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

May 13, 2002

Mr. Chairman and Members of the Committee:

I am pleased to appear before the Committee to discuss the merger of VISNs 13 and 14 into VISN 23 and what that merger means for the future of VA health care for all affected veterans.

On January 23, 2002, the Department of Veterans Affairs (VA) announced the merger of VISN 13 and 14 into new VISN 23. This merger has placed under one structure two health care networks that provided services to veterans in Iowa, Nebraska, Minnesota, South Dakota, North Dakota, and portions of western Illinois, western Wisconsin, and eastern Wyoming.

Combining these two Networks to improve health care delivery and access makes good sense. The facilities within the two VISNs maintain excellent Joint Commission for Accreditation of Health Care Organizations (JCAHO) scores, rank high in patient satisfaction, and are strong performers in quality measures. The change should have no effect on the facilities or their scores, beyond what is expected to be gained in administrative efficiencies. The two VISNs share many commonalities. They are close geographically and both have few metropolitan areas and large areas where rural health care is an issue.

VISN 23 provides services throughout a large region that includes Iowa, Nebraska, Minnesota, South Dakota, North Dakota, western Illinois and western Wisconsin. The Network operates nine medical centers, thirty-five community-based outpatient clinics, four domiciliaries, and seven VA nursing homes. Nearly one million veterans reside within the Network service area, which represents 4.3 percent of the Nation's veteran population. In 2001, Network medical facilities served a total of 215,711 patients and provided 1.8 million outpatient visits.

When compared to the other networks, VISN 23 ranks fifth in the number of patients served last year as compared to their rankings as individual networks where VISN 13 ranked 18th, and VISN 14 was 22nd. VISN 23's combined budget represents 4.87 percent of the national budget and ranks 11th among the other networks. Prior to integration, VISN 13's budget was 2.84 percent of the national budget and VISN 14's budget was 2.03 percent. As you can see from these numbers, integrating VISNs 13 and 14 into a larger VISN 23 has not created for the VISN leadership any extraordinary budgetary or workload challenges beyond those currently faced by other VA health care Networks. More importantly, integration has in no way diminished the VA's health care presence in Nebraska or any other area of the new VISN 23. A VISN is simply the administrative structure. Reorganizing that structure will not affect provision of care.

I would now like to highlight several of the benefits to be gained from this merger.

Improved Coordination of care

The two networks share many patients between Nebraska and South Dakota, and Minnesota and Iowa. For those patients that move between the borders, coordination of care will be improved.

Economies of Scale

The merger is expected to generate cost savings through economies of scales. Joint purchasing across the Midwest will bring lower prices for high cost medical equipment and supplies.

Budget Flexibility

Combining the budgets of former VISN 13 and 14 will give VISN 23 greater flexibility in allocating the estimated one billion dollars on VA programs and services. The merger is expected to generate cost savings, and the estimated savings ($1-6 million), over a period of time, will be redirected into expanding access and enhancing services for veterans throughout the Midwest.

Consolidation of Administration Functions

There will be opportunities to implement management efficiencies by integrating fiscal services, consolidating business offices, and materiel service functions, such as contracting, logistics, supply, and warehouse functions. Combining the talents of the staffs of the two former Network Offices (13 and 14) will bring greater efficiency and effectiveness and eliminate duplication. Of the more than 8,000 employees in VISN 23, less than four tenths of a percent (approximately 28 network office employees) will be directly impacted by the initial phases of this merger, although all VISN 23 employees will ultimately benefit from the improved, more viable organization created by the integration.

Clinical Benefits

Access to specialty care in rural areas such as those served by VISN 23 is often limited and traveling long distances to access health care can be a burden to the elderly. The Department of Veterans Affairs recognizes the importance of healthcare providers working collaboratively with veterans and their families in developing effective ways for delivering accessible, high quality health care in rural areas. A fully integrated senior clinical leadership team will seek to understand the veterans perspective and work cooperatively to eliminate or reduce long distance travel for veterans by developing health care delivery systems that will assure equitable access to VA health care across the Midwest.

When a veteran must travel to access care not available at the local VA medical facility, VA considers all available options and discusses with the veterans and family the most appropriate referral site for accessing the level of care needed. Referral patterns in Nebraska have remained the same in recent years and the reorganization of VISN 23 has not impacted on how or where veterans are referred for care. Currently, elective open-heart surgery is provided at the Minneapolis VA Medical Center through a contract that was established prior to the merger of VISNs 13 and 14. An integrated VISN 23 Cardiac Services Task Force is reviewing this current arrangement and is considering contracting for open-heart surgery in the Omaha, Nebraska area.

Overall, the new VISN 23 will build on the successes of VISNs 13 and 14 and seize opportunities for enhancing quality, expanding access, gaining efficiencies, and improving veteran satisfaction in areas that need improvement. Both Networks 13 and 14 have done excellent clinical work, and we expect that, in combination, the clinical staffs will learn from each other, creating a better and improved health care delivery system.

Today, I am also pleased to report some of the early successes of integration.

Pharmacy and Purchasing Efficiencies

The new Network has been able to identify savings as a result of the joint pharmacy and therapeutics committee's implementation of the use of generic substitutes and laboratory contracting.

Enhanced Mental Health Services

The Network has approved plans to expand psychiatry services in rural areas through the use of Tele-Psychiatry. Included in the plan is the hiring of Psychiatric Regional Care Coordinators in Nebraska and Iowa to enhance coordination of care and Tele-psychiatry services at CBOCs throughout Nebraska.

Improved Business Practices

Recently the Network identified problems within the Nebraska and Iowa MCCF Collections and Fee Basis Units. The Interim Network Director authorized funding for additional temporary staff and combined the resources and expertise of the Business Managers to review business practices and develop a plan for eliminating backlogs and improve business practices. Within the next six months, the Network expects to have the backlog eliminated and plans in place to prevent problems from recurring in the future.

Closing Comments

The merger of the two networks should be transparent to veterans. Each medical facility within Network 23 fulfills important missions for VA, and there are no plans to reduce or eliminate VA programs or services in Nebraska or any other state within the network. For the foreseeable future we plan to maintain a network presence in Lincoln. Unique programs, such as the partnerships VA created with community hospitals in Grand Island and Lincoln, Nebraska, to provide acute inpatient medical care, serve as models for exploring new opportunities and creating new initiatives.

The new Network will continue to address a number of challenges, including managing unprecedented growth within appropriated funding; exercising stewardship of all resources; increasing market share; continuously improving quality of care and veteran satisfaction; fully integrating administrative and clinical programs and processes; investing in capital improvements and information technology; and effectively communicating with veteran groups, labor partners, educational affiliates and other stakeholders.

We will monitor the integration process carefully, and I can assure you that service to Nebraska veterans will be preserved. If resources permit, we hope to expand services in community-based outpatient clinics so that we can provide better access for veterans living in rural Nebraska. We expect this integration to provide us better insight for providing care to patients in rural communities, and, as a result, Nebraska veterans will see more accessible and better-coordinated care. I assure you that VA is committed to redeeming the debt we owe to Nebraska's veterans and to all of our Nation's veterans.

Mr. Chairman, thank you for this opportunity to testify.