The standards for construction of VA facilities and State facilities receiving VA grants are similar as is the average cost per bed. Since VA participation is limited to 65 percent of the cost of construction, expenditure of Federal funds for State home facilities rather than for VA nursing home facilities results in more nursing home beds per dollar appropriated. Question 3. On page 5-9 of Volume II under Legislative Initiatives you propose to provide care, within the limits of VA facilities, to 7 different categories of veterans. Is the listing on this page in the order of priority that you would provide such care. If not, what would be the order of priority. Answer. The listing is not in order of priority per se. We would provide care to service-connected veterans as a first priority. The categories 2-6 of our budget document would be grouped together as a second priority and nonservice-connected veterans who meet the criteria of the means test would be the 3rd priority. Question 4. Please explain the statement under paragraph 4 on Page 5-24 of Volume II. We know positions under title 38 comparable to GS 11-15 were exempted from the grade reduction in fiscal year 1985. What happens in Fiscal Year 1986 and the out years as far as these positions under title 38 are concerned? Is the bottom line that the reduction of funds are being applied to all grade GS 11-15 or comparable grades even though you say title 38 grades have been exempted? Answer. Neither OPM or the VA are requiring Title 38 position reductions in FY 1985 or in any out years of the grade 11-15 reduction program. However, in FY 1985, Title 38 employees were included in determining recurring budget reductions. The inclusion of Title 38 employees in determining these reductions was successfully appealed, and as a result, additional savings in FY 1986-1989 will be based upon Title 5 positions only. The $5,305,000 generated by the Title 38 portion of the FY 1985 reduction has been restored to the FY 1986 budget. Question 5. Under the legislative initiatives on page 5-9 of volume II there is indicated the desire to apply a means test for the treatment of nonservice-connected disabilities. Does the Administrator already have legislative authority to accomplish this? Answer. The Administrator has authority to apply a means test to nonservice-connected veterans under age 65 only. This initiative would treat non-service disabled veterans similarily regardless of age. The means test would not be applied to veterans with any service-connected disabilities even in those cases when treated for a nonservice-connected disability. Question 5(a). What is your estimate of the so called savings if this means test is applied? Answer. Some of the details of the initiative are still under development and, therefore, we have not estimated the specific savings. Question 5(b). Give us your estimate of veterans age 65 years or over who would be denied care in Fiscal Year 1986 if this is enacted. Answer. Based on data collected by GAO who used our nonservice-connected inpatient population as a base, we estimate that approximately 9,800 veterans over aged 65 have sufficient resources to obtain care from other sources. Question 6. On Page 5-9 of Volume II there is a statement that legislation will be proposed to require reimbursement from private health insurance plans where a veteran has such coverage. Question 6(a). Explain to the Subcommittee how this would work. Would a service connected veteran, being treated for a non-service connected condition, have his private health insurer billed? How about former POW's? Vietnam veterans exposed to Agent Orange or veterans exposed to ionizing radiation? VA pensioners? Answer. No recovery would be made from any veteran who has a service-connected disability even if the veteran were treated for a nonservice-connected disability. Recovery would be made from health insurance policies carried by nonservice-connected veterans. This would include nonservice-connected former POWs, those claiming exposure to Agent Orange or to ionizing radiation, and VA pensioners. Question 6(b). What are the expected "savings?" Answer. VA's estimate is still being developed and will be provided with legislative proposal. Question 6(c). What, if any, would be the cost of revamping the VA cost accounting system to accommodate such legislation? Answer. No change to the VA cost accounting system would be needed because of legislation to permit such recoveries. Question 6(d). What would be the annual personnel cost to administer such a collection program? Answer. See answer to "b" above. Question 7. On page 5-16 of Volume II, Section 1.a.(3) there is indicated the conversion of 440 hospital beds to nursing home beds in VA Medical Centers with the conversion of $7.75 million and 220 FTEE for this purpose. Please identify the VA Medical Centers where this will occur together with the number of beds at each center, the funds to be converted and the FTEE to be converted. Answer. The MEDIPP process identified the cumulative impact of the proposed budget actions of 172 medical centers. Within this total, the medical centers identified the following bed changes: The bed reconfiguration and conversion initiative included in the 1986 Budget not only identified those resources saved from reducing costly inpatient hospital beds but also the additional resources required to support the converted nursing home beds. Using current operating costs the resources reduced from inpatient (using the bed distribution identified by MEDIPP) would be $23,222,000 and 521 FTEE and the resources to support increased nursing home requirements would be $7,750,000 and 220 FTEE. The hospital bed configuration/conversion will be operationally implemented as part of the resource allocation (target allowance) process. To the individual medical center involved, the "building-up" MEDIPP process (summation and interrelation of all initiatives used in formulating the 1986 budget) will be different from the "feeding down" process on budget implementation (which provides each medical center with the net result of all budget decisions). The total allocation process will ultimately establish the resource shifts at individual medical centers. Question 8. On Page 5-26 of Volume II it is noted that only $3.1 million is being requested for computer systems equipment. This is $14.8 million below the Fiscal Year 1985 level. Does this mean that an additional $3.1 million will complete the procurement of computer systems for all health care delivery facilities? If not, what is the estimated cost for the complete installation for the decentralized hospital computer system throughout the VA facilities? Answer. By the end of 1985, all facilities will have received Initial and Full CORE equipment for DHCP. The $3.1 million requested includes equipment funds for construction/activation projects ($1,250,000), replacement equipment base ($1,477,000) and upgrades to systems software ($390,000). However, the department requested an additional $2,936,000 and 45 FTEE for enhancements to DHCP hardware and software and an additional $18,852,000 was requested for local field initiatives and office automation. The total final cost for an Enhanced DHCP is not known at this time. Current plans call for the integration of field office automation and local field ADP initiatives into the composition of DHCP. We are currently working to expand the scope of DHCP under the VA Modernization Plan. The three initiatives submitted were as follows: 1 Funding to support the FTEE would have been provided through net reductions in other areas such as equipment maintenance, operating supplies, etc. Question 9. On page 5-28 of Volume II concerning replacement building equipment, if I read the figures correctly, you are asking for $25.3 million in fiscal year 1986 to partially satisfy a current requirement of $165.2 million. Would you clarify this and state whether it will ever be possible to clear up this backlog or will you continue to drop further and further back as far as this deficit is concerned. Answer. The replacement building service equipment backlog is different than normal equipment backlogs. First, the backlog is basically cyclical. That is, statisti cal replacement schedules are established for the replacement of certain items in a building (roof, boiler, etc.). The basic problem is that over fifty percent of the buildings were constructed between 1945 and 1955. This means that a majority of the buildings are between 30 and 40 years old. This is the time period when the projected life for many items expire. There are two outside influences which also impact this backlog. The inflation rate tends to increase the replacement cost. Also, the backlog is affected by the construction program. Since the total replacement requirements are developed independently of the construction program, when a replacement facility is constructed, the replacement requirements of the older facility are eliminated. The $25.3 million requested in 1986 will be for the highest priority projects to insure that facilities are maintained at acceptable levels. Question 10. Please provide us with the information on object class 31 equipment that appears on page 5-27 of Volume II. Answer. The 1985 replacement equipment funding level of $154,851,000 (page 527) represents a 10 percent increase over the 1984 actual level. The backlog, nevertheless, increased 43 percent in 1985 to a level of $309,857,000. The equipment requirements have increased due to inflation and the accumulation of prior years backlogs. Although backlogs result in maintaining pieces of equipment operationally longer than the anticipated life expectancy and prioritizing equipment needs within available resources, total elimination of the object class 31 equipment backlog is not considered desirable or achievable. In 1986 $161,801,000 is requested for replacement equipment which is an increase of $6,950,000 over 1985. Question 11. Please provide us with your plans for future medical facility construction in the Gulf Coast area of Alabama and Florida, including Mobile and/or the Florida Panhandle. How does this fit in with your plans to activate a new outpatient clinic in Pensacola, Florida? Answer. At the present time, no construction plans have been developed for an additional medical facility in the Gulf Coast area of Alabama and Florida. Activation of the new Pensacola, Florida Outpatient Clinic would have a limited impact on any construction planning due to the nature and types of care provided through an outpatient clinic versus an inpatient facility. The Pensacola Outpatient Clinic will be activated through leased space. If a decision is made to establish a new VA medical center in this area and if it is determined the Pensacola Outpatient Clinic is not needed, the lease for the clinic space could be terminated. Question 12. On page 5-34 of Volume II reference is made to a reduction of $52.4 million and 1,916 FTEE in Fiscal Year 1986 due to a productivity improvement to be applied "across the board" to all medical care appropriation activities. Does this assume all VA Medical Centers will improve productivity at exactly the same rate or does this really mean a "meat ax" approach of cutting the budget? Answer. The 1986 employment level of 192,048 FTEE will continue to support the patients treated level included in the 1985 budget (about 1,280,000 patients treated). The net result of a productivity increase is that while average employment decreases, it is not accompanied with a corresponding workload decrease. 1. For the 1,916 FTEE to improve productivity, 32% of this reduction (613) will be assessed to all facilities based on the proportion of their indirect FTEE to all indirect FTEE. Indirect costs and costs not included in the Resource Allocation Models (for acute, ambulatory, and long term care) used for FY 86, average 32% systemwide. 2. The remaining 1,303 will be assessed to medical centers based on their relative efficiency as measured by methods derived from the Resource Allocation Models (RAMS). Under this method only facilities whose efficiency per direct care FTEE is below the system norms developed from the RAMS will be reduced on a proportionate basis. This will be applied to the 68% of facility costs that are direct medical care as measured by the RAMS. 3. All facilities will have some FTEE reduction calculated for their indirect costs and costs not measured by the RAMS, and some facilities will have FTEE reductions assigned to the direct services measured by the RAMs. However, the net reduction or gain in FTEE will not be assigned to any specific category and the facility directors will make the decision as to how the FTEE change should be spread. 4. Specific facility reductions are not available at this time, nor are the specific reductions by occupation known. 5. In line with the Administration's management initiatives, we are planning to conduct most efficient organization (MEO) reviews and expect that productivity improvements will be identified and pursued. Question 13(a). Has the Nurse Scholarship Program been successful in recruiting and retaining nurses? 47-377 0-85--11 Answer. Yes, 273 professional nurses have been newly employed and another 97 VA nurses currently are in service obligation. One participant has completed service obligation and has been retained in VA. The mandatory service obligation prevents turnover that occurs most frequently in the first year of employment. However, at this time, recruitment and retention of nurses in general has improved due to the implementation of other special authorities, including the special pay provisions of P.L. 96-330. Recruitment and retention difficulties still exist in some geographic areas and in some nursing specialties, but in general, the recruitment of RNs is much improved since the severe shortage of the early 1980s. Question 13(b). Did the VA request funding for the program from the Office of Management and Budget in Fiscal Year 1986? Answer. Yes, the VA requested funding at the FY 85 level of $4.7 million and 8 FTEE for FY 86. CONGRESSMAN JOHN PAUL HAMMERSCHMIDT TO VETERANS' ADMINISTRATION Question 1. Do you believe it feasible to combine some small regional office processing functions with those of larger regional offices? Answer. It could possibly be feasible to combine some smaller regional office processing functions with those of larger regional offices. Question 2. Will the proposed phasing out of the Health Professional Scholarship Program adversely affect the recruiting for health care professionals? Answer. There may be a minor affect on registered nurse recruitment, which is the only health care profession for which the scholarship authority has been used. Although the program provided 200 nurse recruits annually-with their two year service obligation-other authorities, primarily special pay, are proving effective in recruitment and retention of nurses. Recruitment difficulties still exist in some geographic areas and in some nursing specialities, but in general, the recruitment of RN's is much improved since the servere shortage of the early 1980's. Many VA Medical Centers now have an adequate supply of nurse applicants to meet the past turnover rates of 4,000 nurses a year. An advantage of the Scholarship Program has been the visibility given to VA as an employer offering career opportunities for many who otherwise may not have consedered VA employment. This positive mechanism for recruitment will be lost. Question 3. Do you consider the current law on priority for examination, and treatment for Agent Orange and radiation exposure to be effective and worthwhile. Answer. Yes, this law has been beneficial to veterans who were exposed to Agent Orange and to those who were exposed to ionizing radiation. These veterans are not only receiving quality medical care, but their medical records are providing a data base for use in studies on possible health effects related to exposure. We do not support any change in this priority until after the completion of the CDC study and the decision of the Administrator. Question 4. You recently commented on management improvements expected in outpatient clinics. This was in response to a GAO report. Would you please tell the Committee what the improvements will do in terms of number of patients treated, quality of treatment, etc.? Answer. The General Accounting Office report confirms many of our own findings from the continuing VA effort to develop better methods of resource allocation and management control in the Department's ambulatory care programs. The GAO report and these VA studies demonstrate that the traditional methods of workload and resource assignment are not the most effective means of management of multiinstitutional medical programs. We believe it is appropriate to gradually move the system toward a capitation allocation methodology which focuses on patients served in a given year. Such capitation can be both visit and person-based, depending on need or the type of incentives desirable by policy. The Chief Medical Director is considering implementing such a capitation methodology in FY 1986, to be phased in over several years with other techniques in acute and long-term care. The VA is also working to improve the management of staffing in outpatient clinics, an area of concern reported in the GAO study. GAO's recommendations are consistent overall with VA's plans to improve the management techniques employed in outpatient programs. We believe such changes will enhance the quality of care of patients treated in VA clinics. Question 5. How would you compare your costs of care in VA hospitals to those of the private sector? Answer. Although we attempted previously several times to complete useful costcomparisons, prior to the advent of the DRG classification system, available technol ogies have not been sufficient to account for inherent operating differences and other variations between the VA system and other health care institutions. Our most recent attempt to compare VA and private sector costs (in 1982) was criticized severely by the General Accounting Office, and that study has been discarded largely as a result. Using DRGs and the VA's internal cost accounting system with an experimental model for allocating casemix resources to VA facilities, we have developed estimates of VA case costs by DRG. We believe these costs can form a basis for acceptable comparison with similar DRG costs from the private sector nationally. We can additionally discriminate between service-connected, non-service-connected pensioner and non-service-connected non-pensioner veterans in this analysis, and can display case-as well as per diem costs. To test the concept, we have informally cost-compared national VA costs to DRG data from all private hospitals in the State of Maryland. From this informal analysis, we found VA average costs to be roughly comparable to Maryland's costs, but reported cost variations between VA facilities are troublesome, unless we consider our role in research and education and specialized needs of veterans. We are gathering data to conduct a broader cost comparison analysis. This study will address benchmark institutions and providers across the spectrum of U.S. health care. We are also consulting with DoD and HCFA to determine the usefulness of their data to this study. By late summer 1985, a draft report of this study should be available. Question 6. Does your contemplated "means test" have a price tag on it for FY '86? Congressional Quarterly quotes some OMB spokesman as stating it saves some $300 million. Answer. An estimate of savings has not been made. Question 7. How could a "means test" save money if a needy veteran is admitted after a non-needy veteran is denied admission? Isn't the universe of qualified veterans so large as to preclude savings, especially as the typical veteran gets older and needs more medical care? Answer. If non-needy veterans are replaced by needy veterans, no savings would be achieved by VA, although savings to the Federal Government for other health programs (i.e., Medicaid) might be realized. The universe of qualified veterans is very large as shown in the table below. However, the extent to which these veterans would now use VA is unknown since both geographic accessibility and personal preference could affect an eligible veteran's decision. We do expect the use of the VA health care capacity to be directed toward service-connected veterans, former POWs, veterans exposed to agent orange or ionizing radiation, pensioners, WWI, Spanish American War, Mexican Border period and other non-service-connected veterans who are truly needy. Veterans in these groups are represented as follows: Spanish American War and Mexican Border Period (Total minus C&P) 260 5,864,000 Total 11,038,903 NOTE.-Double counting exists to some degree for POWs, Agent Orange and Ionizing Radi ation. SOURCE.-1,2,6, and 7 Administrator's Annual Report 1983. 3 DVB Tapes. 4 DM&S/Defense Nuclear Agency Estimate. 5 DM&S Examinations. 8 Office of Reports and Statistics Report, Dec. 1984. Question 8. What would be the criteria of the means test? Answer. Non-service-connected veterans whose annual family incomes including assets (as defined in the Improved Pension Program) are below double the maximum annual VA pension rate based on family size, would be deemed unable to defray necessary medical expenses. Out of pocket medical expenses for other family members would reduce the gross family income for determining eligibility. For NSC veterans whose gross annual family incomes including assets are in excess of double the maximum annual VA pension rate, procedures would be estab |