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Mr. Chairman and members of the Committee, I am Lieutenant General Paul K. Carlton and I appreciate the opportunity to address this committee on VA/DOD health care sharing.

The Air Force has long supported sharing agreements with the VA. In terms of numbers of facilities and agreements, the trend has been an increase in resource sharing between the Air Force and the VA since formal sharing began in the early 1980s. The Air Force has more than 100 sharing agreements with the VA to share almost 300 services from radiology to specialized services such as hyperbarics. The bulk of our partnering activities occur at our three joint venture hospital sites: Albuquerque, Las Vegas and Anchorage. These are long-term commitments on the part of both partners. Both organizations preserve our overall organizational autonomy as appropriate at each location. At the joint venture at the 377th Medical Group at Kirtland Air Force Base in Albuquerque, the Air Force built a separate outpatient clinic which is managed by the Air Force. The Air Force Commander works closely with the Veterans Administration Medical Center Administrator to ensure efficient oversight of the joint venture. Services such as the emergency room, laboratory, and radiology departments were integrated with the VA, creating jointly staffed and operated services within the Veterans Administration Medical Center. The result is a maximizing of the resources at both facilities while ensuring beneficiaries receive quality care in a timely and cost-effective manner. At Kirtland, Air Force providers can admit to VAMC inpatient units, or refer active duty and families to specialty care within the VAMC. The Air Force has access to the VA computer system (VISTA) and military providers can function the same as VA providers by ordering tests, viewing results, and entering other healthcare data as needed in conjunction with a DOD admission to a VA bed. The estimated cost avoidance was in excess of $1.2 million in Fiscal Year 1998 and $1.4 million in Fiscal Year 1999. The avoided costs were the result of utilizing the joint venture rather than the local community. Additionally, beneficiaries who use the VA ancillary, specialty and inpatient care have no out-of-pocket cost shares, resulting in savings to our Prime enrollees of an estimated $450,000. The arrangement ultimately utilizes excess capacity at the VAMC and reduces the government’s CHAMPUS/TRICARE catchment area costs. Although the joint ventures do not generate high dollars of external revenue, the tight intertwining of interests at the local level leads to avoidance of costs.

The Mike O’Callaghan Federal Hospital (MOFH) at Nellis Air Force Base in Las Vegas maintains 62 Air Force and 52 VA beds. The Air Force Commander is dual hatted as the MOFH Chief Executive Officer. The 99^th Medical Group operates with the VA under both an integrated and collocated concept. As the joint venture developed, decisions were made about the appropriate organizational arrangement to meet the mission requirements of the Air Force and VA. As a result, in integrated work centers, the Air Force and VA staffs work side-by-side. These arrangements occur in the emergency department, surgical suite, intensive care unit and the pharmacy. Other work centers are staffed by the Air Force or VA exclusively. For example, both Air Force and VA have separate inpatient units.

Our newest joint venture in Anchorage, Alaska, partners with the Alaska VA Healthcare System and Regional Office and the 3rd Medical Group, Elmendorf Air Force Base. The VA has never had a dedicated inpatient facility in Alaska. The new joint venture is a replacement for the military hospital located in Anchorage and it began operation in May 1999. Under our agreement with the VA, they contributed $11.2 million of the $164 million in new construction costs. A central Executive Management Team directs and manages development and execution of the different components of the joint venture. Functional teams manage specific areas. For example, the VA staffs and manages the 10-bed intensive care unit. VA also provides staff for the emergency room, the integrated internal medicine/cardiopulmonary department, administration, patient services, utilization management, social work, credentialing, and surgical services. The Air Force staffed and operated multi-service unit (inpatient ward) is available for VA admissions. The Air Force recovers its operating costs while avoiding a projected $1.4 million annual expenditure on local civilian-provided intensive care. The VA gains an inpatient facility for treatment of the sickest veterans and avoids an estimated $4.3 million in civilian provider expense.

The Air Force continues to be directly supportive in partnering with the VA. Construction of a VA clinic has begun at Travis AFB in Northern California. The new clinic is projected to begin operation in late 2000. In the interim, the VA operates a primary care clinic within David Grant Medical Center and purchases inpatient care on the military wards.

Nationally, the Air Force is an active participant on the DOD/VA Executive Council. One of the primary purposes of the Council is to facilitate expanded participation by the two Departments and their medical treatment facilities in direct sharing and TRICARE initiatives. One of the major projects overseen by the Council is the development of jointly adopted, evidence-based Clinical Practice Guidelines (CPGs). The group worked to select guidelines that will enhance continuity of care, reduce variability and facilitate cost-effective practices for both agencies. The CPT working group formulated the protocols, developed educational materials for providers, and is evaluating the new guidelines. Implementation of this program will be Service specific. Each clinical guideline will be deployed with complementary "tool kits" and corresponding metrics. The use of the same clinical guidelines helps ensure continuity in the care provided as DOD and VA beneficiaries move between the facilities in the two Agencies.

Another project which the Air Force actively supports is the Government Computerized Patient Record. Our goal is one secure electronic patient record, which is readily available whenever, and wherever a patient is treated, both while on active duty and after retirement.

A single discharge physical was another project overseen by the Council. By removing the redundancy of two separate discharge physicals, we will save money and time.

The newest initiative managed by the Council, based on a White House tasking, is the enhancement of patient safety programs. Building on the expertise within both Agencies as well as the civilian sector, processes are currently being reviewed and proposals developed relating to this critical area.

The Council has overseen a number of studies and reports in the last few years. Based on the recommendations in the studies, the Air Force has implemented reimbursement guidelines to assist our military treatment facilities in reviewing opportunities to partner with the VA. The Air Force is currently working with DOD and the VA to establish a new subcommittee to the Council, the DOD/VA Health Care Sharing Committee. This will enhance direct sharing and TRICARE contracting relationships and would assist in resolving issues that detract from our partnering efforts.

Cooperation is also occurring in the area of drug purchasing. The Federal Pharmacy Executive Steering Committee is composed of DOD and VA pharmacists, physicians and resource managers. By identifying joint pharmaceutical contracting initiatives, the DOD and VA can use combined purchasing power to leverage lower drug prices.

Since the mid 1990’s, the number of Veterans Administration Medical Centers (VAMCs) participating as TRICARE network providers has grown to 81%. As with the non-government TRICARE contracted providers, challenges regarding reimbursement for VAMCs through the managed care support contractors have arisen. The VA is currently working with DOD and the contractors to resolve issues surrounding their participation as TRICARE network providers.

I do need to make clear that VA/DOD sharing or joint projects will not work at every Air Force base. If it is a win-win situation for both partners, then of course it makes sense. These arrangements provide an opportunity to save money for the taxpayer while increasing access to health care for the government beneficiary. We have found some instances where the VA was not the most cost effective option. If the VA is not a competitive player in the market, then an agreement would not be appropriate.

Barriers to sharing for the Air Force also include geographic concerns. There are no VAMCs close to eight Air Force bases. For instance, Grand Forks Air Force Base in North Dakota is more than a seventy mile drive to the closest VAMC. Weather restrictions combined with the driving distance make active sharing difficult at these locations. Another barrier includes concerns that have arisen about the role of direct sharing versus participation of the VA as part of the TRICARE network. This area is currently being reviewed by the Assistant Secretary of Defense (Health Affairs).

I believe that DOD medical contingency and readiness requirements drive a need for two separate systems to support the different missions of the two organizations. Readiness related activities must remain within DOD control. Resupply of pharmaceuticals and medical supplies for contingency operations, readiness training for Air Force medical personnel, and command and control are some examples. While there remains a need for two systems, our existing partnering efforts are critical to meeting future peacetime health care needs. The right answer is an approach that continues to explore future opportunities by building on our strengths while recognizing the rapid changes in the U.S. health care environment. Both the DOD and VA systems have been responding to years of fiscal and budgetary constraints, a need to reinvent or reengineer within the federal sector, and technology-driven shifts to more outpatient-based services. Our joint ventures, sharing agreements, TRICARE managed care support contracts and joint DOD/VA projects have evolved to meet these needs. Air Force facilities will continue to develop partnering programs with their VAMC counterparts to meet the future requirements of both our organizations.

In conclusion, I believe there are great benefits in VA/DOD health care sharing. However, the arrangements must be carefully evaluated to confirm the benefit before pushing forward. I support continued exploration of how we can capitalize on those areas in which joint efforts produce positive results for both Agencies. I thank you again for the opportunity to testify today and for your continued support of the Air Force Medical System.

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