Path to Recovery
"This is where you clear your mind of the day's worries. Take a deep breath and relax," Hahn says, standing at the entrance to the maze. "Once you find your way through it, you should feel centered. This is an exercise in stress management.
"We recognized the fact that veterans are not just dealing with death and dying, but a lot of other stressful issues," says Hahn, program manager for geriatrics and long-term care at the medical center. "They have a lot of spiritual needs that they don't get from the traditional model of medicine." While the labyrinth and a belief in its spiritual healing powers date back thousands of years, the medical center in upstate New York has only been using the technique for a year.
In a way, the Veterans Health Administration has been wandering through its own labyrinth for the past six years. The agency changed the way it cares for veterans, moving away from lengthy-and costly-inpatient hospital stays to outpatient settings and a focus on primary care. The transformation also created regional networks of health care facilities. Instead of operating independently, hospitals in a geographic area are now tied together. Most decision-making shifted from Washington to regional offices. In making these changes, VHA officials have had to weave their way through a complex maze filled with congressional oversight, veteran angst, employee unrest and bad publicity.
How well the VHA has maneuvered through this puzzle of change is open to debate. Studies in the Journal of the American Medical Association and the New England Journal of Medicine suggest that the quality of care has improved. Patient satisfaction numbers are on the rise. Regional directors have squeezed out efficiencies as budgets have flat-lined. Outpatient clinics have sprung up in remote areas to improve access. That's not to say the agency has reached the labyrinth's center and is now stress-free. Veterans groups complain that access still is a huge problem and that waiting times to see a physician are too long. They worry that specialty services such as mental health care and substance abuse treatment have gotten short shrift due to the emphasis on managed care. And wide performance variations exist among the 22 regions, known as Veterans Integrated Service Networks (VISNs).
The criticism is likely to grow as the VHA embarks on the next phase of its transformation. Through Capital Asset Realignment for Enhanced Services (CARES), the agency is taking stock of its facilities to determine whether veterans are getting the right care in the right settings. The program could result in shutting down and consolidating some facilities, an option that is sure to meet opposition wherever it's proposed.
"When you try to do a transformation of an organization this size, not everyone is going to lock hands and sing," says Gary Young, associate professor of health services at Boston University's School of Public Health. Young wrote a June 2000 report about the VHA's transformation for the PricewaterhouseCoopers Endowment for the Business of Government. "But this had to be done," Young says. "They made some very serious changes. Mistakes were made, but they couldn't be avoided."
Facing Extinction
VHA's transformation started in 1995 under the leadership of Kenneth Kizer. The top health care official in California, Kizer was highly regarded for making innovative changes at the state's health department. The Clinton administration recruited him to push through a series of aggressive changes at the VHA, an agency on the brink of extinction. The VHA had failed to keep pace with trends in the health care industry. It was stuck in a 1950s mode: to provide inpatient care at large hospitals. Meanwhile, the rest of the health care industry was moving toward managed care and treating patients far less expensively in outpatient settings.
Young points out that the VHA also was at risk of losing patients. During the mid-1990s, both Congress and state legislatures were exploring ways of extending health insurance to low-income people, who account for more than half of those the VHA cares for. Under most of these proposals, these low-income veterans would have become eligible for health insurance and been able to go to a hospital of their choice. Additionally, Congress and the Clinton administration froze the agency's budget. From 1995 to 1999, the Veterans Affairs Department's medical care operating budget, which supports VHA medical facilities, hovered between $16 billion and $17 billion. Funding increased to $20 billion in 2001.
Clinton administration officials and congressional staffers had been toying with VHA reform for years, but the wheels were not put in motion until Kizer was confirmed in late 1994. "I thought I had a pretty clear mandate to look at the system and redesign it," says Kizer, now president and CEO of the National Forum for Health Care Quality, Measurement and Reporting. "The clock was ticking, and we needed to move as fast as possible."
At the core of Kizer's vision was decentralization. "Everything was being decided in Washington," he recalls. "That meant it took forever to make the most minute decisions. One of the clear messages I heard was we had to decentralize a lot of operational decision-making. This isn't rocket science."
Instead of having 172 independent hospitals take orders from Washington, Kizer created 22 regional networks. Each network is an integrated web of care. Hospitals, nursing homes, home health care programs and outpatient clinics in a region align resources and delivery of care. Also instrumental in the transformation was changing the funding mechanism. In the past, funding was based on a facility's historic budget allocation. Inefficiency meant getting more money. Funding now is based on the number of patients served. It was one of Kizer's most politically unpopular moves. "Places like Florida and Texas and Arizona, where people had moved and retired, historically were on the short end of the stick because the money was flowing to Massachusetts and New York and Illinois. What we did meant shifting hundreds of millions of dollars from politically powerful areas," he says.
Vision Thing
While the changes forced some regions to do more with less, they also created flexibility, allowing regional directors to try new and innovative approaches to cutting costs, increasing access and improving care. One of the most successful adapters is VISN 2 in upstate New York and nearby parts of Pennsylvania.
The network, which covers 47 counties in New York and two in Pennsylvania, totaling 43,000 square miles with an estimated 573,546 veterans, has achieved tremendous efficiencies and is getting high marks from veterans. From 1996 to 2000, VISN 2 had the largest improvement in customer satisfaction scores of any network, according to VHA data. It also had the second-highest growth rate in patients served, from 82,049 in 1996 to 116,868 in 2000. During the same period, the cost per patient fell from $5,200 to $4,011. The 23 percent drop ranks among the best for the 22 networks.
The network made these strides in the face of dwindling resources. Its funding fell 5 percent from 1997 to 1998, and dropped an additional 1.1 percent in 1999. "The budget was so bad we knew we couldn't survive unless we reengineered extensively. We couldn't compete," says Frederick Malphurs, VISN 2 director.
Because of the new funding allocation system, the network was losing about $25,000 per "complex" patient. A complex patient generally has been in the hospital 30 days during a reporting period and requires extensive treatment. VHA provides about $50,000 per complex patient while treatment was costing VISN 2 about $75,000.
With the budget gun at his head, Malphurs in 1997 instituted an aggressive re-engineering plan. The network quickly shifted from inpatient care to alternative treatment options. That meant setting up outpatient clinics-now totaling 28-across the region. He also forged partnerships with private health care providers. Before 1996, VHA was prohibited from contracting for services with private hospitals or clinics. As part of the transformation, Congress lifted those restrictions.
In Elizabethtown, N.Y., for example, the network contracted with a local hospital to provide radiology services to nearly 1,500 veterans. Doing so saved time and money because the network did not have to find a facility and recruit staff. On average, contracting is about 30 percent cheaper than setting up a VHA-staffed facility, according to Malphurs. "You have to do an assessment and see which model is right for which communities. We are not contracting out everywhere and everything," he says.
The network's ability to find efficiencies and see more patients has helped turn around a dire budget situation. In fiscal 2000, funding grew 11.9 percent from the 1999 level. Between 1996 and 2001, the network's allocation increased 14.3 percent, despite some lean years during the mid-1990s.
Care Lines
Malphurs contends that few if any of the improvements could have been made under a centralized VHA. Case in point: VISN 2's care lines. Before the transformation, the network had five medical centers. Each had a director, associate director, chief of staff, head nurse and so on. There was another layer of bureaucracy under that. Malphurs did away with the directors and created five so-called care lines, which function as network-wide business units. They include medical, diagnostics and therapeutics, geriatrics and extended care, behavioral health, and management systems.
Each care line director has line and budget authority for a unit. As head of the behavioral health care line, for instance, Scott Murray is responsible for aligning resources and treatment decisions across the network. "It means that we have a network-wide vision now. So if Albany needs resources, Buffalo and the other centers will make sacrifices. And they've been willing to do that," Murray says. "When we had facility-based decision-making, no one wanted to give up anything."
In general, veterans say they are satisfied with the level of care and believe network leaders are listening to their concerns, according to James Jewell, a service officer with the New York branch of the Veterans of Foreign Wars. But there are points of contention as well. The ongoing argument over the level of funding for mental health services and access to psychologists in community health clinics is one example. This problem plagues the VHA nationwide.
The transition has not been easy on employees. Medical center directors were reluctant to relinquish authority. In fact, none of the original medical directors at the five hospitals stayed to see the transformation through. Some line employees complain about a never-ending emphasis on continuous improvement and change. It's a problem that could result in burnout, says Tim Hoff, assistant professor of health policy management at Albany University. At some point, management needs to let employees catch their breath and enjoy the fruits of their labor, he says.
Another danger is that care lines become isolationist. "You can focus so much on your product that you lose sight of the forest through the trees," says Hoff, who plans to issue a report on the behavioral health care line this fall. He says the care lines have to interact with each other. "That's an area where they will have to focus attention because I don't think they are there yet."
The Pendulum Swings
Decentralization has allowed networks like VISN 2 to become more innovative and efficient, but it also has created a system of uneven performance across the nation. VISNs 1 (New England) and 14 (the Central Plains) had "extremely slow" rates of growth in new users, according to a 1999 review by the American Legion. The General Accounting Office found variations across all 22 networks in waiting times, drug formularies and screening for hepatitis C.
In the case of pharmaceuticals, GAO last January reported that not all medical facilities were in compliance with the national formulary (GAO-01-183). Drug formularies are lists of medications that health care organizations encourage their providers to prescribe. The VA's national formulary ensures that veterans have access to the same pharmaceuticals no matter where they seek care. GAO also found that 12 of the 22 networks did not collect data on approved or denied nonformulary drug requests, as required by headquarters. Without the data, the VA does not have an accurate picture of which drugs are being requested and should be considered for addition to the national formulary. In addition, the networks lack a standardized method for approving and denying nonformulary requests. For patients moving from one location to another, this can lead to lengthy delays in getting medication.
"Headquarters went too far in saying, 'Hands off.' The pendulum swung too far to autonomous decentralized networks," says Cynthia Bascetta, GAO's director of veterans health and benefits issues. "There is a need for more direction. Headquarters should set standards, provide support and hold network directors [who] are not performing accountable."
Directors are accountable for their performance, counters Frances Murphy, deputy undersecretary of the VHA. Leafing through a large three-ring binder, she points to page after page of quality measures that network directors are required to meet. Various performance reports are reviewed on a monthly, quarterly and yearly basis. Poor performers get bad evaluations and are not eligible for bonuses. Directors are evaluated on how well they meet the goals in their performance agreements. They also can earn extra points by taking leadership roles on any number of VHA's national priorities. Last year, bonuses for network directors ranged from $12,000 to $24,000. Network directors conduct similar performance evaluations of facility managers.
The proponents of centralization appear to be making headway. Sources within the VA say Secretary Anthony Principi is looking at ways for Washington to regain some control of the networks. It's not clear how or in what form he would centralize decision-making. "We need to have enough consistency in the system so a veteran can walk into any one of our facilities and be guaranteed the highest quality care available," Murphy says. "That requires some centralized planning and policy. It is important that we put a policy in place and we hold people responsible for meeting that minimum standard, so we don't have to micromanage in all cases."
Chicago Blues
VHA's transformation won't be truly complete until it tackles perhaps its biggest management challenge-realigning its assets. If the experience in VISN 12, which serves Chicago, Wisconsin and upper Michigan, is any example, agency officials may find themselves wandering in the labyrinth looking for that stress-free center for quite some time.
The agency launched CARES, its asset realignment effort, last year in VISN 12 and issued a set of recommendations July 16. All the networks will be reviewed by April 2002.
"It was designed to be a very local process," says Kizer, who initiated CARES. "What has happened since then is it appears to be much more centralized. What seems to be missing is the local participation."
Indeed, Joe Petrosky of the American Legion's Illinois branch says local veterans groups were largely left out of the loop during the review. He says officials from the VA and its contractor, Booz-Allen and Hamilton, briefed the groups but rarely solicited input on such issues as transportation and access. The result is a proposal that has angered nearly every constituency in the region. In Chicago, for instance, the agency proposed eliminating inpatient care at the 126-bed Lakeside VA Medical Center. That would leave Chicago with one VA inpatient hospital, West Side Medical Center, where the number of beds would drop from 219 to 177. The hospitals are six miles apart. VA officials determined that the city did not need two hospitals so close together.
The staff at Northwestern University Medical School opposes the plan. Students and residents at the university are assigned to Lakeside for training. Petrosky says closing Lakeside will leave many veterans out in the cold. Chicago has been through this before. GAO and the VA earlier recommended closing one of the Windy City's two VA hospitals. Those plans were shelved due to intense public and congressional pressure.
The VHA's Murphy says communication should improve as CARES rolls out nationwide. The key, she says, is to ensure that the VHA has the data to back up its proposals. Additionally, the program has to stay focused on access and providing quality care. She does not want the agency to become mired in an ongoing debate over bricks and mortar.
"My fear is exactly that," says Kizer. "People will use the unique circumstances of Chicago to either endorse or indict CARES across the rest of the country. Chicago should be an example of one. I don't think you can extrapolate it to the other networks. CARES is very sound, and it needs to be done, but if you have one bad example that is held up as the benchmark, then the whole project is torpedoed."