VA Health Care: Lessons Learned From Medical Facility Integrations

Published by the Government Accountability Office on 1997-07-24.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                          United States General Accounting Office

GAO                       Testimony
                          Before the Subcommittee on Health and the
                          Subcommittee on Oversight and Investigations,
                          Committee on Veterans’ Affairs, House of Representatives

For Release on Delivery
Expected at 9:30 a.m.
Thursday, July 24, 1997
                          VA HEALTH CARE

                          Lessons Learned From
                          Medical Facility
                          Statement of Stephen P. Backhus, Director
                          Veterans’ Affairs and Military Health Care Issues
                          Health, Education, and Human Services Division

VA Health Care: Lessons Learned From
Medical Facility Integrations

              Messrs. Chairmen and Members of the Subcommittees:

              We are pleased to be here today to discuss preliminary results of our
              ongoing work on the integration of medical facilities operated by the
              Department of Veterans Affairs (VA). In general, a VA integration involves a
              restructuring of the services within two or more medical facilities into a
              seamless health care delivery system.

              VA operates 173 hospitals and over 200 freestanding outpatient clinics
              nationwide at a cost of about $17 billion a year. Two years ago, VA created
              22 networks to help improve service delivery to the 3 million veterans who
              use its medical facilities each year. Each network is responsible for
              overseeing between 4 and 11 hospitals. To date, networks have initiated
              integrations in 18 geographic areas, involving a total of 36 hospitals.1

              Our work to date has focused primarily on VA’s ongoing integrations in
              Chicago, Illinois, and in Alabama. Our review of the Chicago integration is
              being done in response to requests by part of the Illinois congressional
              delegation, including Congressmen Evans and Gutierrez, who serve on the
              House Veterans’ Affairs Committee, and Chairman Bond of the Senate
              Appropriations Committee’s Subcommittee on VA, HUD, and Independent
              Agencies. Chairman Everett has asked us to review the Alabama

              We have visited the four medical facilities being integrated in Alabama and
              Chicago and their respective network offices. Also, to gain a broader
              perspective, we discussed VA’s other 16 integrations with network officials
              and others. In addition, we discussed integration issues with several
              private health care providers and consulting firms.

              As you requested, my testimony focuses on (1) the role of facility
              integrations in reshaping VA’s health care delivery system and (2) lessons
              learned that could help enhance VA’s process for planning and
              implementing ongoing and future facility integrations.

              In summary, facility integrations are a critical piece of VA’s overall strategy
              to enhance the efficiency and effectiveness of health service delivery to
              veterans. VA’s strategy is similar to how the private sector health care
              industry is evolving. In essence, integrations can allow VA to provide the
              same or higher quality services to veterans at a significantly reduced cost.
              In just 2 years, by unifying management and consolidating services, VA’s

               See app. for a list of the 18 integrations.

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    VA Health Care: Lessons Learned From
    Medical Facility Integrations

    integrations have produced millions of dollars in savings that can be
    reinvested in the system to further enhance veterans’ care.

    But VA also faces inherent difficulties in planning and implementing
    integrations, primarily stemming from the potential adverse impacts on
    stakeholders such as veterans, facility and medical school personnel, and
    members of Congress who represent these groups. For example, while
    integrations will generally enhance VA’s ability to serve veterans, they will
    likely result in, among other things, fewer, less convenient, or less
    desirable (1) employment opportunities for VA and medical school
    employees or (2) training opportunities for medical school residents and

    With so much at risk, it is imperative that VA plan and implement
    integrations to maximize their benefits and minimize the adverse impacts.
    VA’s integration planning approach has many positive features. For
    example, local facilities currently plan and implement their integrations
    using work groups comprising VA medical facility employees and others,
    such as affiliated medical school employees. The involvement of local
    facility employees in planning activities appears to expedite the process,
    primarily because no two integration situations are alike.

    Our work to date, however, indicates areas where improvements could be
    made. For example, integration decisions are generally made
    incrementally, that is, on a service-by-service basis, at varying times
    throughout the process instead of being made on the basis of decisions
    about all activities across the integrated facilities. Also, planning and
    implementation activities frequently occur simultaneously, which does not
    allow for consideration of the collective effect of such changes on the
    integration. In addition, stakeholders are involved at varying times in
    different ways but are not always provided sufficient information at key
    decision points.

    Currently, VA is considering ways to improve its facility integration
    process. With that in mind, our work suggests that VA could achieve better
    results by

•   adopting a more comprehensive planning approach,
•   completing planning before implementing changes,
•   improving the timeliness and effectiveness of communications with
    stakeholders, and
•   using a more independent planning approach.

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                            VA Health Care: Lessons Learned From
                            Medical Facility Integrations

                            Generally, the 18 integrations, with one exception, share some common
Background                  characteristics. For example, most of VA’s integrations to date involve
                            (1) facilities that have complementary missions, such as acute and mental
                            health care; (2) one facility that is significantly larger than the other(s);
                            and (3) only one or no facility(ies) with a strong medical school affiliation.
                            By contrast, Chicago’s Lakeside and West Side facilities have almost
                            identical missions, are about the same size, and have strong affiliations
                            with major medical schools.

                            VA’s facility integrations use different ways to improve management,
                            clinical, and patient support services. These include

                        •   unifying management by creating a single team to manage all facilities
                            instead of using separate management teams at each facility;
                        •   consolidating a service by moving all employees and patients to one
                            facility rather than continuing to provide the service at multiple locations;
                        •   centralizing a service by moving some but not all of the employees
                            associated with it to one of the facilities;
                        •   contracting out some services that VA employees have historically
                            provided; and
                        •   reengineering service delivery by designing more efficient and effective
                            ways to do business.

                            Of the 18 integrations, 5 have reported that all activities have been
                            completed, and they anticipate no additional changes to their management
                            or delivery structure at this time. The remaining integrations are in various
                            stages of planning and implementation, and several anticipate completion
                            within the next few months.

                            Facility integrations are a critical part of VA’s nationwide strategy to
Facility Integrations       restructure its health care delivery system to improve access, quality, and
Play a Key Role in          efficiency of care to veterans. VA’s restructuring plan reflects, in large part,
Reshaping VA’s Health       the changes that have been under way in the private sector health care
                            system for some time. Profound changes in the health care environment
Care Delivery               brought about, in part, by technological advances, economic factors,
                            demographic changes, and the rise of managed care are causing a dramatic
                            shift away from inpatient care and a corresponding increase in outpatient
                            care. Toward that end, VA has been establishing new community-based
                            clinics, emphasizing primary care, decentralizing decision-making, and
                            integrating facilities to provide an interdependent, interlocking system of
                            care. VA’s progress to date indicates that integrations are having positive

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VA Health Care: Lessons Learned From
Medical Facility Integrations

results, but it remains to be seen whether integrations will reach their
maximum potential and accomplish what VA intends and veterans need.

Integrating health care facilities is a complex process that requires careful
planning because it can have an adverse affect on many stakeholders, such
as veterans, facility employees, and medical school personnel. For
example, facility integrations will undoubtedly alter the way veterans
receive health care. Historically, each VA facility has generally tried to
provide veterans with one-stop service delivery, that is, to provide as many
services as possible at a single location. After consolidating services as
part of integration, more veterans may have to go to more than one
location for care. For example, when acute inpatient care is moved from
the Tuskegee hospital to the Montgomery hospital, veterans receiving
primary care at Tuskegee will have to use the Montgomery facility when
they need a hospital admission. These changes will generally bring VA
service delivery practices more in line with those of the private sector.

Integrations nevertheless provide significant benefits to veterans,
primarily because VA can reinvest the money it saves in access and service
improvements. VA estimates that integration of facilities has generated
over $83 million in savings, which has been used, in part, to (1) provide
new community-based clinics that expand veterans’ access to primary
care, (2) offer new services at existing medical facilities, or (3) make
existing services more accessible through longer operating hours or
shorter waiting times.

Facility integration has also had a significant impact on VA employees.
Most savings are achieved by reducing the number of employees providing
the same services at multiple medical facilities within the same geographic
area. To date, VA has been able, for the most part, to accomplish this
reduction through buyouts and routine attrition, although some
reductions-in-force were or will be used. In some situations, employees
will move from one medical facility to another or transfer to different
positions within their current facility, which may require retraining.

In addition, medical school personnel are affected by the integrations. As
VA reduces unnecessary duplication of services, medical schools may have
to share management of integrated services, which would result in a
reduction in the number of physicians employed and residents trained. In
addition, some would have to travel to different facilities rather than
continue to provide services at their present locations. For example,

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                        VA Health Care: Lessons Learned From
                        Medical Facility Integrations

                        medical school employees and others may have to travel between the
                        Lakeside and West Side facilities, a distance of about 6 miles.

                        Because of the large reinvestment opportunities potentially available,
Lessons Learned That    facility integrations are one of the best ways VA has to improve quality and
Could Enhance VA’s      access to care for veterans while also increasing the efficiency of health
Facility Integrations   care delivery. Currently, VA is considering ways to improve its facility
                        integration process. On the basis of our visits to the Chicago and Alabama
                        facilities and discussions with officials involved with the other 16
                        integrations, we also believe that improvements can be made to VA’s
                        integration process. Our discussions with several private sector health
                        care providers who are involved with major facility integrations have
                        indicated to us that adopting the following changes could bring VA’s
                        process more in line with private sector integration practices.

Using a Comprehensive   Integration of VA medical facilities may be more successful if done on a
Planning Approach       comprehensive planning basis. Such an approach could involve, among
                        other things, a thorough assessment of all potential resources needed to
                        meet the expected workload over the next 5 to 10 years in a geographic
                        service area. At present, VA does not always include these elements in its
                        planning process. Consequently, integration planners do not always
                        consider all viable options, changing conditions, and future investments.
                        This could cause VA to miss better options, which could greatly lower the
                        dollar savings and thus reduce reinvestment opportunities to improve
                        veterans’ care.

                        Comprehensive planning for integration of services that includes all VA
                        facilities within the same geographic service area expands the options
                        available for consideration. For example, in the Chicago area, four VA
                        facilities within 35 miles of each other serve essentially the same veteran
                        population. If veterans’ current inpatient needs could be met in three
                        rather than four locations, VA could save about $20 million annually in
                        operating costs, although some of the savings may need to be reinvested to
                        increase outpatient capacity at the three locations or in community clinics.
                        Operating in fewer locations also could generate additional savings by
                        avoiding future renovations and equipment replacement, and possibly
                        through the sale or lease of excess capacity.

                        VA may realize greater results over the long run if it uses a longer planning
                        horizon. This could enable VA to determine how its current workload will

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                       VA Health Care: Lessons Learned From
                       Medical Facility Integrations

                       compare with its future resource needs. For example, as in the private
                       sector, VA’s inpatient workload has been decreasing and is expected to
                       continue decreasing over the next 5 to 10 years. If inpatient workload
                       continues to decrease, excess hospital space will increase. Thus, if it uses
                       current workload as a basis, VA may decide that it is not viable to
                       consolidate services, but if it uses future workload estimates, VA may
                       conclude that it is viable to consolidate.

                       VA may also realize better results if its planning considers all potential
                       resources needed over the next 5 to 10 years. If VA plans for veterans’
                       current needs, it risks using funds for construction, renovation, and
                       equipment that may yield short-term benefits only. For example, in
                       Chicago, VA approved renovations of Lakeside’s surgical intensive care
                       unit and emergency room, and the replacement of its cardiac
                       catheterization equipment. For West Side, VA approved the replacement of
                       the angiography suite. If, within 5 to 10 years, the inpatient workload is
                       consolidated at one facility, VA would have realized limited benefits from
                       some of these investments.

Completing Planning    VA’s decision-making may be enhanced if it completes all planning for the
Phase Before           integrated facilities before beginning to implement the integrations. Each
Implementing Changes   of its 18 facility integrations involved between 2 and 35 work groups to
                       develop proposals to integrate management, clinical, and patient services.
                       VA currently begins implementing proposals as they become available from
                       the various work groups, without first examining all proposals together for
                       an overall perspective.

                       VA’s integration process contains one common decision
                       point—headquarters’ approval of the initial proposal to integrate. With this
                       approval, VA essentially decides to operate two or more facilities as a
                       health care system using a single management team. Once an integration is
                       approved, the director for the new system sets up governing boards to
                       direct and oversee the integration process and decision-making. The
                       boards establish work groups to analyze data and explore integration
                       options. Typically, as each work group completes its planning, it submits
                       an integration proposal to the board with recommendations to the
                       director. Once the board approves the recommendations, the director
                       generally begins implementing them.

                       This incremental approach runs the risk that later work group proposals
                       could affect previously implemented actions. In addition, it is especially

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                            VA Health Care: Lessons Learned From
                            Medical Facility Integrations

                            difficult, if not impossible, to assess the reasonableness of VA’s decisions
                            when they are made incrementally. For example, VA decided to relocate
                            some administrative staff from the Montgomery to the Tuskegee facility,
                            primarily because VA concluded that sufficient space was not available at
                            Montgomery. But VA had not yet determined how much staffing was
                            needed for a number of other services at Montgomery before
                            implementing these changes. This occurred primarily because, at the time,
                            planning for those services was not completed. VA was still considering, for
                            instance, several options for restructuring Montgomery’s and Tuskegee’s
                            nutrition and fiscal services, which could greatly affect the availability of
                            space in the Montgomery facility.

                            VA recognizes the need for a more structured process. Two months ago, it
                            established a team to revise its integration guidance. VA is considering
                            adopting a five-phase process that includes conceptualization, quantitative
                            and qualitative analyses, implementation planning, implementation, and
                            evaluation. These are logical phases in that the end of each phase seems to
                            provide a decision point at which stakeholders may efficiently and
                            effectively participate in VA’s process. Moreover, this process suggests that
                            decisions on the proposed integration of services on a facilitywide basis
                            will be made only after planning is completed, because the next phase
                            focuses on the implementation of the plan. As such, this approach should
                            help VA make better integration decisions.

Providing a Detailed        Stakeholder participation in the process could be enhanced if VA provides
Integration Plan to         a detailed integration plan before implementation begins. VA encourages
Stakeholders Before         local facilities to have early and continued stakeholder involvement. The
                            local facilities have worked hard to involve stakeholders by using such
Implementation Begins       techniques as meetings, letters, briefings, newsletters, and videos.

                            Stakeholders, however, have sometimes found it difficult to understand
                            and support VA’s actions because they were not provided sufficient
                            information about the integrations, such as

                        •   how services will be integrated,
                        •   how potential changes will affect veterans and employees,
                        •   why selected alternatives are the best ones available,
                        •   how much the potential changes will cost to implement,
                        •   how much the potential changes will save, and
                        •   how VA will reinvest savings to benefit veterans.

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                       VA Health Care: Lessons Learned From
                       Medical Facility Integrations

                       For example, for the Montgomery/Tuskegee integration, VA decided to
                       consolidate administrative services by moving most employees from
                       Montgomery to Tuskegee. However, it made this decision before
                       determining how many or which employees would be moved or what it
                       would cost to renovate the space needed to accommodate the increased
                       number of administrative staff at Tuskegee. Therefore, VA officials could
                       not answer some key questions raised by congressional stakeholders.

                       VA’s incremental planning approach contributes to these communication
                       problems because it limits the amount of information available about the
                       integration before implementation begins. Providing this information
                       would enable VA to communicate more effectively with stakeholders.
                       Moreover, presenting such planning results in a written document that
                       could be shared with stakeholders would further enhance the opportunity
                       for effective communication by allowing VA to obtain stakeholders’ views
                       and gain support or “buy-in” for its proposed integration activities.

Using an Independent   Objective facility integration planning based on independent judgment is
Planning Approach      critical to successful integrations. Making decisions to restructure medical
                       facility services when the decisions could adversely affect the planners’
                       own interests presents an inherently difficult situation. Many competing
                       interests are at stake in VA’s integrations, including those of VA employees,
                       medical school personnel, and residents of affected communities. As
                       planners, these groups may not aggressively consider all viable options
                       and may avoid difficult choices by focusing only on marginal changes to
                       the status quo. In such situations, VA integrations might yield less than
                       their full potential benefit to veterans, needlessly limiting savings available
                       for reinvestment.

                       For example, in the West Side/Lakeside integration, VA uses work groups
                       to study integration of individual clinical services. Medical school faculty
                       chair the work groups that will make proposals for how VA will integrate
                       two of the more important services—surgery and medicine. The work
                       groups are expected to address integration of management and
                       consolidation of services. A potentially divisive issue is whether to
                       consolidate clinical services and, if consolidated, where the services
                       should be located. Because the planners will be greatly affected by the
                       outcomes, it has proven extremely difficult for the competing medical
                       schools to address this issue.

                       Page 8                                                       GAO/T-HEHS-97-184
VA Health Care: Lessons Learned From
Medical Facility Integrations

To overcome this problem, a more independent planning approach using
planners (full-time VA planners or consultants) with no vested interests in
the geographic area could be used to develop data, explore options, and
recommend actions to the network director.

In conclusion, VA has only scratched the surface in reaping the benefits of
medical facility integrations; the greatest benefits are yet to be realized.
Effective integrations involve difficult choices and, as we discussed today,
the decisions should be objective and in the best interests of veterans.
Toward this end, we encourage VA to continue improving its integration
process, because every dollar saved by integrating in a more efficient way
can be reinvested to better meet veterans’ medical needs or serve veterans
who might otherwise not be served.

This concludes my prepared statement. We will be glad to answer any
questions you or Members of the Subcommittees may have.

Page 9                                                     GAO/T-HEHS-97-184

VA’s Approved Integrations

               VISNa                            VA health care system        Integrated facilities
               1                                Connecticut                  Newington, CT; West
                                                                             Haven, CT
               2                                Western New York             Batavia, NY; Buffalo, NY
               3                                New Jersey                   East Orange, NJ; Lyons, NJ
               3                                Hudson Valley                Castle Point, NY; Montrose,
               4                                Pittsburgh                   Pittsburgh (Highland Drive),
                                                                             PA; Pittsburgh (University
                                                                             Drive), PA
               5                                Maryland                     Baltimore, MD; Fort
                                                                             Howard, MD; Perry Point,
               7                                Central Alabama              Montgomery, AL; Tuskegee,
               11                               Northern Indiana             Fort Wayne, IN; Marion, IN
               12                               Chicago                      Lakeside, IL; West Side, IL
               13                               Black Hills                  Fort Meade, SD; Hot
                                                                             Springs, SD
               14                               Greater Nebraska             Grand Island, NE; Lincoln,
               14                               Central Iowa                 Des Moines, IA; Knoxville, IA
               17                               North Texas                  Bonham, TX; Dallas, TX
               17                               Central Texas                Marlin, TX; Temple, TX;
                                                                             Waco, TX
               17                               South Texas                  Kerrville, TX; San Antonio,
               20                               Puget Sound                  American Lake, WA;
                                                                             Seattle, WA
               21                               Palo Alto                    Livermore, CA; Palo Alto, CA
               22                               Southern California System   Sepulveda, CA; Los
                                                of Clinics                   Angeles, CA
               Veterans integrated service network.

(406142)       Page 10                                                               GAO/T-HEHS-97-184
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