VA Health Care: Efforts to Improve Veterans' Access to Primary Care
Services (Testimony, 04/24/96, GAO/T-HEHS-96-134).

GAO discussed the Department of Veterans Affairs' (VA) plan to improve
veterans' access to primary health care. GAO noted that: (1) by creating
new access points, VA may be able to cost-effectively improve users'
access to health care and reduce the inequities in veterans' access
caused by geographic inaccessibility; (2) creating new access points may
increase costs dramatically, since VA failure to adhere to statutory
eligibility limitations has resulted in an increase in the amount of
services provided and members receiving benefits; (3) the lack of a VA
facility in a particular area does not necessarily justify the
establishment of a new primary care access point in that area; (4) VA
hospitals need to find ways to finance new access points through
reorganization of resources rather than with additional funds; (5) in
some underserved areas, it has been more cost-effective to contract for
health care services rather than establishing a new VA access point; and
(6) new access points could cause financial difficulties for VA, because
these new facilities will make VA funded care more accessible to
veterans who would otherwise not have used VA facilities.

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

 REPORTNUM:  T-HEHS-96-134
     TITLE:  VA Health Care: Efforts to Improve Veterans' Access to 
             Primary Care Services
      DATE:  04/24/96
   SUBJECT:  Veterans
             Veterans benefits
             Veterans hospitals
             Eligibility criteria
             Health care facilities
             Health care services
             Health resources utilization
             Health care planning
             Health care cost control

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


Before the Subcommittee on Hospitals and Health Care, Committee on
Veterans' Affairs, House of Representatives

For Release on Delivery
Expected at 10:00 a.m.
Wednesday, April 24, 1996

VA HEALTH CARE - EFFORTS TO
IMPROVE VETERANS' ACCESS TO
PRIMARY CARE SERVICES

Statement of David P.  Baine, Director,
Health Care Delivery and Quality Issues
Health, Education, and Human Services Division

GAO/T-HEHS-96-134

GAO/HEHS-96-134T


(406103)


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

  VA - Department of Veterans' Affairs
  ABC - Department

VA HEALTH CARE:  EFFORTS TO
IMPROVE VETERANS' ACCESS TO
PRIMARY CARE SERVICES
==================================================== Chapter Statement

Mr.  Chairman and Members of the Subcommittee: 

We are pleased to be here today to discuss the Department of Veterans
Affairs' (VA) efforts to improve veterans' access to health care.  VA
operates one of our nation's largest health care systems, including
173 hospitals and 220 clinics.  Last year, VA spent about $16 billion
serving 2.6 million veterans. 

Traditionally, almost all veterans seeking care have used VA-operated
facilities.  VA's hospitals and clinics, however, are often located
hundreds of miles from each other.  As a result, about half of all
veterans live over 25 miles from a VA hospital, including 6 percent
who live over 100 miles away; and over a third live more than 25
miles from a VA clinic.  Veterans have frequently indicated that they
do not use VA health care because they live too far from the nearest
hospital or clinic. 

To improve veterans' access to health care, VA recently empowered
network\1 and hospital directors to employ all means at their
disposal, within available resources, to establish new access points. 
VA defines an access point as a VA-operated clinic or a VA-funded or
-reimbursed private clinic, group practice, or single practitioner
that is geographically distinct or separate from the parent facility. 
In general, access points are to provide primary care to all veterans
and refer those needing specialized services or inpatient stays to VA
hospitals. 

In using access points to restructure their direct delivery systems
into integrated service-delivery networks, VA directors have
considerable freedom to develop their own goals and objectives as
well as their own implementation strategies.  To date, 9 hospitals
have opened 12 new access points.  Recently, VA notified the Congress
that 47 hospitals (including 5 of the original 9) are ready to open
an additional 58 access points.  Another 200 are under development
and could be operating by this December. 

Of the 12 new access points, VA staff operate 4 and contract with
county or private clinics to operate the remaining 8.  Contract
access points are paid an annual fee per patient in advance to serve
enrolled veterans according to an agreed-upon benefit package.\2 Most
have encouraged all veterans currently receiving VA health care to
enroll in new access points along with veterans who have not
previously received care.  However, some have limited enrollment to
only veterans with service- connected conditions or current VA users. 
To date, the 12 access points have enrolled nearly 5,000 veterans. 

At your request,\3 we have reviewed VA's efforts to establish access
points and will provide you with a report this summer.  Today, we
would like to discuss some legal, financial, and equity-of-access
issues facing VA managers as they strive to establish new access
points.  Finally, we will highlight several options to address these
issues. 

Our comments today are based on visits to 3 VA hospitals that operate
6 new access points; interviews with 115 veterans now using them; and
discussions with officials of the other 6 hospitals that are now
operating new access points.  We also reviewed a wide range of
records and documents provided by these facilities.  We have
discussed the results of our work with the Deputy Under Secretary for
Health as well as other VA officials and representatives of veterans'
service organizations. 

In summary, in establishing new access points, VA has identified what
could be a cost-effective way to enhance the availability of health
care for current users, especially those residing in underserved
areas.  Doing this, however, has raised some important issues that VA
has not yet adequately addressed.  For example, VA is not adhering to
statutory limitations that govern what services VA may provide and
who may be served.  As a result, veterans are receiving more services
than current statutes allow.  Also, creating hundreds of new access
points may attract more veterans than network and hospital directors
can finance within their existing budgets. 

Empowering local hospital directors to establish new access points
provides an opportunity to ensure that similarly situated veterans
are afforded equal access to VA care.  However, access inequities may
continue, given that directors are establishing new access points
without clear, consistent criteria for targeting new locations and
populations to be served. 


--------------------
\1 VA realigned the 173 hospitals into 22 service networks, each
consisting of between 5 and 12 facilities. 

\2 VA patients are generally a fraction of the total patient
population these providers serve. 

\3 Subsequently, Senator Bond, Chairman of the Subcommittee on VA,
HUD, and Independent Agencies, Senate Committee on Appropriations,
also asked us to examine VA's efforts. 


   INAPPROPRIATE STATUTORY
   AUTHORITY BEING USED TO IMPROVE
   PRIMARY CARE ACCESS
-------------------------------------------------- Chapter Statement:1

Historically, the Congress has limited VA's authority to provide
medical care to veterans, expanding it in a careful and deliberate
manner.  Although VA's authority has increased significantly over the
years, important limitations have not been recognized by VA in
establishing and operating new access points. 

At the access points we visited, many veterans receive primary care
contrary to applicable statutory limitations and priorities on their
eligibility for such services.  As authority for operating contract
access points, VA relies on a statute (38 U.S.C.  8153) that permits
it to enter into agreements "for the mutual use, or exchange of use,
of specialized medical resources when such an agreement will obviate
the need for a similar resource to be provided" in a VA facility. 
Specialized medical resources are equipment, space, or personnel
that--because of cost, limited availability, or unusual nature--are
unique in the medical community. 

VA officials assert that primary care provided at access points is a
specialized medical resource because its limited availability to
veterans in areas where VA facilities are geographically inaccessible
(or inconvenient) makes it unique.  One significant aspect of VA's
reliance on this authority is that it effectively broadens the
eligibility criteria for contract outpatient care, thus allowing some
veterans, who would otherwise be ineligible, to receive treatment. 

In our view, this statute does not authorize VA to provide primary
care through its access points.  Nothing in the statute suggests that
the absence of a VA facility close to veterans in a particular area
makes primary care physicians unique in the medical community.  The
purpose of allowing VA to contract for services under the specialized
medical resources authority is not to expand the geographic reach of
its health care system, but to make available to eligible veterans
services that are not feasibly available at a VA facility that
presently serves them.  Furthermore, contracting for the provision of
primary care at access points does not obviate the need for primary
care physicians at the parent VA facility. 

VA has specific statutory authority (38 U.S.C.  1703) to contract for
medical care when its facilities cannot provide necessary services
because they are geographically inaccessible. 

This authority could be relied upon to authorize contracting for the
operation of access points.  However, contract care provided under
this authority is available only for specified services and classes
of veterans that are more restrictive than those under 38 U.S.C. 
8153, upon which VA relies. 

For example, under 38 U.S.C.  8153, a veteran who has income above a
certain level and no service-connected disability is eligible for
pre- and post-hospitalization medical services and for services that
obviate the need for hospitalization.  But under 38 U.S.C.  1703,
that same veteran is not eligible for pre- hospitalization medical
services or for services that obviate the need for hospitalization. 

If access points are established in conformance with 38 U.S.C.  1703,
VA would need to limit the types of services provided to all veterans
except those with service-connected disabilities rated at 50 percent
or higher (who are eligible to receive treatment of any condition). 

All other veterans are generally eligible for VA care based on
statutory limitations (and to the extent that VA has sufficient
funds).  For example, veterans with service-connected conditions are
eligible for all care needed to treat those conditions.  Those with
disabilities rated at 30 or 40 percent are eligible for care of
non-service-connected conditions at contract access points to
complete treatment incident to hospital care.  Furthermore, veterans
with disabilities rated at 20 percent or less, as well as those with
no service-connected disability, may only be eligible for limited
diagnostic services and follow-up care after hospitalization. 

Most veterans currently receiving care at access points do not have
service-connected conditions and, therefore, do not appear to be
eligible for all care provided.  VA is to assess each veteran's
eligibility for care on the merits of his or her unique situation
each time that the veteran seeks care for a new medical condition. 
We found no indication that VA requires access point contractors to
establish veterans' eligibility or priority for primary care or that
contractors were making such determinations for each new condition. 

Last year, VA proposed ways to expand its statutory authority and
veterans' eligibility for VA health care.  Several bills have been
introduced that, if enacted, should authorize VA hospitals to
establish contract access points and provide more primary care
services to veterans in the same manner as the new access points are
now doing. 


   VA'S ABILITY TO FINANCE ACCESS
   POINTS WITHIN EXISTING
   RESOURCES
-------------------------------------------------- Chapter Statement:2

VA hospital directors are likely to face an evolving series of
financial challenges as they establish new access points.  In the
short term, hospitals must finance new access points within their
existing budgets; this will generally require a reallocation of
resources among hospitals' activities.  Over the longer term, VA
hospitals may incur unexpected, significant cost increases to provide
care to veterans who would otherwise not have used VA's facilities. 
These costs may, however, be offset somewhat if access points allow
hospitals to serve current users more efficiently. 

So far, VA hospitals have successfully financed access points by
implementing local management initiatives, unrelated to the access
points, which allow the hospitals to operate more efficiently.  For
example, one hospital director estimated that he had generated
resources for new access points by consolidating underused medical
wards at a cost savings of $250,000. 

To date, most directors have concluded that it was more
cost-effective to contract for care in the target locations than
operate new access points themselves.  Essentially, they have found
that it is not cost-effective to operate their own access points for
a relatively small number of veterans.  For example, one hospital
that targeted 173 veterans for an access point concluded that this
number could be most efficiently served by contracting for care.  By
contrast, private providers seem willing to serve small numbers of
veterans on a contractual, capitated basis because they already have
a non-VA patient base and sufficient excess capacity to meet VA's
needs. 

The longer-term effects of new access points on VA's budget are less
certain.  This is because VA has not clearly delineated its goals and
objectives; nor has it developed a plan that specifies the total
number of potential access points, time frames for beginning
operations, estimates of current and potential new veterans to be
served, and related costs.  Of these, key cost factors appear to be
the magnitude of new users and their willingness to be referred to VA
hospitals for specialty and inpatient care.  Costs could potentially
vary greatly depending on whether VA hospitals' primary objective is
to improve convenience for current users or to expand their market
share by attracting new users. 

In theory, VA hospitals could improve access for all current users
within their existing budgets.  Through careful planning, it appears
that hospitals' staffing costs can be reduced in proportion to the
costs of new access points.  For example, one hospital employs 5
primary care teams that, on average, each spend about $300,000 a year
to provide primary care to about 1,500 veterans.  This hospital can
reduce the number of teams to 4 once it enrolls 1,500 veterans at new
access points closer to their homes.  These newly established access
points could be cost-effective if their total costs are the same or
lower than the VA hospital's costs--$300,000 or less in this case. 

VA hospitals, however, could experience significant budget pressures
if new access points modestly increase VA's market share.  For
example, VA currently serves about 2.6 million of our nation's 26
million veterans.  To date, 40 percent of the 5,000 veterans enrolled
at VA's 12 new access points had not received VA care within the last
3 years.  Most of the new users we interviewed had learned about the
access points through conversations with other veterans, friends, and
relatives or from television, newspapers, and radio. 

VA's access points may prove more attractive to veterans in part
because they overcome barriers such as geographic inaccessibility and
quality of care.  About half of the veterans who have used VA health
care in the past, and a larger portion of the new users, said that it
matters little whether they receive care in a VA-operated facility. 
In fact, almost two-thirds of the new users indicated that if
hospitalization is needed, they would choose their local hospital
rather than a distant VA facility. 

Veterans will also generally benefit financially by enrolling in new
VA access points.  For example, prior VA users will save expenses
incurred traveling to distant VA facilities as well as out-of-pocket
costs for any primary care received from non-VA providers; most said
that they use both VA and non-VA providers.  New VA users will also
save out-of-pocket costs, with low-income veterans receiving free
care and high-income veterans incurring relatively nominal charges. 

Also, about 80 percent of the new users have alternative health care
coverage, and most of the rest said that they paid for their own
primary care.  Most prior VA hospital users also have alternative
coverage that they may use to obtain primary care from non-VA
providers.  Based on our interviews with veterans using new access
points, we learned that 70 percent of the veterans had Medicare
coverage, 50 percent had private insurance coverage, and 7 percent
had Medicaid coverage.  VA will act as an intermediary and bill
private insurers to recover the cost of providing care.  Previously,
the insurers would have paid the local providers directly, but now VA
pays the contract provider a capitated rate and then bills the
insurer to recover its costs on a fee-for-service basis. 

The combination of these factors could lead to VA attracting several
hundred thousand new users through its access points.  This may force
VA to turn veterans away if sufficient resources are not available,
or it may cause VA to seek additional appropriations to accommodate
the potential increased demand. 

Currently, VA is to provide outpatient care to the extent resources
are available.  When resources are insufficient to care for all
eligible veterans, VA is to care for veterans with service-connected
disabilities before providing care to those without such
disabilities.  Furthermore, when VA provides care to veterans without
service-connected disabilities, it is to provide care for those with
low incomes before those with high incomes. 

Presently, most of the nine hopsitals encourage current and new users
to enroll in their new access points.  For example, the 3 hospitals
we visited had enrolled 1,250 veterans in new access points.  Of the
1,250, about 20 percent had service-connected disabilities, including
about 4 percent rated at 50 percent or higher.  Of the remaining 80
percent, most had low incomes, including about 10 percent who were
receiving VA pensions or aid and attendance benefits. 


   CREATING NEW ACCESS POINTS CAN
   ADDRESS LONG-STANDING EQUITY
   CONCERNS
-------------------------------------------------- Chapter Statement:3

Inequities in veterans' access to VA care have been a long- standing
concern.  For example, about three-fourths of veterans (both those
with service-connected conditions and others) using VA clinics live
over 5 miles away, including about one-third who live over 25 miles
away. 

Establishing new access points gives VA the opportunity to reduce
some of these veterans' travel distances.  Although VA provided
general guidance, it left the development of specific criteria for
targeting new locations and populations to be served to network and
hospital directors.  Directors have several options when targeting
new locations and populations to be served.  For example, they could
target those current users or potential new users living the greatest
distances from VA facilities. 

VA's 12 new access points operate in a variety of locations,
including 3 areas that are more than 100 miles from a VA facility; 6
areas between 50 and 100 miles from a VA facility; and 3 areas less
than 50 miles from a VA facility (including 1 large urban area
located 8 miles from a hospital).  Most have improved convenience for
existing users and attracted new users as well.  However, two new
access points have served only current VA users, while another one
has served only new users. 


   CONCLUDING OBSERVATIONS
-------------------------------------------------- Chapter Statement:4

VA's plans to establish access points could represent a defining
moment for its health care system as it prepares to move into the
21st century.  On one hand, VA hospitals could use a relatively small
amount of resources to improve access for a modest number of current
or new users, such as those living the greatest distances from VA
facilities or in the most underserved areas. 

On the other hand, VA hospitals could, over the next several years,
open hundreds of access points and greatly expand market share. 
There are over 26 million veterans and 550,000 private physicians who
could contract to provide care at VA expense.  VA's growth potential
appears to be limited only by the availability of resources and
statutory authority, new veteran users' willingness to be referred to
VA hospitals, and other health care providers' willingness to
contract with VA hospitals. 

Although VA should be commended for encouraging hospital directors to
serve veterans using their facilities in the most convenient way
possible, VA has not established access points in conformance with
existing statutory authority.  In our view, under current statutes,
new access points should be VA-operated or provide contract care for
only those services or classes of veterans specifically designated by
VA's geographic inaccessibility authority.  While legislative changes
are needed to authorize VA hospitals to provide primary care to
veterans in the same manner as the new access points are now doing,
such changes carry with them several financial and equity-of-access
implications. 

In addition, VA has not developed a plan to ensure that hospitals
establish access points in an affordable manner.  If developed, such
a plan could articulate the number of new access points to be
established, target populations to be served, time frames to begin
operations, and related costs and funding sources.  It could also
articulate specific travel times or distances that represent
reasonable veteran travel goals that hospitals could use in locating
access points. 

Given the uncertainty surrounding resource needs for new access
points, such a plan could also articulate clear goals for the target
populations to be served.  Hospitals could be directed to provide
care at new access points in accordance with the statutory service
priorities.  If sufficient resources are not available to serve all
eligible veterans expected to seek care, new access points that are
established would serve, first, veterans with service-connected
disabilities and then, second, other categories of veterans, with
higher income veterans served last.  Finally, this approach could
provide for more equitable access to VA care than VA's current
strategy of allowing local hospitals to establish access points that
serve veterans on a first-come, first-served basis and then rationing
services when resources run out. 


------------------------------------------------ Chapter Statement:4.1

Mr.  Chairman, this concludes my statement.  I will be happy to
answer any questions that you or other Members may have. 


   CONTRIBUTORS
-------------------------------------------------- Chapter Statement:5

For more information, please call Paul Reynolds, Assistant Director,
at (202) 512-7109.  Michael O'Dell, Patrick Gallagher, Abigail Ohl,
Robert Crystal, Sylvia Shanks, Linda Diggs, Larry Moore, and Joan
Vogel also contributed to the preparation of this statement. 


*** End of document. ***