Pulling the Plug

eterans hospitals are among the few remaining symbols of what's good about government in communities across America. They're prized employers. They serve honorable clients. They demonstrate the concern and clout of congressional representatives. As a result, they're almost impossible to close. But the Veterans Affairs Department has come up with what it hopes is a foolproof plan to shut down nearly a dozen unneeded hospitals.

The plan also would add outpatient clinics and shift the location of many specialized services, but its true test will be closing hospitals. VA officials have spent four years collecting and crunching data to align an aging physical plant with 21st century health care needs. VA's Capital Asset Realignment for Enhanced Services initiative got under way in 2000 after the General Accounting Office found that the department probably was wasting $1 million a day maintaining unneeded buildings and land (GAO/T-HEHS-99-173).

But people in affected communities across the nation are outraged by the VA's plan to close hospitals. They are saddened by the potential loss of local hospitals and good jobs, and they're angry about what they see as high-handed decisions made far away in Washington. Veterans groups aren't happy either. Members of Congress are getting the message.

The reactions come as no surprise to anyone who has watched the Defense Department's base closing and realignment process over the years. Throughout government, agencies are struggling to offload aging buildings that serve no purpose other than to demonstrate legislators' largesse. So all eyes are on the VA: Will its painstaking four-year CARES process be enough to overcome the political pressure to keep unneeded hospitals open?

PRACTICAL MEDICINE

The Veterans Health Administration, which manages the nation's largest health care system, will spend more than $28 billion this year to provide care in its clinics and 162 medical centers, some of which date back to the 19th century. The typical VA hospital was built to care for veterans returning from World War II. Other hospitals opened in an era when mental patients and those with tuberculosis and other ailments were sent to bucolic campuses far from the polluted cities and from their families and friends. Some of the hospitals are too small by today's standards, while others have vacant wards.

When most of the medical centers were built, patient hospitalizations tended to be much longer than they are today. Over the past 35 years, the number of patients hospitalized in VA facilities on an average day plummeted from 91,878 to 14,925. The department has closed many wards and even some buildings on its medical campuses, but it has been slow to consolidate facilities and abandon locations.

The drop in hospitalizations occurred despite a significant increase in the number of veterans using VA's health services. Today, the VA treats many on an outpatient basis. Home health care is used when possible, and surgery often is followed by little or no time in the hospital. Preventive care heads off some major health crises, and new drugs reduce the need to hospitalize those with mental illnesses. The VHA has opened more than 1,300 outpatient clinics nationwide.

While the VHA was changing the way it practices medicine, the world around it was changing too. Fewer veterans remained in the big cities of the North and Midwest, and more lived in the Sunbelt. People were living longer and requiring more geriatric care. What's more, the VHA system has been strained by surging demand since 1998, when it was opened to all veterans, whether their health needs are related to military service or not. The 5.2 million patients the VA will treat in fiscal 2005 represent a 20 percent increase over the patient load in 2001. Waiting lists for medical care have exceeded 300,000 at times, although new enrollment was restricted in 2003 and other measures have reduced the backlog.

With all these trends converging, the VA's health care facilities no longer meet veterans' needs. The department spends about one-quarter of its $23 billion budget to operate, maintain and add to its real property, but 900,000 health care enrollees live too far from hospitals according to the VA's standards-60 minutes' driving time for urban areas, 90 minutes for rural areas and two hours for "very rural" areas.

These trends already were well known when the CARES program began, but by that time, Congress had lost patience with the department. Capital planning exercises had been under way for years at VA, but little change actually occurred. Robert W. Roswell, the undersecretary who heads the VHA, says that after GAO pegged the cost of unneeded buildings and land at $1 million a day, Congress vowed to hold up construction funding until the CARES process was completed. "We still have a major construction budget," Roswell says, "but it's been significantly reduced since the publication of that report."

CARES began late in 2000 with a pilot project in the Chicago area, which gathered large amounts of data about the area and veterans' health care needs, then weighed the options for meeting those requirements. VA Secretary Anthony Principi decided in February 2002 to consolidate inpatient services at the West Side Division VA hospital, and provide only outpatient services at the other Chicago-area hospital, Lakeside.

That decision foreshadowed many of the proposals that would emerge from the nationwide CARES process. Although the department is technically closing the Lakeside hospital, the building will continue to be used for VA medical services. The VA is unlikely to completely abandon locations in many cases.

Roswell says the Chicago realignment taught VA officials the importance of listening to stakeholders, such as politically powerful veterans organizations, labor unions and local officeholders, as it realigns. The Chicago experience also showed the importance of involving Defense Department officials, with whom the VA intends to collaborate more, along with the medical researchers who carry out the VA's important studies.

Principi ordered the nationwide effort to proceed, with an in-house number-crunching program as Job 1. With the data in the department's own computer systems, it could be updated, reused and sliced and diced as needed. A National CARES Program Office with a staff of eight in Washington and another 12 in the field went to work. With the Chicago area done, there were 20 remaining Veterans Integrated Service Networks-semiautonomous regional health care delivery organizations. Each network developed its own plan with help from the CARES office.

CARES produced a comprehensive inventory of the VA's medical real estate, travel times to points of care, projections of the number of veterans and their medical needs for the next 20 years; conducted a "gap analysis" to identify where needs would go unmet without intervening changes; and proposed modifications of facilities. The networks also considered alternative strategies such as contracting for services and joint ventures with Defense or other health care providers.

Developing forecasts of the need for VA patient services was no easy task. The department hired CACI International Inc. of Vienna, Va., and the national actuarial firm Milliman USA, headquartered in Seattle, to build a model that compares the VA's patient population, utilization of services and other characteristics with those in the private sector. "We know veterans are sicker than the insured private sector population," says Jay Halpern, acting director of the National CARES Program Office.

The model still is being expanded and refined. This spring, Halpern says, the department will issue projections for nursing home and long-term psychiatric care, areas not included in the first round of CARES. But even in 2003, VA had collected a wealth of data, such as local construction and renovation costs, an assessment of the condition of the 5,007 VHA buildings nationwide, and the characteristics of 2,000 types of visits to primary care providers. The data enabled the regional networks to analyze different scenarios for treating their patients.

PUTTING ON THE SQUEEZE

VHA's Roswell received plans from the 20 regional networks in mid-April 2003, and he had until June 1 to compile them. "I was struck by the variability" in the way the networks chose to bridge current and future gaps in care, he recalls. Roswell discovered that the model did not require the networks to achieve cost efficiencies. Although time was short, Roswell identified places with two or more hospitals near one another and asked the network directors to consider consolidating them. Some agreed, some didn't, but the speed of this review left little room for consultation with stakeholders, prompting criticism later.

In August 2003, Roswell issued a draft national plan to eliminate inpatient services at nearly 20 hospitals. Nine would be closed outright and the rest would be converted to outpatient clinics, nursing homes or other types of facilities. In 10 cities, the draft plan called for new hospitals or major additions to existing hospitals.

The 100-page plan also recommended opening 242 outpatient clinics and proposed many changes in the mix of services offered at the VA's 162 hospitals and at other facilities. It would reduce the number of hospital beds by 600 and dispose of 3.6 million square feet of unused space. New facilities also would include two rehabilitation centers for blind veterans, four spinal cord injury centers and expanded long-term care for spinal cord injury patients in five locations.

Roswell's plan would cost $4.6 billion over 20 years, but it eventually would allow the VA to redirect $166,000 a day in operating resources-people, space, facility maintenance dollars and more-into more and better health care services.

COLD DOSE OF REALITY

In August 2003, the plan went for review to a commission the VA's Principi created to advise him on final realignment decisions. The 16 commissioners were deluged by 212,000 comments. They held public hearings in 38 locations nationwide to listen to stakeholders and see facilities for themselves. The commission took more than a month beyond its year-end target date to absorb the information and produce a report of more than 500 pages.

Commissioners cast a cold eye on CARES and the way the VA has managed its capital assets. Although Roswell and his staff described the draft national plan as "data-driven," the commissioners said the model needs more work. They called on the VA to re-examine the numbers before spending much money on closing facilities or acquiring new ones.

The commission's chairman, Everett Alvarez, a former VA official and prisoner of war, describes the CARES model as "probably the most comprehensive and uniform data set ever assembled for capital planning." But the commission sent the VA back to the drawing board to correct its understatement of mental health services demand and inconsistent planning for long-term care.

Roswell had called for delaying opening of some of the outpatient clinics, but the commission "found that VA's rationale . . . disproportionately disadvantages rural veterans and is contrary to the goal of CARES." The panel proposed that regional networks be given more say in when and where to open such clinics and that Roswell's priority scheme be scrapped.

Since VA hospitals and clinics are classic congressional pork, the department's wishes historically have been but one factor in decisions about VA construction budgets. But now, VA officials believe, they've won tacit support from authorizing and appropriating committees on the Hill and once the department completes CARES, Congress will provide the money to carry out the plan. "It's a fundamental departure," Roswell observes.

Perhaps, but even if the VA got to close, open or modify every hospital or operation Principi targets in his final CARES list (which was due in late March), legislators still retain their right to add funds for more facilities in their districts. Early this year, members of Congress already were trying to pick apart CARES. Department leaders fought back, arguing that the $1 million a day they now spend maintaining unneeded facilities should be shifted to improving veterans' care.