new services.

             SAVINGS FROM INCREASED
             OUTPATIENT CARE
    -------------------------------------------------------- Letter :3.7.1

    Savings from shifting to outpatient care varied at the medical
    centers we reviewed.  For example, Lebanon medical center officials
    estimated that the shift to outpatient care saved their facility $346
    for each day of inpatient care avoided in fiscal year 1997, while
    officials at the Jackson medical center estimated that they saved
    $665 for every day of inpatient care avoided.  At the Pittsburgh
    medical center, officials estimated that savings from an increase in
    outpatient surgeries for fiscal year 1997 totaled more than $7.5
    million through May 31, 1997.  For example, these officials estimated
    that using observation beds saved about $930,000 from October 1,
    1996, through May 31, 1997.  The Brockton/West Roxbury medical center
    avoided $630,454 in inpatient costs in fiscal year 1997 by increasing
    the number of outpatient surgeries, according to officials'
    estimates.\20 Facilities used these savings to fund increases in
    other services, notably primary care.

    --------------------
    \20 Data on additional outpatient surgery costs were not readily
    available at the time of our review.

             SAVINGS FROM STAFF
             REDUCTIONS AND
             REASSIGNMENTS
    -------------------------------------------------------- Letter :3.7.2

    Nationally, the networks' efforts to reduce staff have reduced VA's
    personnel expenditures.  On the basis of VA staffing data, we
    estimate that the reduction of 16,114 FTEEs (8.1 percent) in
    staff--as measured from the beginning of fiscal year 1996 to the
    beginning of fiscal year 1998--will save VA annual costs of
    approximately $897,000,000.\21 The three networks and seven
    facilities we visited reduced FTEEs during this period.  At the
    facilities we visited, the number of staff reduced ranged from 396
    FTEEs (14 percent) at the Pittsburgh medical center to 13 FTEEs (less
    than 1 percent) at the Jackson medical center.

    --------------------
    \21 Based on VA estimate of payroll costs per FTEE in fiscal year
    1998.

             SAVINGS AND EFFICIENCY
             GAINS FROM INTEGRATIONS
    -------------------------------------------------------- Letter :3.7.3

    Integrations within and among medical centers have helped generate
    savings and increase operational efficiency.  VA estimates that
    integrating facilities had generated over $83 million in savings by
    July 1997.  Medical centers have used these savings to provide new
    CBOCs and to make new services available or to improve accessibility
    of existing services.  In Pittsburgh, the integration of the
    University Drive and the Highland Drive hospitals reduced FTEEs by
    232 during fiscal year 1997.  Hospital officials estimated savings
    from reduced staffing levels and other actions associated with the
    integration to be approximately $4.2 million in fiscal year 1997.

    VISN 1 (Boston) officials estimate that a proposed integration of
    tertiary care facilities will save $40 million a year for 5 years.
    Beginning in fiscal year 1997, this network also expects to save
    $640,000 annually from the integration of laundry services at three
    of its medical centers and over $1.8 million by having the
    Brockton/West Roxbury medical center perform laboratory services for
    all VA hospitals in the network.  The Northampton medical center
    integrated medical and ambulatory care services into primary care and
    combined engineering with environmental management services, saving
    $138,293, according to officials there.  Lebanon medical center
    officials project an annual savings of more than $489,000 from
    integrating administrative services at their facility.  Jackson
    medical center officials estimate that FTEE reductions attributable
    to integrations will save about $400,000 per year.

    In some cases integrations did not save money because hospitals
    reinvested potential savings to enhance existing services or to allow
    them to offer new services.  For example, officials at the Jackson
    medical center said that although they realized no net savings from
    consolidating ward administration into nursing services, the
    resulting efficiencies enabled them to expand nursing coverage for
    the operating room and outpatient areas.

       VA IS TAKING STEPS TO IMPROVE
       ACCESS TO HEALTH CARE
    ------------------------------------------------------------ Letter :4

    Veterans' access to health services is improving as VA hospitals
    reinvest the savings from efficiency initiatives and restructure
    their service delivery.  VA hospitals have increased the number of
    primary care teams, added or improved space to accommodate additional
    primary care patients, shortened appointment waiting times, increased
    the number of locations providing community-based care, and redefined
    the role of VA inpatient nursing home care.  As a result, the
    networks we contacted have been increasing the number of
    high-priority veterans they serve.

          USE OF PRIMARY CARE HAS
          IMPROVED ACCESS
    ---------------------------------------------------------- Letter :4.1

    VA has improved veterans' access to health care through the use of
    primary care.  Medical centers assign patients to primary care teams,
    which are responsible for managing patient care.  The composition of
    a primary care team varies depending upon a medical center's mission
    and patient population, but these teams generally include physicians,
    one or more health care professionals (for example, nurse
    practitioners, physician assistants, registered and licensed
    practical nurses, and medical residents), and clerks for
    administrative support.  Some teams may include a psychiatrist,
    social worker, dietician, or physical therapist.  For example, the
    Northampton medical center, which has more psychiatric than acute
    care beds, has established a primary care team to treat psychiatric
    patients.  Members of this team include a psychiatrist, psychiatric
    social worker, psychologist, and clinical pharmacist as well as a
    clinical nurse specialist or physician assistant, dietician, and
    administrative staff.

    As the first point of contact, primary care teams provide accessible,
    routine care for veterans, establish an ongoing relationship with
    them, and coordinate treatment for patients requiring specialized
    care.  They generally provide a comprehensive range of medical
    services, except for emergency or specialty care.  As managers of
    patient care, teams help ensure that appropriate services are
    provided and duplicate services are avoided.  For example, by calling
    veterans on the telephone primary care teams can answer veterans'
    questions about their health and ask whether veterans are following
    their post-discharge instructions.  This practice may eliminate the
    need for veterans to visit medical centers.

    In addition, primary care team staff encourage veterans to schedule
    appointments rather than just walk in to medical centers for
    treatment as many veterans have done in the past.  Appointments
    enable VA to improve scheduling of its workload and resources,
    reducing the time patients spend waiting for an appointment as well
    as that spent waiting upon arrival to be seen.  For example,
    officials at the Causeway Street outpatient clinic in Boston and the
    Jackson medical center told us that scheduling nonurgent patients for
    appointments reduced the number of walk-ins and allowed for more
    efficient staff assignment.  This helps reduce the number of patients
    receiving care inappropriately at specialty clinics, improving access
    for those who need such care.

    Each of the medical centers we visited had established primary care
    teams, and most of them had increased the number of these teams
    between fiscal years 1995 and 1997.  For example, the Brockton/West
    Roxbury and the Lebanon medical centers had no primary care teams in
    fiscal year 1995; by fiscal year 1997, they had seven and four,
    respectively.  The medical centers we reviewed showed sizable growth
    in the numbers of veterans assigned to primary care teams.  (See
    table 3.) In fiscal year 1997, VA had over 1,000 primary care teams
    in operation.

                              Table 3

               Number of Veterans Assigned to Primary
                                Care

                                                        Fiscal
                         Fiscal year   Fiscal year        year
    Medical center              1995          1996        1997
    ------------------  ------------  ------------  ----------
    Brockton/West           Data not      21,212\a      19,860
     Roxbury, Mass.        available
    Clarksburg, W. Va.         6,349         9,720      10,982
    Fayetteville, Ark.         8,000        10,500      12,800
    Jackson, Miss.             2,500         8,758      11,372
    Lebanon, Penn.                 0         1,984       4,308
    Northampton, Mass.             0        11,880      12,470
    Pittsburgh, Penn.       Data not        10,765      25,540
                           available
    ----------------------------------------------------------
    \a According to medical center officials, this facility's fiscal year
    1996 count may be overstated because veterans were inappropriately
    assigned to more than one primary care team.

    Source:  VA medical centers.

             MEDICAL CENTERS HAVE
             SUPPORTED INCREASED USE
             OF PRIMARY CARE IN
             VARIOUS WAYS
    -------------------------------------------------------- Letter :4.1.1

    Medical centers we visited have taken many actions to accommodate
    increased numbers of primary care patients.  For example, they have
    expanded and converted hospital space to create additional primary
    care clinics, added more examination and treatment rooms and support
    space, and used off-site clinics to deliver primary care.
    Previously, physicians in the medical centers we visited had only the
    use of their offices or one exam room to see patients.  Multiple
    examination rooms enable primary care teams to treat more patients
    because a physician can treat one patient while other patients
    prepare for or are attended by other team members.  More examination
    and treatment rooms for each physician or team allow primary care
    doctors to see more patients, more efficiently using their time and
    reducing patients' waiting time.  For example, at the Lebanon medical
    center, we observed renovations under way to increase primary care
    space from 978 to 4,786 square feet in fiscal year 1997.
    Furthermore, by converting additional hospital space, Lebanon will
    add 2,400 square feet in fall 1998.  In fiscal year 1998, the
    Fayetteville medical center is expanding its primary care space from
    3,400 to 11,233 square feet, including 16 examination rooms, 2
    treatment rooms, and support space.  By renovating existing space for
    use by primary care teams, the Jackson medical center increased space
    from 2,021 to 13,835 square feet from fiscal years 1995 to 1996.
    Renovation under way at the time of our visit will more than double
    the number of examination rooms for each primary care physician.
    This medical center is also more than doubling the number of
    physicians assigned to primary care.  Finally, all medical centers we
    visited also provide full- or part-time primary care clinics in
    off-site locations in neighboring communities, improving access to
    care for veterans in those areas.

    All the medical centers we reviewed reported that increased space
    devoted to primary care allowed them to see more patients:

      -- The Fayetteville medical center anticipates that the additional
         space will allow them to treat more than 55 new primary care
         patients each week.  This increase in new patients will be
         possible because the additional space will allow each physician
         to use two examination rooms instead of one-
         half of a room, which was what they had before renovating.

      -- Additional space devoted to primary care at the Clarksburg
         medical center will enable each primary care team to increase
         the number of its assigned patients from 2,116 per team in 1995
         to almost 4,500 in 1997.

      -- Additional space allowed primary care enrollment at the Lebanon
         medical center to increase from 1,984 veterans in fiscal year
         1996 to more than 4,308 in fiscal year 1997.

      -- The Jackson medical center reported that newly converted
         hospital space for primary care completed in December 1997 will
         allow physicians to see 20 percent more patients than they now
         see.  Each primary care provider will have use of two to three
         rooms; each provider had only one room before this expansion.

          APPOINTMENT WAITING TIMES
          HAVE BEEN SHORTENED
    ---------------------------------------------------------- Letter :4.2

    VA cited decreased waiting times for appointments as a part of its
    objective to increase veterans' access to services in its
    Prescription for Change--its blueprint for reforming health care.  In
    fiscal year 1996, VA headquarters established a 30-day standard for
    veterans' obtaining appointments for specialty and primary care
    clinics.  Documents we reviewed showed that all 22 VISNs succeeded in
    achieving a median waiting time of less than 30 days.

    Some of the medical centers we visited have shortened appointment
    waiting times for specialty care as access to primary care has
    improved.  At the Lebanon medical center, as the number of VA primary
    care patients increased by 2,324 in fiscal year 1997, waiting times
    for appointments at some specialty clinics decreased.  For example,
    the appointment waiting time at this center's urology clinic declined
    from 100 days to 40 days.  Fayetteville medical center officials
    report that before their medical center introduced primary care, the
    average appointment waiting time for specialty care was more than 90
    days; it is now less than 30 days.  At the Pittsburgh medical center,
    appointment waiting times for new patients decreased between fiscal
    year 1995 and 1997 in over half of that center's specialty clinics.

    Some medical centers have also shortened waiting times for primary
    care appointments.  From fiscal years 1996 to 1997, the Jackson and
    Pittsburgh medical centers shortened appointment waiting times for
    primary care from 32 to 13 days and 12 to 5 days, respectively.  Data
    provided by the Lebanon medical center showed that the number of
    veterans receiving an appointment within 7 days more than doubled in
    this time period.  At the Brockton/West Roxbury and Fayetteville
    medical centers, however, appointment waiting times remained
    constant--at approximately 7 days--
    reflecting the increasing number of veterans enrolled in primary
    care.

    In addition, medical centers have shortened appointment times by
    establishing more flexible scheduling of outpatient services.  For
    example, the Brockton/West Roxbury medical center now schedules its
    smoking cessation clinics in the evenings and other medical clinics
    on weekends to improve access.  Officials there cite improved
    scheduling of clinics as one factor in improving access and leading
    to an increase in patients assigned to primary care.

          CBOCS ARE IMPROVING ACCESS
    ---------------------------------------------------------- Letter :4.3

    VA is also improving veterans' access to health care by increasing
    the number of CBOCs that it funds or operates.  CBOCs are
    geographically separate from their "parent" medical center and
    provide outpatient primary care.  Their locations facilitate access
    to health services for veterans who live some distance from a VA
    facility--about one-half of all veterans live 25 miles or more from a
    VA hospital--especially those living in medically underserved areas.
    CBOCs exemplify VA's effort to convert from a hospital-based system
    to one focusing on outpatient services.\22 When appropriate,
    providers at CBOCs refer patients to hospitals for specialty care.

    Some of VA's goals for CBOCs are to

      -- shorten hospital lengths of stay by doing preadmission work-up
         or providing postdischarge follow-up care closer to the
         patient's home;

      -- reduce veterans' need to travel long distances to receive care;

      -- redirect patients currently served at medical center clinics,
         shortening waiting times or relieving congestion at these sites;

      -- shorten waiting times for follow-up care, for example,
         postsurgical care or after a hospitalization; and

      -- improve access to care for historically underserved veteran
         populations.

    The Congress must review and approve medical centers' proposals to
    open CBOCs after preliminary review by VISNs and VA headquarters.  As
    of November 1997, 153 CBOCs were approved or operating nationwide.
    VA estimates that these clinics, when fully operational, will serve
    more than 280,000 veterans each year.  Fifty-eight of the recently
    approved CBOCs were in the seven networks we reviewed.  As of
    November 1997, these networks indicated their intent to establish at
    least 150 additional CBOCs through fiscal year 2002.

    --------------------
    \22 See VA Health Care:  Improving Veterans' Access Poses Financial
    and Mission-Related Challenges (GAO/HEHS-97-7, Oct.  25, 1996).

          MEDICAL CENTERS ARE
          IMPROVING ACCESS TO NURSING
          HOME CARE
    ---------------------------------------------------------- Letter :4.4

    Some medical centers that we contacted changed their nursing home
    services to improve access and reduce costs.  In the past, some
    medical centers in the Northeast provided extensive nursing home
    benefits, which could involve stays lasting many years.  Responding
    to VERA's incentives, officials at the medical centers in Pittsburgh,
    Lebanon, and Newington/
    West Haven (the Connecticut Health Care System) told us that they
    have made nursing home services available to more veterans at less
    cost to VA by establishing alternatives to long-term, inpatient
    nursing home care.  The Pittsburgh and Lebanon medical centers now
    use their inpatient nursing home services to evaluate, medically
    stabilize, and then, if appropriate, prepare patients for placement
    in the least restrictive community environment, including their own
    homes.  According to Lebanon officials, for example, this
    "transitional care" approach has reduced the average length of stay
    in the nursing home unit.  This has enabled them to increase the
    number of patients served annually from 264 in fiscal year 1995 to
    448 in fiscal year 1997 without increasing the number of staff in the
    unit.  At the Pittsburgh medical center, the number of nursing home
    patients served increased from 399 in fiscal year 1996 to 571 in
    fiscal year 1997, according to facility officials.

    Beginning in 1996, the Connecticut Health Care System replaced its
    nursing home program with a sub-acute care program and additional
    patient support services.  The objective of sub-acute care is the
    same as that of the nursing home programs in the Pittsburgh and
    Lebanon medical centers.  Following evaluation and medical
    stabilization in the sub-acute care unit, patients are discharged to
    their home or a community facility.  To enable veterans to return
    home, the Connecticut Health Care System

      -- established a day hospital program to provide medical services,
         such as physical therapy and intravenous medications, to
         patients who then return home at night;

      -- upgraded support services in patients' homes, such as providing
         visiting nurses; and

      -- improved transportation services.

    These changes reduced the Connecticut Health Care System's nursing
    home beds from 150 in fiscal year 1995 to 40 by the end of fiscal
    year 1997.  Despite the decrease, the number of patients served in
    fiscal year 1997 was more than double the number served in fiscal
    year 1991.

          VA IS SERVING MORE
          HIGH-PRIORITY VETERANS
    ---------------------------------------------------------- Letter :4.5

    Network efforts to improve access to VA medical services have led to
    VA's serving an increased number of high-priority patients (Category
    A).  Category A patients are those veterans who qualify to receive
    medical care on the basis of a service-connected disability, low
    income, or special health care needs.  In each of the networks we
    contacted, the number of unique (unduplicated) Category A veterans
    served rose between fiscal years 1996 and 1997.  (See table 4.)

                              Table 4

                     Category A Veterans Served

                                                   Increase in
                                                    the number
                                          Fiscal   of Category
                        Fiscal years       years    A veterans
    VISN                   1994-96\a     1995-97        served
    ------------------  ------------  ----------  ------------
    1 (Boston)               175,070     178,919         3,849
    2 (Albany)                95,771      99,661         3,890
    3 (Bronx)                172,743     174,188         1,445
    4 (Pittsburgh)           175,493     196,747        21,254
    16 (Jackson)             344,469     346,876         2,407
    18 (Phoenix)             169,429     174,174         4,745
    20 (Portland)            167,472     170,633         3,161
    ----------------------------------------------------------
    \a To achieve an annual count of Category A veterans served by each
    network, VA totals the number of unique Category A veterans seen at
    least once during that fiscal year and the two previous fiscal years.

    Source:  VHA Office of Policy, Planning and Performance.

       MONITORING CHANGES TO HEALTH
       CARE SERVICES IS IMPORTANT
    ------------------------------------------------------------ Letter :5

    VA headquarters' monitoring of changes to the health care system is
    important because network and medical center directors are responding
    to incentives to change VA's health care delivery.  These changes,
    which are intended to improve efficiency and access, could lead to
    outcomes that compromise care received by some veterans.  For
    example, officials in several of the VISNs we contacted have
    reinvested savings from changes in inpatient care and specialty
    services--such as nursing home care--to improve veterans' access to
    primary care.  Previously, however, we reported that VA headquarters
    lacked timely and detailed indicators of certain changes in its
    health care delivery--particularly to veterans receiving special care
    services such as nursing home care or treatment for spinal cord
    injuries.\23 Without such indicators, it is difficult for VA to
    ensure that service delivery changes do not compromise the
    appropriateness of the health care veterans receive.

    VA, to its credit, has developed some performance indicators for VISN
    directors such as patient satisfaction, efficiency indicators (for
    example, BDOC), and number of veterans served.  VA officials told us
    that it holds VISN directors accountable for meeting goals related to
    these indicators.  VA also created indicators measuring the number of
    veterans treated for certain disabling conditions and funds spent for
    their care.\24

    Although the indicators will provide headquarters officials with some
    important process information about patient care, as we noted in our
    previous report, these data--and VA's other data sources--generally
    provide little assessment of the outcomes of program changes on
    veterans.  As noted, monitoring the impact of such changes is
    critical because networks are responding to VA's incentives to reduce
    the cost of care.  Special care services, which include the most
    expensive services VA delivers (for example, nursing home care or
    care for veterans with spinal cord injuries), are especially
    important to monitor because the population receiving these services
    is particularly vulnerable.  Lack of adequate performance information
    will hinder VA headquarters' ability to take corrective action if
    networks' program changes are inconsistent with VA's organizational
    goals.  VA officials told us they have begun to develop some outcome
    measures.

    --------------------
    \23 See GAO/HEHS-97-178, Sept.  17, 1997.

    \24 The six conditions include spinal cord dysfunction, blindness,
    amputations, severe mental illness, traumatic brain injury, and
    post-traumatic stress disorder.  Homeless veterans and substance
    abusers who are disabled due to mental illness are included in the
    mental illness category.

       CONCLUDING OBSERVATIONS
    ------------------------------------------------------------ Letter :6

    VA is making unprecedented changes to its health care system.
    Introducing practices inspired by managed care, VA is shifting the
    emphasis of its medical care delivery system from extensive inpatient
    services to outpatient care.  Responding to management and budgetary
    incentives, VISN and medical center directors are implementing
    changes intended to improve the efficiency of their operations, while
    improving veterans' access to their services.

    The medical centers we contacted are operating more efficiently in
    several key areas:  they are performing more outpatient treatment and
    surgery, shortening veterans' length of stay in the hospital, and
    integrating hospital services to streamline operations.  As VA shifts
    from providing mainly inpatient to outpatient care, it needs fewer
    hospital beds and staff; staff reductions should lead to significant
    cost reductions.  In addition, to improve access, the facilities we
    contacted are increasing the number of patients assigned to primary
    care and decreasing the waiting times for appointments.  Other data
    we reviewed show similar efficiency and access improvements
    throughout VA's health care system.

    The transformation of the VA health care system, however, is a work
    in progress.  Networks and medical centers are rapidly introducing
    new approaches to delivering care and planning the introduction of
    other initiatives.  Adequate monitoring of the outcomes of these
    changes is essential to assure VA's stakeholders that veterans are
    receiving health care that is timely and appropriate.

       AGENCY COMMENTS
    ------------------------------------------------------------ Letter :7

    Officials from the Veterans Health Administration reviewed a draft of
    this report.  They generally agreed with its contents and provided
    technical comments, which we incorporated as appropriate.

    ---------------------------------------------------------- Letter :7.1

    As arranged with your staff, we are sending copies of this report to
    the Acting Secretary of Veterans Affairs, interested congressional
    committees, and other interested parties.  We will make copies of
    this report available to others upon request.

    If you have any questions about this report, please call me at (202)
    512-7101 or Bruce D.  Layton, Assistant Director at (202) 512-6837.
    Other major contributors to this report are Frederick K.  Caison,
    Linda C.  Diggs, Darrell J.  Rasmussen, Jean N.  Harker, Brian W.
    Eddington, and Liz Williams.

    Sincerely yours,

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

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

    We focused our work on VA's efforts to improve the efficiency of its
    health care system and improve veterans' access to health services.
    To assess VA's progress in increasing the efficiency of its health
    care system, we examined VA records documenting effects of efficiency
    initiatives, including increased outpatient visits, decreased
    bed-days of care and operating beds, reduction and reassignment of
    staff, and integration of services.  We focused on these measures
    because VA lacks outcome measures that show the impact of these
    changes on veterans' health status.  To assess VA's progress in
    improving veterans' access to services, we examined the steps VA is
    taking to accomplish this, including emphasizing primary care and
    increasing the number of locations that provide community-based care.

    To obtain data on efficiency and access issues, we interviewed
    network and medical center directors, medical center staff, VA
    headquarters officials, and representatives from veterans service
    organizations, such as the American Legion, Disabled American
    Veterans, Paralyzed Veterans of America, and Veterans of Foreign
    Wars.  We visited three Veterans Integrated Service Network (VISN)
    offices in Boston, Jackson, and Pittsburgh--to obtain the views of
    network directors, chief medical officers, and chief financial
    officers and supporting documentation on network-led initiatives to
    manage VISNs' resources and change service delivery.  We selected
    these VISNs for site visits because of the differing impact of the
    Veterans Equitable Resource Allocation (VERA) system on their fiscal
    year 1997 budgets and also because of the differences in the
    geographic dispersion of these networks' facilities.  In addition, we
    conducted telephone interviews and collected efficiency and access
    information from two other networks with budget decreases in fiscal
    year 1997--VISN 2 (Albany) and VISN 3 (Bronx) in New York--and two
    networks with budget increases--VISN 18 (Phoenix) in Arizona and VISN
    20 (Portland) in Oregon.

    We also visited seven medical centers--in Brockton/West Roxbury and
    Northampton, Massachusetts; Jackson, Mississippi; Fayetteville,
    Arkansas; Lebanon and Pittsburgh, Pennsylvania; and Clarksburg, West
    Virginia.  We toured these facilities to identify physical changes
    made to accommodate increased use of primary care.  We interviewed
    medical facility directors, administrative officials, chiefs of the
    various services, physicians, nurses, and union officials for
    information on VA's reorganization and VERA implementation and
    collected facility-specific documents.

    In addition, we met with the director of the Connecticut Health Care
    System in VISN 1 (Boston) to discuss that medical center's
    initiatives to improve access and efficiency.  We met with officials
    of the Causeway Street outpatient clinic, which provides 180,000
    primary and specialty care visits each year to veterans in downtown
    Boston, and toured the facility.  We also interviewed officials in
    the Veterans Health Administration's Office of the Deputy Under
    Secretary for Health; Office of the Chief Network Officer; Office of
    Policy, Planning and Performance; Office of the Chief Financial
    Officer; and strategic health care groups.  We obtained and reviewed
    VA headquarters documents on policies, monitoring procedures, and
    performance data to address issues about the monitoring of changes
    implemented by networks and medical centers.  We drew on previous
    work to make observations about VA's monitoring of the health care
    that networks are providing.  Because many of VA's reform initiatives
    had been recently introduced or were in the planning phase during our
    review and due to inconsistencies among facilities' reporting of
    data, we relied on VA documentation and officials' estimates of
    savings.  We did not verify the accuracy of these estimates.  We
    performed our review in accordance with generally accepted government
    auditing standards between November 1996 and January 1998.

    PROFILES OF SEVEN NETWORKS
    ========================================================== Appendix II

    We selected seven networks on the basis of projected changes in
    resource allocations if the Veterans Equitable Resource Allocation
    (VERA) system had been fully implemented in fiscal year 1997.  We
    selected four networks--VISN 1 (Boston), VISN 2 (Albany), VISN 3
    (Bronx), and VISN 4 (Pittsburgh)--that would have lost resources had
    VERA been fully implemented.  We selected three networks--VISN 16
    (Jackson), VISN 18 (Phoenix), and VISN 20 (Portland)--that would have
    gained resources had VERA been fully implemented.\25 The cities named
    on the map of each VISN show the locations of VA medical centers in
    that VISN.  The Pittsburgh Health Care System includes two hospitals
    in Pittsburgh.

    We compiled data for the profiles from several sources, including VA
    annual reports, network strategic plans, and documents provided by
    headquarters and network officials.  Data are from fiscal year 1996
    unless otherwise noted.  VA's figures for full-time employee
    equivalents (FTEE) are based on regular hours worked by VA employees
    during the first pay period of each fiscal year.  The annual counts
    for Category A veterans (those with service-connected disabilities,
    low incomes, or special health care needs) reflect the number of
    unique Category A veterans seen at least once during a fiscal year
    and the two previous fiscal years.  Other veterans generally have
    incomes and net worth above a certain threshold and must pay part of
    the cost of the care they receive.  Nonveterans include veterans'
    dependents and beneficiaries in the Civilian Health and Medical
    Program of the Uniformed Services and VA employees.  Data on
    inpatient and outpatient treatments count each visit of a patient
    separately; therefore, these data show the number of times patients
    received care at a VISN medical center.  Patients may have received
    care at more than one medical center.

       Figure II.1:  VISN 1 (Boston)

       (See figure in printed
       edition.)

    Note:  NA means "not applicable."

       Figure II.2:  VISN 2 (Albany)

       (See figure in printed
       edition.)

    Note:  NA means "not applicable."

       Figure II.3:  VISN 3 (Bronx)

       (See figure in printed
       edition.)

    Note:  NA means "not applicable."

       Figure II.4:  VISN 4
       (Pittsburgh)

       (See figure in printed
       edition.)

    Note:  NA means "not applicable."

       Figure II.5:  VISN 16 (Jackson)

       (See figure in printed
       edition.)

    Note:  NA means "not applicable."

       Figure II.6:  VISN 18 (Phoenix)

       (See figure in printed
       edition.)

    Note:  NA means "not applicable."

       Figure II.7:  VISN 20
       (Portland)

       (See figure in printed
       edition.)

    Note:  NA means "not applicable."

    RELATED GAO PRODUCTS

    VA Health Care:  Resource Allocation Has Improved, but Better
    Oversight Is Needed (GAO/HEHS-97-178, Sept.  17, 1997).

    VA Health Care:  Opportunities to Enhance Montgomery and Tuskegee
    Service Integration (GAO/T-HEHS-97-191, July 28, 1997).

    VA Health Care:  Lessons Learned From Medical Facility Integrations
    (GAO/T-HEHS-97-184, July 24, 1997).

    VA Health Care:  Assessment of VA's Fiscal Year 1998 Budget Proposal
    (GAO/T-HEHS-97-121, May 1, 1997).

    Department of Veterans Affairs:  Programmatic and Management
    Challenges Facing the Department (GAO/T-HEHS-97-97, Mar.  18, 1997).

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

    VHA's Management Improvement Initiative (GAO/HEHS-96-191R, Aug.  30,
    1996).

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

    VA Health Care:  Efforts to Improve Veterans' Access to Primary Care
    Services (GAO/T-HEHS-96-134, Apr.  24, 1996).

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

    --------------------
    \25 VA began phasing in VERA in fiscal year 1997.  VERA's immediate
    impact was lessened because its adjustments to network allocations
    only affected budgets for the second half of the fiscal year and caps
    were placed on the amount of funds moved among networks.  Because of
    the phase in, VISN 4 (Pittsburgh) gained resources instead of losing
    them.  VISN 1 (Boston), VISN 2 (Albany), and VISN 3, (Bronx) lost
    less money than projected because of the phase in, while VISN 16
    (Jackson), VISN 18 (Phoenix), and VISN 20 (Portland) gained less than
    projected.

    *** End of document. ***