Pentagon-VA partnership could save money, improve military health care

As America sends tens of thousands of troops into harm's way, an enormous medical establishment is already wrestling with how best to care for those who come back less than whole. In fact, there are two such establishments.

The Defense Department spends about $20 billion a year on the medical needs of some 6.2 million troops, family members, and retirees. And the Veterans Affairs Department spends about $25 billion a year caring for 4 million former service members, primarily the poor and the disabled. Getting these giant departments to work together better could save taxpayers billions and help heal those wounded in the nation's wars.

Now, after years of stops and starts-and kicks from Congress-the arcane but costly question of how the two departments can share the medical burden has made its way onto President Bush's agenda. But even with the president pushing, it can be hard to budge the two largest bureaucracies in the federal government.

Look at some success stories from the Southwest. For years, when a veteran in El Paso, Texas, needed specialized care, the VA outpatient clinic in town usually had to refer him to the nearest full-service VA hospital-in Albuquerque, N.M., a four-hour drive away. Today, that vet can go literally next door-to a military hospital. William Beaumont Army Medical Center gives the VA access to expensive expertise and equipment, such as pathologists and MRI scans, that the smaller clinic could never support on its own; in return, the VA reimburses the Army nearly $5 million a year, well below the going rate for the same medical care in the private sector.

As an added bonus, soldiers mustering out at Beaumont can get their VA workup for disability benefits done on the spot, where their military records are easily available. Meanwhile, up at Albuquerque, the tables are turned, with the big VA hospital there providing specialized support to a smaller Air Force clinic located on VA property-at an estimated savings to the military of $341,000 a year over private-sector providers of the same services.

All this sharing seems straightforward. It is not. Each joint venture took intensive negotiations to get it started-and constant work-arounds to keep it going. Reimbursement rates had to be thrashed out for every medical procedure or treatment. Every day, patient data is laboriously cut-and-pasted from the VA's records software into the military's incompatible program. The VA and the military still run separate pharmacies even when their facilities are under the same roof. And every new idea has to work its way up two chains of command, each with its own clashing culture.

With all of these obstacles, it's a wonder anything gets done. But two powerful trends in American medicine are pushing the departments together.

The first is specialization. In the old days of black bags and horse buggies, all doctors' training and tools were much the same. But today's treatments require an array of expensively educated specialists and their million-dollar machines-which few hospitals can afford on their own. In Albuquerque, for example, it takes the added demand from military patients to make having a VA mammography department worthwhile. And at Great Lakes, Ill., the Naval Hospital struggles to support an in-house radiology department, so it is working to send X-rays electronically to the VA's North Chicago hospital for analysis.

The second recurring theme is decentralization. More-sophisticated, less-invasive procedures mean fewer patients are recovering overnight in hospitals. More focus on minor surgeries, prescriptions, and catching illness early means more-frequent walk-in visits. This trend-reinforced by military downsizing over the past decade-means that both Defense and VA are underusing their big, old-fashioned, costly hospitals, at the same time they're struggling to build networks of smaller, cheaper clinics.

Sometimes, a new VA facility fits neatly into the unused space at a base hospital, as is the case at the VA clinic housed in the base hospital at Fort Knox, Ky. Sometimes, the two departments can build a community clinic together, as they're considering doing in Pensacola, Fla.

These two great trends have created countless local opportunities for sharing. By the Defense Department's estimate, VA and military facilities from the East Coast to Hawaii have some 600 sharing agreements valued at $86 million a year. But that's a drop in a $45 billion bucket-less than 1 percent of the two systems' combined health care spending.

Such figures show the limits of a retail approach to linking the medical services of the two huge departments. "An awful lot of it has been from the bottom up, [and] that's terrific, but it's a little too idiosyncratic," said Gail Wilensky, co-chair of a presidential task force on improving veterans' benefits, which is due to report in March. "The difficulty is attempting to institutionalize this."

When neighboring facilities happen to have like-minded managers, sharing can get started. But if either leader leaves, the successor might drop the project. And even joint ventures that build momentum must cut against the grain of incompatible bookkeeping procedures, clinical practices, and computers. Local innovators can work around such systemic problems-but only national leadership can solve them.

Which is what has actually started happening in the past few years. The two departments are buying drugs in bulk together: The estimated savings of $98 million in fiscal year 2001 more than tripled to $369 million in 2002. Last October, the VA and Defense Departments agreed on a common price list for medical services, based on Medicare standards. Now, instead of each facility laboriously negotiating unique reimbursement rates, said the undersecretary of Defense for personnel and readiness, David S.C. Chu, "they can just send a patient and send the bill." Local pilot projects such as El Paso's, where troops about to leave the service can get their VA disability exam while still on active duty, are being made standard procedure nationwide. And by 2005, the departments expect to be able to share key electronic medical records. An approving Congress has reinforced many of these initiatives in statute and set aside $15 million of each department's 2003 budgets specifically for new sharing ventures.

These successes build on two decades of hard work. But many observers in the bureaucracy, Congress, and veterans groups agree that this administration has given sharing new momentum. President-elect Bush raised the issue in his very first meeting with Anthony J. Principi, whom he later made VA secretary. And since then, Bush has personally nudged Principi and Defense Secretary Donald Rumsfeld to keep moving. Said Principi, "At Cabinet meetings from time to time, he will look at me and look at Don, and say, `How well are you two working together?'"

The workhorse of cooperation is a high-level council co-chaired by Principi's deputy, Leo Mackay, and by Chu. This council was created under President Clinton-albeit one level lower down, and with a narrower mandate-but it was virtually defunct by 2001. Now that it has been revived and elevated, said Chu, "there's a whole different tone between the leadership of the two Cabinet departments."

Years of painful history show the importance of such high-level pressure. After Congress passed the first law on sharing back in 1982, there was "a blossoming of sharing, hundreds and hundreds of agreements," recalled one long-serving Hill staffer. The sharing had died down by 1992, amid the distractions of post-Cold War downsizing at Defense and major internal changes at both departments. But by the mid-1990s, the heads of the two health systems-acting Assistant Secretary Dr. Edward Martin at Defense and Undersecretary Dr. Kenneth Kizer at VA-set up the original VA-Defense sharing council and held regular meetings.

"If we skipped a month," recalled Kizer, "things would start eroding immediately. It had to be continuous, ongoing pressure from the two top officials." Martin, however, retired in 1998; Kizer, a controversial, hard-charging reformer, was ousted in 1999, and sharing waned again.

The obstacles to VA-Defense sharing are enormous-and they represent more than bureaucratic stubbornness. Experts in both departments, Congress, and veterans groups point out that the two systems serve very different missions. Military patients are mostly young troops and their families-delivering babies is big business at base hospitals-who move every few years. Veterans are older, less mobile, and less healthy. For the severely disabled in particular, Defense has nothing to match the VA's world-renowned services for spinal cord injuries, blindness, and posttraumatic stress. And the one population eligible for benefits from both the VA and Defense-military retirees with 20 or more years of service-has fought a long, hard, and politically successful battle to get the majority of their medical care at the military hospitals to which they grew accustomed while on active duty. Any sharing that sacrificed the unique core competencies of each system would have generals, retirees, and veterans groups howling in protest.

"Any kind of merger of the two systems into some kind of hybrid would be totally unworkable," warned Richard Fuller, legislative director of the Paralyzed Veterans of America. "We've made that very plain." But short of that bright red line, most veterans advocates are perfectly willing to let the VA and Defense look for efficiencies, especially in "back-office" functions such as bulk purchasing of pharmaceuticals, which do not affect patients directly. "Both systems need to be careful," said Fuller, but "the approaches that the VA and DOD have taken so far have been more or less appropriate and done with common sense."

Senior officials are quick to emphasize that they plan no radical upheavals. "I don't think there's any thought or consideration being given to merging the two departments," reassured Mackay. "We serve some very different patient populations, and we serve them in very different ways.... There are some natural limits to what this [sharing] can achieve. That said, I think there are some powerful efficiencies that can be garnered; real savings that can be made for the American taxpayer; and real improvements in the quality of services that we give to service members and veterans."