Editorial Operational Efficiency Research in Department of Veterans Affairs Health Services Prakash L. Grover and Charles D. Flagle There is a long tradition of concern for the efficient use of health care resources in the Veterans Administration (now the Department of Veterans Affairs [VA]). The studies contained in this special supplementary issue of HSR: Health Services Research are best understood if they can be perceived as activities in a long and continuous search -within a constrained budget - for better ways of achieving VA objectives in veterans' health care. Until recent years, the conventional wisdom maintained that health services in general in the United States had little incentive to be efficient since providers were reimbursed for whatever costs they incurred. However, by statute, the VA segment of this country's health services has been accountable for its expendituressubject to oversight by the General Accounting Office (an agency of the Congress) and by the Office of Management and Budget (an executive agency). Historically, both of these agencies have played a constructive role in VXs efforts to achieve optimal hospital bed capacity and a sound system of management. History also reveals that VA, on its own initiative, has been intrinsically involved with the nation's health services efforts to contain cost while simultaneously assuring quality. The Department of Veterans Affairs has by circumstance been forced to strive for cost containment through operational efficiency in building and using its complement of physical and human services. Address correspondence and reprint requests to Prakash L. Grover, Ph.D., Chief of Special Projects Office, HSR&D Service, Department of Veterans Affairs (VA) Medical Center, Perry Point, MD 21902; Charles D. Flagle, D.Eng. is Senior Research Scientist at VA HSR&D-Special Projects Office, and Professor Emeritus in the School of Hygiene and Public Health, Johns Hopkins University.
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OPERATIONAL EFFICIENCY DEFINED The term operational efficiency, interpreted broadly here, has different specific meanings at different levels of VA health services. It has to do with achieving to a high degree the potential capabilities of resources available; conversely, it also involves avoiding the wasting of scarce and valuable health care resources. To a physicist or engineer the meaning of efficiency is very clear a neat, measurable, dimensionless ratio of energy output to energy input to arrive at "useful work." However, the concept of efficiency becomes difficult when we attempt to apply it literally to individuals or organizations. Our inputs may be measured in worker-hours, but outputs are something else - sometimes quantifiable as measures of units of service, sometimes intangible as health benefits or quality of care. Figuratively, efficiency means an estimate of actual accomplishment relative to potential accomplishment. As used here, operational efficiency includes, but goes beyond, the traditional concepts of work study, activity analysis, or cost analysis. It examines the content of activities and the potential contribution of new technologies and modalities of care on forms of practice and organization. It also examines the mechanisms by which patient flow is coordinated among outpatient, inpatient, and extended care facilities in order to achieve an appropriate match of resources to patient needs. Our use of operational efficiency includes the familiar economic concepts of allocative efficiency (distribution of resources within the overall system) and technical efficiency (utilization of resources made available at institutional and clinical levels). Insight into technical efficiency is aided by subdividing it into categories of logistical efficiency (e.g., in staffing, scheduling) and medical content efficiency (e.g., the choice of appropriate modalities of care). Allocative efficiency within VA health services refers to the distribution of total resources among services and facilities for inpatient, outpatient, and long-term care to achieve appropriate care at least cost. The key to allocative efficiency lies in understanding the demand for utilization of various services and the cost of organizational forms of services. Some of the articles in this special supplement deal with factors influencing hospital utilization, for example, the search by Hurley, Linz, and Swint for evidence (not found) that community hospitals direct patients with problem DRGs to VA. Similarly, Holloway, Medendorp, and Bromberg have in this issue examined factors influ-
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encing early readmissions to the hospital, finding that DRGs may increase early readmissions. This knowledge and the administrative response to it affect the need for hospital beds relative to other facilities. Similarly again, the work of Neff and McFall and of Gummow, Gregory, and Macnamara deal with service utilization problems. It should be noted that in addition to their significance with respect to concerns of allocative efficiency within VA, these articles also add to the knowledge base for logistical efficiency in staffing to meet utilization demand. To a degree, the studies presented here do not adequately reflect the weight of attention paid within the Department's Health Services Research and Development Service (VA HSR&D) to content of care. It is to be expected that physician researchers in VA's clinical settings will be interested in searching for the most effective modalities of care. By simultaneously conducting studies of the effectiveness of alternative modalities along with their cost and their manpower implications, they will ease the way for appropriate and efficient choices of strategies of care.
STRATEGIES TO ENHANCE OPERATIONAL EFFICIENCY WITHIN VA In the context of the health services in general, operational efficiency relates to the search for the most economical mix of effective services and matching needs. Efforts to control costs of health services and to achieve a rational allocation of health resources have taken two basic directions. The first involves economic strategies to constrain utilization of services by influencing both consumers and providers and by coordinating the flow of patients to appropriate forms of care. The second involves the choice of procedures within the system to deliver care of acceptable quality with cost-effective use of resources. Figuratively speaking, in the first approach one stands at the door of the hospital or clinic looking out on the world of patients-to-be, other providers, third party payers, and regulators with a concern for an appropriate flow of patients into the system and an economic rationalization of demand-a quest for allocative efficiency. In the second approach, one looks inward on key activities of service provision: matters of staffing and logistics, work performance, and the professional decision processes of diagnosis and therapy that determine resource requirements-a concern for cost effectiveness or technical efficiency. The two approaches are complementary and interrelated. What-
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ever the appropriate levels of demand on elements of the system, the problem of achieving least unit cost of service remains. For our purpose here, both approaches are characterized as concern for operational efficiency, seen from different levels of the organization. Even though Veterans Affairs has not been directly affected by costcontainment mechanisms imposed on the health system at large, particularly those related to reimbursement, the fact is that VA has incorporated case-mix measures, such as DRGs, to rationalize its allocation of funds to hospitals. As a vertically integrated system, it has not only the opportunity, but the obligation to strive for allocative efficiency in budgeting for levels of care: ambulatory, acute, long-term, and domiciliary. Much research has been carried out to support the allocation of resources to levels of care, e.g., the bed-size planning model (Hodgson, Kilpatrick, and Nguyen 1977). Although the major locus of health services research in VA is the Health Services Research and Development Service in the Office of Assistant Chief Medical Director, Research and Development (see appendix), many organizational elements of the VA-past and present - have addressed problems of the efficient use of resources, and their work, too, forms a part of the context within which the HSR&D studies should be seen. Health services research -by whatever name it has been called or wherever it has been located in the VA structure has been a mechanism for linking development within the VA to external trends. Under the postwar Hill-Burton Program of health facilities renovation and construction, research programs were created to develop guidelines for design and operation. Parallel efforts were carried out in the VA, often in formal collaboration by mandate with research groups and individuals in government and universities. Before the formal establishment of a health services research program, important developments took place. Some of the earliest work relating nurse staffing to levels of patient dependency was done in the VA and has become part of standard operating procedures (Giovanetti 1978). When DRGs appeared as an important management device in community hospitals, the VA related them to its own efforts toward equitable and economic distribution of resources (Kruegal and Evans 1981). These efforts of the Department of Medicine and Surgery led to a resource allocation methodology (RAM) based on four models: one for acute care using DRGs, one for ambulatory care, one for long-term care using resource utilization groups (RUGs), and an educational modification component (VA Health Resource Management Staff 1986). While the models themselves are standard planning mechanisms, applying population projections to estimated rates of morbidity
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and associated utilization of resources, the process of estimating such rates poses continuing problems for health services research. There is not much that VA or anyone else can do about the demographics of the aging VA population; the forces are inexorable and predictable. However, planning of services can take these into consideration (Randall, Kilpatrick, Pendergast et al. 1987), and some intervention is possible to change morbidity patterns; some change in the array of services can affect the fraction of veterans using VA services, and changes in technologies and practice patterns continuously affect the nature and quantity of resources needed to respond to morbidity. Participation in the development and evaluation of interventions, service programs, technologies, and practice patterns is in the domain of health services. To the extent that research contributes to the ability not only to shape services but to estimate the impact of change on resource requirements, it contributes to strategic planning as well as to the management of services and the choice of modalities and programs of care. It is in light of this background that we examine the contributions of current research to the enhancement of operational efficiency, examining the efforts at three levels: clinical-level patient care, organizational management, and systemwide policy analysis.
RESEARCH AT THE CLINICAL LEVEL An issue in health services research is the degree to which clinically oriented research is an appropriate part of health services research. Some physicians involved in health services research argue that administrators are prone to seek efficient ways of doing things after assuming that the right or best care is already being given. Clinicians, on the other hand, believing that current modalities of care are not optimal, assert that the search for improved interventions necessarily continues. The situation is reminiscent of the early days of "scientific management," which held that an essential role of management was to find "the one best way" of doing things and then to develop efficient procedures for doing it. The clinicians' quest to maximize clinical effectiveness is a logical component of health services research, complicated by the stream of new technological developments, which affect both the physician-patient relationship and, as in the case of capital-intensive technology, the interorganizational relationships for equipment sharing to achieve economies of scale. Numerous examples - some of them involving new technologies -
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can be found of VA health services research dealing with content and logistical efficiency at the clinical level. To cite a few within the VA HSR&D Field Program, Saltz et al. (1983) have developed a computerized consultation system on Alzheimer's Disease. Feussner, BlessingFeussner, and Linfors (1983), Hla, Feussner, Blessing-Feussner, et al. (1983), and Linfors, Feussner, Blessing, et al. (1984) report a series of studies on improvement of detection, treatment, compliance, and control of hypertension. A review of publications emanating from the VA HSR&D Field Program reveals a blend of work examining both content and process aspects of clinical work. Allen, Becker, McVey, et al. (1986) have examined the effect of the geriatric team concept; Silliman et al. (1986) the effectiveness and role of family in home care of stroke patients. This work, along with that of Saltz, Smith, Saltz, et al. (1983) examining alternatives to institutiornalization, have direct bearing on logistical efficiency. In some studies at the clinical level, the concern is for allocation of direct care resources. Hogan, Smith, andJameson (1986) have studied functional assessment of nursing home patients, research directed toward appropriate nurse staffing patterns. This kind of work, although focused in its observational activities at the clinical level, produces knowledge with direct bearing on operational efficiency at the organizational or institutional levels.
RESEARCH IN OPERATIONAL EFFICIENCY AT THE ORGANIZATIONAL LEVEL AND POLICY LEVELS It is well known that the job to be done in most health care settings varies from day to day as patients' conditions vary. An approach to logistical efficiency has been to search for indicators of current and near-term care resource requirements as a guide to flexible staffing. Hogan, Smith, and Jameson (1986) represent this direction of work toward short-term efficiency. It is an established approach, concentrating on the patient day of care and its levels of patient functioning and resource requirements. It is somewhat (if distantly) related to efforts to measure resource requirements for total episodes of care or hospital admissions. Here diagnosis plays a dominant role; hence, the evolution of the concept of diagnosis-related groups (DRGs) with efforts to improve their predictive power by introducing measures of severity of
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illness and levels of dependency. These activities have had their effect at VA institutional management levels in several major ways: first, on the development of a rational basis for hospital budgeting and, second, on comparative studies of VA and non-VA characteristics. For example, Wolinsky et al. (1985) have compared veteran and nonveteran uses of health services with results relevant to long-range planning. A review of the publications and reports of health services research in the Veterans Administration (and, now, the Department of Veterans Affairs) suggests that the findings have value beyond their immediate locale and circumstance. There remains the task of interpreting and synthesizing the research results before their value for health policy development can be realized.
CONCLUSIONS VA is the largest health care system in the nation. Nevertheless, it is a system embedded within a much larger set of health services and is variously affected by developments in the larger system. Hence, not only is health services research necessary in VA; its interaction with its counterparts in the larger system is vital. This establishes the rationale for VA HSR&D Field Programs, each simultaneously tied to VA health centers and affiliated with university and community programs. The field program research expresses concerns at institutional and regional levels. Nevertheless, whether explicitly stated or not, nearly all of the results have implications for operational efficiency at the national level, not only within VA but throughout the total health care system. That is why communication of these results through the journal HSR: Health Services Research is welcomed.
APPENDIX THE DEPARTMENT OF VETERANS AFFAIRS AND ITS HEALTH SERVICES RESEARCH AND DEVELOPMENT SERVICE
The Department of Veterans Affairs (VA; formerly, Veterans Administration) Veterans Health Services and Research Administration (VHS&RA; formerly, Department of Medicine and Surgery) operates the nation's largest health care system, comprising 172 medical centers, 231 outpatient clinics, and 119 nursing home care units. As authorized by Congress, VHS&RA is responsible to the Secretary of Veterans Affairs for providing quality medical care on a timely basis to eligible
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veterans and selected dependents in VA facilities.' When necessary and appropriate to VA mandate, care may also be provided at VA expense on a fee or contractual basis in non-VA health care facilities.2 In 1988, over 1.1 million inpatients were treated and over 23 million outpatient visits serviced in VA health care facilities. Nearly $10.2 billion was appropriated to VHS&RA and a full-time equivalent staff level of 193,798 was authorized for providing this level of care.3 Research and Development (R&D) in VA VHS&RA supports the health care mission primarily by producing new knowledge, techniques, or products that benefit veteran patients and humanity in general. In 1988, VHS&RA R&D budget obligations were $192.9 million in three divisions: Medical (biomedical) Research, $164.2 million; Rehabilitation R&D (encompassing knowledge, techniques, and devices including implants and restorative and sensory aids for the ill and handicapped), $20.5 million; Health Services R&D (now described), $8.2 million.4
HSR&D The mission of the HSR&D Service in VA "is to assist the search for the most cost-effective approaches to delivering quality health services to the nation's veterans" through the support of high-quality health services research studies.5 Service activities encompass four program areas: 1. The Investigator-Initiated Research Program (which comprised approximately 55 percent of the 1989 budget) encourages and supports projects proposed and conducted by VA researchers, clinicians, and administrators. As of March 31, 1989, 82 HSR&D investigatorinitiated research projects had received support in fiscal 1989 at 44 facilities (including four projects supported by a special Department of Defense allocation). 2. The HSR&D Field Program (28 percent of the 1989 budget) is a network of core VA staff assigned to selected field facilities, who collaborate with community institutions (e.g., university schools or departments and research institutes) to assist in accomplishing the HSR&D Service's mission. In 1989, nine HSR&D Field Programs encompassing 36 VA medical facilities were supported. 3. The Special Projects Program (17 percent of the 1989 budget) conducts research assessments, syntheses, and other special research projects responsive to specific needs identified by Congress or Department officials, and assists in transforming health services research findings into practice.
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4. The HSR&D Resources Program is responsible for establishing HSR&D priorities, monitoring and reporting progress, and ensuring that administrative and budget systems adequately support the activities of the HSR&D Service. (These are Central Office staff, managerial, and administrative activities funded from the VA Central Office account for staff salaries and support; thus, they are not reflected in the HSR&D budget allocations). For a detailed account of the HSR&D Service, see Goldschmidt (1986) and Association for Health Services Research (1988).
ACKNOWLEDGMENTS Thanks are due Dr. Shirley Meehan, Mrs. Rainelle Holcomb, and Mr. George Mercer for their assistance in compiling the issue. Mrs. Mary Hatfield's secretarial assistance is also deeply appreciated. NOTES 1. Department of Veterans Affairs, Secretary of Veterans Affairs. Annual Report 1988. Washington, DC: Government Printing Office, 1989, xiv-xv.
2. Annual Report 1988, 7. 3. Department of Veterans Affairs. Medical Programs Fiscal Year 1990, Vol. 2. Washington, DC: Office of Budget and Finance, January 1989, 6-35. 4. Medical Programs Fiscal Year 1990, 7-5. 5. VA "Transition Team" briefing document, 1988.
REFERENCES Allen, C. M., P. M. Becker, L. J. McVey, C. C. Saltz, J. R. Feussner, and H. J. Cohen. "A Randomized Controlled Clinical Trial of a Geriatric Consultation Team: Compliance with Recommendations."Journal of the American Medical Association 255, no. 19 (16 May 1986):2617-21. Association for Health Services Research. "Update of the Veterans Administration Health Services Research and Development Program." HSR Reports (January 1988): 10-23. Feussner, J. R., C. L. Blessing-Feussner, and E. W. Linfors. "Blood Pressure Measurement: Getting the Right Cuff." North Carolina MedicalJournal 44, no. 4 (April 1983):241. Giovanetti, P. "Patient Classification System in Nursing: A Description and Analysis." DHEW Publication No. (HRA) 78-22, Washington, DC: Government Printing Office, July 1978.
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Goldschmidt, P. G. "Health Services Research and Development: The Veterans Administration Program." HSR: Health Services Research 20, Part II (February 1986):6. Hla, K. M., J. R. Feussner, C. L. Blessing-Feussner, F. A. Neelon, E. W. Linfors, C. F. Starmer, and P. A. McKee. "BP Control Improvement in a University Medical Clinic by Use of a Physician's Associate." Archives of Internal Medicine 143 (1 May 1983): 920-23. Hodgson, T. J., K. E. Kilpatrick, and L. Nguyen. "A Model for Allocating Beds to Services." Bulletin of the Operation Research Society of America 25, Supplement 1 (Spring 1977). Hogan, A. J., D. W. Smith, and J. Jameson. "Functional Assessment of Nursing Home Patients: Reliability and Relevance." Evaluation and the Health Profession 85 (November 1986):33-34. Kruegel, D., and C. Evans. "The Organization of Health Services Research in the Veterans Administration."Journal of Medical Systems 5, nos. 1 and 2 (1981): 157-62. Linfors, E. W., J. R. Feussner, C. L. Blessing, C. F. Starmer, F. A. Neelon, and P. A. McKee. "Spurious Hypertension in the Obese Patient: Effect of Sphygmomanometer Cuff Size on Prevalence of Hypertension." Archives of Internal Medicine 144 (1 July 1984): 1482-85. Randall, M., K. Kilpatrick, J. Pendergast, K. Jones, and W. Vogel. "Differences in Patient Characteristics Between Veterans Administration and Community Hospitals." Medical Care 25, no. 11 (November 1987): 10991104. Saltz, J., R. Smith, C. C. Saltz, M. Komrad, D. Loveland, J. Leiser, J. Roberts, and K. Kindel. "A Computerized Consultation System on Alzheimer's Disease." Proceedings of the Second Annual Conference of the American Associationfor Medical Systems and Informatics. Baltimore, MD, October 1983. Silliman, R. A., R. Fletcher, J. L. Earp, and E. H. Wagner. "Families of Elderly Stroke Patients: Effects of Home Care." Journal of the American Geriatrics Saciety 34, (1986): 643-48. Veterans Administration Health Resources Management staff. The Resource Allocation Methodology (RAM) for the Veteran Administration Department of Medicine and Surgery. Washington, DC: The VA, November 1986. Wolinsky, F., R. Coe, R. Modely, and S. Homan. "Veterans and Nonveterans: Use of Health Services -A Comparative Analysis." Medical Care 23 (1985):1358.