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Veteran's Health care: time for a change? (Veteran's Health Care).

The Department of Veterans Affairs' mission is "to care for him who are shall have borne the battle for his widow and orphan." The Veterans Health Administration comprises 172 hospitals that are the hub of the health care delivery system. It is the largest provider of graduate medical education, and one of the major research organizations in the United States. The medical care budget exceeds $17 billion annually. Most of the persons cared for are not legally entitled to this health care based on service connected disability. The utilization of acute care hospital beds appears excessive when compared to that obtainable with managed care for Medicare or commercial insurance beneficiaries-the cost per member per month is three times higher. There may also be exploitation of the Veterans Administration hospitals by university medical schools. The Veterans Health Administration is a very expensive way to deliver care to entitled service connected veterans. Therefore, it is suggested that privatization be considere d as an alternative vehicle for delivering health care.

Key Concepts: Veteran's Health Care/Cost Implications/Privatization

THE DEPARTMENT OF VETERANS AFFAIRS' (VA) mission is, in the words of Abraham Lincoln, "to care for him who shall have borne the battle for his widow and orphan." (1) This mission statement does not prescribe that the care will be separate, exclusive, or in any way sequestered from the mainstream of care in the United States. In particular, it does not prescribe a separate medical system. The fact that the VA system is insular and archaic in design and practice is largely due to the failure of Congress to respond to VA leadership for reform. (2)

The Veterans Health Administration is the medical care delivery portion of the Department of Veterans Affairs. Kenneth W. Kizer, MD, is the VA Under Secretary for Health and functions as the Chief Executive Officer. Kizer oversees the nation's largest integrated health care system with a medical care budget exceeding $17 billion, approximately 200,000 staff, 172 hospitals, 376 ambulatory care clinics, 131 nursing homes, 33 domiciliaries, 205 readjustment counseling centers, and other facilities. In addition to this, the VA is the largest provider of graduate medical education and also one of the major research organizations in the United States. (1) It is not clear that all of the components of this massive organization directly benefit "he who has borne the battle," or that this system is cost-effective in addressing its mission.

In the current health care revolution, the delivery of medical care to the veteran should be re-examined in light of the tremendous changes in two of the four major health care systems for: (1) the employed, insured, middle income America; (2) the unemployed, uninsured, inner-city minority America; (3) military medical care; and (4) Veterans Administration health care. (3) It may be that this latter system could be absorbed into or contract with one of the others which are continuing to evolve in a more cost-effective fashion and that clearly have excess acute care bed capacity.

In order to examine whether this is reasonable, it is first necessary to describe the system that exists for veteran health care. It should be recognized that medical care is but one component of the veteran's care. The Department of Veterans Affairs provides social services and benefits as well. In this article, only the medical care portion will be examined.

The VA as it is now

One of the peculiar characteristics of the care for the veteran is that eligibility is variable from site to site. (2) But in all sites, veterans with service connected disability and who are poor have eligibility for care. Approximately 40 percent of this group use the VA--10 percent of veterans overall. This care is also available for conditions that represent a progression of the injury or illness for which they receive the disability. What is a variable is whether those who are not service connected veterans or who are not poor are eligible for care. (1)

In fiscal year 1994, 2,932,968 veterans applied for care. Of these, 1,158,917 were service connected. Thus, only 39 percent of the veterans were service connected or fully entitled to such care. (1) It is this latter number that clearly has an entitlement to care, either delivered by or sponsored by the Veterans Health Administration. Whether or not non-service connected veterans are entitled morally to care under the Veterans Health Administration is open to debate, however, there is no legal entitlement to such care. It is presumed that such non-service connected individuals have access either to the employed, insured, middle income or the unemployed, uninsured, inner-city minority American health care system.

The Veterans Health Administration has a unique relationship to its own dedicated consumer groups both locally and nationally. (3) These groups function as major political lobby agencies for veteran benefits. Examples of these agencies are the Disabled American Veterans, the Vietnam Veterans associations, the WWII Veterans associations, the Korean War Veterans associations, The Retired Officer Association, and the American Legion. All of these organizations maintain proactive postures in regard to obtaining as much entitlement for their veteran constituents as possible.

The veterans health care beneficiaries have an emotional allegiance to the veterans organizations and services, whether or not the level of quality warrants such loyalty. Within the Veterans Health Administration central office are three layers of administration: (1) the office of the Under Secretary for Health: (2) 13 subordinate offices; and (3) 45 program areas subordinate to the 13 offices. This represents an unwieldy bureaucracy in the central office itself, and is reproduced to some extent at the local level.

Kizer restructured the regional offices into Veterans Integrated Service Networks (VISN) in March 1995 and realigned the medical facilities into 22 VISNs. This structure replaced the four regional offices, as well as their 44 component divisions. Network directors have strategic planning and budget responsibility over all medical facilities and their network, as well as authority and responsibility to meet unique community needs.

The VISNs range in size from five to 12 medical facilities and resources are allocated among the medical centers and clinics. Contract services are developed with the private sector and shared resource agreements with the Department of Defense will be established or expanded by the VISNs. (1) The VISNs' headquarter sites are located in the following cities: Boston, Albany, Bronx, Pittsburgh, Baltimore, Durham, Atlanta, Bay Pines, Nashville, Cincinnati, Chicago. Minneapolis/St. Paul, Ann Arbor, Omaha, Kansas City, Jackson, Dallas, Phoenix, Denver, Portland, San Francisco, and Long Beach. (1)

This restructuring eliminated several hundred positions and saved $9.3 million per year. In addition, in his first year as CEO of the Veterans Health Administration, Kizer decreased the central office staff by 25 percent, which generated savings of $8.7 million dollars annually. Eight hundred and eighty-seven forms, or 25 percent of the total, were eliminated. Many of the remaining forms were simplified--the patient intake form was reduced from 90 questions to 16. A universal VA access card is being piloted instead of the archaic system of each facility requiring a specific identification card. (2)

The paradoxes

There are some paradoxical features of the Veterans Health Administration system. It is large and hospital-based. There are 172 hospitals that serve as the administrative and functional hub for other facilities. It is long-term care oriented and lacks a focus on preventive care, which is often obtained through other community resources. There is no emphasis on routine ambulatory care, and very little focus on wellness concepts. (3) All of these characteristics comprise a different orientation from the mainstream changes in the United States health care in the 1990s and the advent of managed care. This system is more reminiscent of medical care 10 to 30 years ago and it has changed little until recently. (5)

Changes that have occurred in the past few years reflect what is happening in the other health care systems. (4) General internal medicine modules or firms" are designed to provide continuity and comprehensive care--a telephone triage system screens and prioritizes medical problems and the patients are seen the same day or as needed. Each patient is seen by the same primary care provider at regularly scheduled visits. Providers interact with the module dietitian, social worker, clinical pharmacist, psychologist, psychiatrist, and other health care team members to provide comprehensive health care.

Case management has become an integral part of the veteran's health care. Ambulatory surgery centers and ambulatory management of patients have shifted the emphasis away from hospitalization for virtually all diagnostic and therapeutic care.

Another feature of the Veterans Administration hospitals is that a very high percentage are "deans" or teaching hospitals which are closely affiliated with university medical schools. This linkage with the university medical schools was developed in order to recruit high caliber faculty and residents to care for the veterans. This goal, indeed, was accomplished since the faculty and the residents at the affiliated veterans hospitals meet the same criteria for selection and advancement as do their counterparts based at the university. But It comes at a price.

An eighths system exists, whereby a faculty member/staff physician may receive from one to seven-eighths salary support of the veterans hospital administration physician scale. This is then supplemented by the university medical school so that the faculty member/staff physician is compensated at the same magnitude as those who are paid by the university. From personal observation, the Veterans Administration does not receive the full measure of these eighths arrangements and occasionally it is severely abused.

Closely linked with this faculty support is the fact that the VA funds Career Development Awards, start-up research projects, Merit Investigatorships, and individual research projects. The National Institutes of Health, Research 01 and Program Project 01 grants, and the Research Career Development Awards are investigator initiated peer reviewed grants. These usually are more competitive and prestigious than the comparable VA funded award. Thus, these VA monies are somewhat more readily obtainable. Whether or not the VA should be in the business of subsidizing research work which would not be funded by the National Institutes of Health is open to question. It Is also debatable as to whether the VA should be funding research that is not directly related to veteran issues.

It is clear that the VA has some unique health problems. These include and are not limited to Agent Orange, the Persian Gulf syndrome(s), substance abuse, dual psychiatric diagnoses, and spinal cord injury. It is also logical that the Department of Defense (DOD) and the VA cooperate in some of these areas. To date, there have been significant difficulties in the DOD releasing funds to the VA. (2,6)

The sum of all of this relationship between the Veterans Administration hospitals and university medical schools is that there is a tremendous subsidy of the medical school and sometimes less than a full measure of return. The funding of graduate medical education to the extent that it improves veterans care Is defensible: however, it is questionable whether the Veterans Administration should be the largest funding source for graduate medical education in the United States.

Three thousand, two hundred and two part-time physicians largely represent the university subsidized faculty on the eighths system. In addition, many of the full-time Veterans Administration physicians participate in teaching.

The statistics

Inpatient care facilities have 53,082 average operating beds with a daily census of 40,647 with an inpatient occupancy rate of only 77 percent. (1) Kizer closed 4,500 hospital beds in his first year, eliminating 9,000 staff positions. (2) Surgical length-of-stay for those who were discharged after less than 100 days was 7.7 days and the medical length-of-stay for those discharged at less than 100 days was 10.6 days, not including blind rehabilitation, spinal cord injury, rehabilitation medicine, or intermediate care. Thus, the average length-of-stay for medical/surgical beds was 9.15 days.

There were 679,748 acute hospital admissions to medicine/surgery and neurology. The average length-of-stay of 9.15 days calculates to 2,120 days per 1,000 members per year (PTMPY). This is far above what one would expect for a group of individuals whose ages range from the 20s through the late elderly years. Medicare managed care, for example, averaged 1,295 bed days PTMPY. This obviously is a much older population. Commercial managed care acute hospital utilization under 65 years of age averaged 270 days PTMPY. (7) Outpatient care clinic visits increased in 1995 by 2.4 million visits. This is a 9.2 percent increase and is clearly a move in the right direction. (7)

It seems that this high utilization would probably increase costs per member for the delivery of care. The budget is approximately $17 billion for the 2,845,557 applicants under care. (8) The cost for these veterans calculates to be $497 per member per month (PMPM). If the cost is allocated to only those who are entitled to care, for example, the 1,158,917 service connected veterans who received care, the cost is $1,222 PMPM. Obviously, if only service connected veterans were allowed to access care, facilities could be closed and staff reduced, but probably never to a level where even Medicare PMPM rates would apply. Either of these figures far exceeds the $325 to $408 PMPM revenue for full risk Medicare managed care contracts. (6) For commercial managed care the average is $127 PMPM. (8)

Even if the Veterans Health Administration leadership continues to make strategic changes, there are major obstacles for the VA to be cost-effective. These include special interest groups, congressional micromanagement, system inertia, and the long tradition and expectation of inpatient care. While cost reductions of $9.3 million and $8.7 million are impressive, they are a tiny fraction of the more than $17 billion that calculates to exorbitant costs of care PMPM. (8)


It seems that the Veterans Health Administration is a very expensive way to deliver care to the more than one million entitled service connected veterans. There are areas of activity and funding supported by the Veterans Health Administration that are questionable as to their contribution to the mission of the Department of Veterans Affairs. It also appears that there has been exploitation of the Veterans Health Administration by university and medical schools. There is clearly a formidable bureaucracy guiding this system which is highly codified and inflexible, The need for acute care beds can be satisfied in the public domain. (3) The primary care physicians are needed in the public domain. (9)

It is questionable whether this program is affordable in the 1990s. Serious consideration should be given to privatization, since managed care insurance can be purchased, even when risk adjusted for prior disability, for considerably less than the PMPM figures calculated for VA delivered care.


(1.) Department of Veterans Affairs (VA). Home Page. http://www.vagov//VA.htm. Jan. 1996.

(2.) Beall, T. Ten minutes with Kenneth Kizer, MD. California Physician, 1996; June: 22-24.

(3.) William, S.J., and Torrens, P.R. Introduction to Health Sciences. 4th Edition. Albany, New York; Delmar Publishers. Inc., 1993:24-25.

(4.) Sigmond, R.M. Learning from the ghost of health care past. Health Care Reform Journal 1995: (Nov-Dec):14-19.

(5.) Department of Veterans Affairs (VA). Home Page. http://www.vagov//VA.htm, July, 1996.

(6.) Final Approval Near for VA Research: DOD/VA Cooperative Research Program Continues. AFCR News. 1995; 7:1.2.

(7.) Gabel, J.R., Dial, T.H. Hobar, 3. et al. HMO Industry Profile. Washington, D.C.; Group Health Assoc. 1994:23, 67, 197.

(8.) Office of the Assistant Secretary for Finance and Information Resources Management of the Department of Veterans Administration. FY 1996 Budget submission: Medical Programs 1996: 2:1-3.

(9.) Dalen, J. E. U.S. Physician Manpower Needs. Archives of Internal Medicine 1996; 156:21-24.

Michael P. Corder, MD, MHA, CPE, FACP, FACMQ, FACPE, is Chief Medical Officer at Bakersfield Family Medical Center in Bakersfield, California and Clinical Professor of Medicine at the University of California-Los Angeles. He can be reached by calling 805/327-4411 or via fax at 805/327-2517.
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Author:Corder, Michael P.
Publication:Physician Executive
Geographic Code:1USA
Date:Nov 1, 1998
Previous Article:Part 1 why has the U.S. experienced such difficulty?
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