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. 


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