STATEMENT OF
THE HONORABLE ANTHONY J. PRINCIPI
SECRETARY OF VETERANS AFFAIRS
BEFORE THE
COMMITTEE ON VETERANS' AFFAIRS
UNITED STATES SENATE

September 11, 2003

Mr. Chairman and Members of the Committee:

I am pleased appear before the Committee to describe the process that produced VA’s Draft National CARES Plan, which represents the most comprehensive effort to develop a roadmap that will guide the allocation of capital resources within the Veterans Health Administration (VHA).  With me today is Dr. Robert Roswell, VA’s Under Secretary for Health, who will discuss the contents of the draft national plan itself.

CARES is a comprehensive, data-driven planning process that projects the future demand for health care services in 2012 and 2022, compares them against the current supply, and identifies the capital requirements and the asset realignments VA needs to improve access, quality, and the cost effectiveness of the VA health care system.

VA initiated CARES to create a strategic framework to upgrade the health care delivery capital infrastructure and ensure that scarce resources are placed in the types of facilities and locations that would best serve the needs of an aging veteran population with increased acute and outpatient care needs.  The dramatic changes in the delivery of VA health care services including the expansion of outpatient services, an aging infrastructure with the average age of buildings over 50 years, costs associated with the maintenance of excess space, and the potential use of underutilized campuses to provide revenues to enhance services were powerful factors that coalesced into the need for CARES.  GAO’s 1999 reports, which were critical of the management of vacant space within VHA, and Congressional reluctance to provide capital without an overall assessment of the current and future capital requirements to meet the health care needs of veterans have reinforced the importance of a comprehensive capital plan.

The CARES Process was designed to balance the need for a national planning process with the recognition that health care delivery is local.  This was accomplished through the use of national databases that standardized the forecasts of enrollment and utilization, the identification of national planning topics, and the use of standardized tools in determining how to meet the projected needs.  Forecasts of enrollment and the need for outpatient and inpatient care were developed through the year 2022 for each VISN and market area.  Data were integrated with Medicare to ensure forecasts reflected Medicare utilization.  All VHA space was assessed for functionality and safety.  Based upon these data, a national planning agenda was developed and sent to the field for solutions.  A standardized costing and decision support system assisted in the planning.  The agenda included the development of cost effective solutions to meet the future space requirements, the mission of small facilities, reduction in vacant space, consolidations and realignments of services and campuses and collaboration with DoD.  Stakeholder input was required and occurred at the national and field levels.  Seventy-four market plans were submitted as input to the development of the Draft National CARES Plan.

CARES was initiated in a Pilot in VISN 12 in 1999.  The CARES process focuses on markets – or distinct veteran population areas.  The Phase I pilot identified three market areas: theChicago area, Wisconsin and the Upper Peninsula of Michigan.

In this initial effort, the contractor assessed veterans’ health care needs in the test market and then formulated various solutions that could meet those needs.  Following a detailed review process a plan to realign capital assets in the VISN 12 market areas was approved.  The results of CARES Phase I were announced in February 2002.

In preparing for CARES Phase II extension of the process to the remaining 20 VISNs, I determined that VA personnel, rather than contractor staff, would coordinate and carry out the planning process.  The conversion from a contracted study in one VISN, to a VA-operated planning process extended to the entire system, went well beyond the scope of the pilot.  The use of VA staff was necessary to ensure that a process was created that would be ongoing and become part of VA strategic planning process rather than a one time study performed by outside consultants.

In effect, CARES Phase II piloted a new process that will be integrated into a redesigned strategic planning process.  The challenge of developing a national process while recognizing that health care is delivered through local systems required a new approach that included the following elements:

• use of national databases and methodologies to determine current and future needs;
• assessment of all space in VHA for its safety and functionality;
• national definition of the planning initiatives to be addressed by VISNs;
• VISN development of plans that address the planning initiatives;
• standardized planning support systems and data for plan development and costing to ensure consistent results;
• policy and tools that supported local and national stakeholder involvement;
• on-site technical support to the VISNs for plan development; and
• detailed national review process to create a national plan from the VISN plans.

A major enhancement in the Phase II model was increased commitment to the aggressive, systematic inclusion of stakeholders.  The requirement for in-depth communications with a vitally interested public at national, regional, and local levels was integral to the process.  Multiple modalities and media were designed and used to inform stakeholders about CARES in general and to solicit their comments on potential changes in respective markets in particular.

Nine-Step Planning Model

The enhanced CARES model comprised a nine-step process designed to ensure consistency in the development of CARES Market Plans within each VISN.

Step 1:  Identify Market Areas as the Planning Unit for Analysis of Veteran Needs

The VISNs identified 74 market areas based on standardized data for veteran population, enrollment, and market share provided by HQ.  Each network also used local knowledge of their unique transportation networks, natural barriers, existing referral patterns, and other considerations to help select their market areas.

Step 2:  Conduct Market Analysis of Veteran Health Care Needs

A national actuarial firm – referred to hereinafter as CACI/Milliman – that had developed enrollment, workload, and budget projections for VA budget development, under VA direction modified the model to develop standardized forecasts of future enrollees and their utilization of resources from 2002 through 2022 for each market area in all VISNs.  Translation of the data into the VHA CARES Categories listed below  facilitated the identification of “gaps” between current VHA services and the level or location of services that will be needed in the future.  These were “high level” macro categories that would enable planning to occur at a level of detail adequate for capital needs rather than detailed service-level planning:

Inpatient Medicine                             Outpatient Primary Care

Inpatient Surgery                               Outpatient Mental Health

Inpatient Psychiatry                           Outpatient Specialty Care

Outpatient Ancillary and Diagnostic Care

The model also projected workload demand in the following categories, which were not used to identify gaps because private sector benchmark utilization rates were not available to validate results:

Residential Rehabilitation                            Domiciliary

Intermediate/Nursing Home Care               Blind Rehabilitation

Spinal Cord Injury

Since the statistical model’s data validation on these non-private sector services was not adequate for objective planning, these categories were either removed from the Phase II cycle (i.e., held constant) or, as in the case of Blind Rehabilitation and Spinal Cord Injury, alternative forecasting models were developed by teams of VA planners and VHA experts from the concerned special disability programs, who collaborated to produce these unique projections.

Data on the current supply and location of VHA health care services were collected for all facilities, markets, and VISNs.  In most instances, FY 2001 was used as the source year for baseline data.  A profile was created for each VISN and made accessible to VHA staff on a web site established as the repository for all CARES data.  Baseline data included:

• Space (condition, capacity and current vacant space)
• Workload (FY 2001 bed days of care and clinic stops)
• Unit Costs (facility specific in-house and contract unit costs)
• Special Disability Population Data
• Access Data
• Facility List
• Research Expenditures and Academic Affiliations
• Clinical Inventory
• Potential DoD, VBA and NCA Collaborations
• Enhanced Use Lease Valuations
• Summary of VISN FY 2003/FY 2007 Strategic Plans

Step 3:  Identify Planning Initiatives for Each Market Area

Data collected in Step 2 made it possible to directly compare current access and capacity, with quantitative projections of future demand.  “Gaps” were indicated in any market where actual utilization in FY 2001 was significantly less than utilization projected for FY 2012 and FY 2022.  Such gaps in various market areas formed the basis for the development of “planning initiatives” -- essentially a description of the potential future disparity between capacity and need. 

Planning Initiative Selection Teams were formed and selected planning initiatives for each VISN and Market Area based on established criteria for planning remedial action.  Planning Initiatives were identified in the following areas:

• Access to Health Care Services
• Outpatient Capacity (Primary Care, Specialty Care, Mental Health)
• Inpatient Capacity (Medicine, Surgery, Psychiatry)
• Special Disabilities (Blind Rehabilitation, Spinal Cord Injuries and Disorders)
• Small Facilities
• Consolidations and Realignments (Proximity)
• Vacant Space
• Collaborative Opportunities (DoD, VBA, NCA)

In addition to the Planning Initiatives, all workload changes that resulted in gaps between predicted demand and current supply had to be planned for, including in-house provision of services or by contracting, sharing, or other arrangements.  The requirement to manage all projected workload was a significant addition to the planning process; it was included in order to assure that all space needs were addressed in the National CARES Plan.  The Planning Initiatives and their data were transmitted to the field in November 2002 to begin the market planning process.

Step 4:  Develop Market Plans to Address Planning Initiatives and All Space Requirements

The selected planning initiatives formed the key elements of the VISN CARES Market Plans.   All VISNs developed market plans, which included a description of the preferred solution selected by the VISN for all planning initiatives identified in every market as well as potential solutions considered to address each planning initiative.

VISN planning teams were expected to identify alternative solutions for their plan development process.  In proposing these various alternative solutions, VISN planners were required to assemble specific supportive data, which were entered into the IBM-developed market-planning tool.  The standardized algorithms in the market planning tool assured a consistent methodology for analyzing each solution’s impact on workload, space and cost, as well as other CARES criteria such as quality, access, community impact, staffing, and others

Thus, all VISNs used the same criteria and planning tool (using local operating and capital costs) to determine the relative merits of meeting future demand via contract, renovation of available space, new construction, sharing/joint ventures/enhanced use or acquiring new sites of care.  VISNs briefed stakeholders on their planning initiatives, and presented their proposed solutions.  Comments and other feedback from stakeholders were duly noted for incorporation into the planning process.  VISN market plans were submitted to VHA Headquarters on April 15, 2003.

Step 5:  VACO Review and Evaluation: Developing the Draft National CARES Plan

The VISN plans served as input to the development of the Draft National CARES Plan.  The Draft National CARES Plan is not a compilation of individual VISN plans.  It represents a comprehensive series of national decisions made after reviewing the individual VISN Market Plans.  Each VISN CARES Market Plan was subjected to an extensive tri-partite review before ultimately being considered by the Under Secretary for Health for inclusion in the Draft National CARES Plan.  The groups conducting the reviews were field and headquarters review teams organized by the National CARES Program Office, the Clinical CARES Advisory Group (CCAG), and the CARES Strategic Resource Group (also known as the “One VA Committee”).  The clinical experts (CCAG) provided the most rigorous review and comments on issues with medical and other direct care (including mission-related) implications, while the Strategic Resource Group took a more generalized management approach, looking especially closely at matters concerning collaboration with other departments or administrations.

The National CARES Program Office performed a comprehensive and intensive review, assembling review groups to look at similar types of planning initiatives from all VISNs, assuring a structured assessment that was consistent across the VA system as well as an overall assessment of whether the individual solutions within a market added up to a sensible market plan.

The final review was by the Under Secretary for Health, who reviewed the key issues and the comments from the diverse review groups and stakeholders.  As a result of the Under Secretary for Health’s review of the adequacy of the market plans, selected VISNs were required to review the potential realignment of specific facilities/campuses and to consider the feasibility of conversion from a 24-hour/7day-per-week operations to an 8-hour-per-day/40-hour-per-week type of operation.  The rationale for the requested review was to fully assess the potential to consolidate space and improve the cost effectiveness and quality of VA’s health care delivery.  The guidance included the continuation of all services to veterans as part of the realignment review.  The results of this initiative were completed in July 2003 and incorporated into the draft National CARES Plan.

The product of the Under Secretary’s review process and policy decisions formed the draft National CARES Plan that I transmitted to the CARES Commission on August 4, 2003.

Step 6:  Independent Commission Review

I established the CARES Commission in December 2002 to provide an objective and external perspective to the CARES process.  It is not expected to provide a ‘de novo’ review of the VA medical system.  Rather, the Commission is charged with reviewing the Under Secretary’s Draft National CARES Plan so that it can make specific recommendations to me regarding the realignment and allocation of capital assets needed to meet the demand for veterans’ health care over the next 20 years.

At the first of its monthly meetings, in February, I asked the Commission to examine the Draft Plan with a critical and independent eye; I also asked the Commission to report to me on the validity of the opportunities identified in the Plan for improving our ability to provide quality healthcare for veterans by effective deployment of physical resources.

The Commission is made up of 16 individuals from all walks of life—doctors and nurses, medical and nursing school professors and deans, health care professionals, members of veterans service organizations, former VA officials, business managers and leaders in their communities.  Each member brings his or her special qualifications and experiences to the Commission, as well as sensitivity to the Commission’s unique mission.  Chairing the Commission is the Honorable Everett Alvarez, Jr., who is best known as the first American aviator shot down over North Vietnam and who was a prisoner of war for 8-1/2 years.  Among his other accomplishments, Chairman Alvarez served as Deputy Director of the Peace Corps, and as Deputy Administrator of the Veterans Administration for four years.

The Commission may accept, modify or reject the recommendations in the Draft National CARES Plan.  In making its recommendations, the Commission will consider information gained through nation-wide site visits, written comments from interested parties and formal public hearings.  The Commission completed 59 of its 65 site visits in July, with some scheduled into this month.  These informal tours through VA facilities and the geographic areas they serve have included meetings and conversations with many veterans, individuals inside the VA family, and local community leaders.  The Commission has completed over half of its 36 formal public hearings, with the last one scheduled for October 3.

Step 7:  Secretary of Veterans Affairs Decision

I anticipate that the Commission will provide me their recommendations and supporting comments regarding the Draft National CARES Plan by December 2003.  After reviewing their recommendations, I will make a determination to accept, reject, or refer back to the Commission for additional review or information prior to making a final decision.

Step 8:  Implementation

VISNs will prepare detailed implementation plans for their CARES Market Plans, which will be submitted to the Under Secretary for Health for approval.  Approved market plans will be used by VISNs to develop capital proposals that will be selected for funding through a capital prioritization process that is linked to the CARES process and to subsequent strategic planning cycles.

Step 9:  Integration into Strategic Planning Process

As VISNs proceed with the implementation of their CARES Market Plans, the planning initiatives and proposed solutions will be refined and incorporated into the annual VHA strategic planning cycle.  The integration of capital assets and strategic planning will ensure that programmatic and capital implementation proposals are integrated into current VHA strategic planning and resource allocation.  The alignment of policy assumptions and strategic objectives will thus form an integrated planning process.

Mr. Chairman, in a recent article in the Washington Post, Dr. David Brown commented on VA by indicating that “VA is the most safety conscious, self aware, and in many ways the best run medical system in the country.”  This is high praise indeed from a well-respected physician, and it is my goal is that the VA strategic planning process will in every way possible reflect the standards and performance implicitly expressed in Dr. Brown’s statement.  The CARES initiative is an important step in that direction.  This completes my testimony.  I will now be happy to answer any questions that you or other Members of the Committee might have.