Thanks to the triumph of the Hardhats, the veterans healthcare system was emerging in the mid-1990s as a world leader in the use of information technology to improve the practice of medicine. But the system was in deep political crisis—a quarter of its hospital beds were empty.1 One government audit in 1994 found that 21 out of 153 VA surgeons had gone a year or more without picking up a scalpel.2
It looked like what would finally undo the veterans healthcare system was the rapidly declining population of veterans. By the mid-1990s, World War II veterans were passing away at a rate of 1,000 per day. Moreover, those who survived in retirement tended to migrate from the Northeast and the Midwest to the Sunbelt, leaving veterans hospitals in places like Pittsburgh or on the Colorado plains with wards of empty beds and idle staff. Meanwhile, in places like Tampa and St. Petersburg, veterans hospitals were overwhelmed with new patients, who, facing overcrowded conditions and overworked staff, found plenty to complain about.
Adding to the threatening climate of opinion, some liberals as well as conservatives were beginning to ask questions about the veterans health-care system that they would not have dared to raise at any other time in the twentieth century. “You mention the word ‘veteran,’ and you’re supposed to pitch forward on your sword,” Senator Alan K. Simpson, Republican of Wyoming and chairman of the Veterans’ Affairs Committee, complained to the New York Times in 1994. He and other fiscal hawks increasingly saw spending on veterans health as just another wasteful form of pork barrel spending.
Meanwhile, serious voices on the other end of the political spectrum called for simply dismantling the veterans health system. Richard Cogan, a senior fellow at the Center on Budget and Policy Priorities in Washington, told the New York Times in 1994: “The real question is whether there should be a veterans health-care system at all.”3 At a time when the other health-care systems were expanding outpatient clinics, the VA still required hospital stays for routine operations like cataract surgery. A patient couldn’t even receive a pair of crutches without checking in. Its management system was so ossified and top-down that permission for such trivial expenditures as $9.82 for a computer cable had to be approved in Washington at the highest levels of the bureaucracy.4
The major veterans service organizations, such as the American Legion, still supported the VA, but many individual veterans, especially younger ones, would use its hospitals only as a last resort. Hollywood once again captured and helped reinforce the public’s negative perception of the VA with the movie Article 99, which was about a group of doctors in a veterans hospital who had to contend with too many patients, budget cuts, and ruthless administrators.
Press reports, meanwhile, continued to serve up chilling anecdotes and damning conclusions. “The VA’s War on Health” read a Wall Street Journal headline in 1993. “The Worst Health Care in the Nation,” the Washington Times echoed in 1994. It was a demoralizing time for those who still believed in the nobility of the VA’s motto, which is, in words borrowed from Abraham Lincoln’s second inaugural address, “to care for him who shall have borne the battle, and for his widow, and his orphan.”
Within the Clinton White House, skepticism about the veterans health system also ran deep. Early in the first term, Hillary Clinton and other proponents of the administration’s original health-care plan had imagined that veterans hospitals might simply be folded into a much larger federally organized system of “alliances” they were planning. Even after their master plan crashed and burned in 1993, many in the administration still questioned whether veterans hospitals ought to have a future.
In January 1994, Kenneth W. Kizer, MD, MPH, was surprised to learn, if for no other reason than that he was a registered Republican, that he was on the administration’s short list of candidates to head the Veterans Health Administration—a position that had remained unfilled since Clinton’s election in 1992. He could hardly be sure at first what the administration might have in mind. “There were a fair number of people who thought the system wasn’t salvageable: people in the administration, people out of the administration, the health policy wonks. You know, there were a fair number who just said no,” Kizer recalls.
Yet his background, temperament, and intellect had given Kizer a unique vision of not only how to reform the veterans health system, but also how to turn it into a model of twenty-first-century health care—a vision that fortunately reached the administration’s ears. In announcing his new VA Under Secretary for Health, the president enthusiastically noted, “Dr. Kizer brings a wide range of clinical and administrative expertise to the VA at a time when tested leadership will be crucial to the Department’s success in the framework of national health-care reform.” It was a prediction that has become more true today than Clinton probably dared to imagine. Indeed, future historians may well record that among Clinton’s greatest legacies was the reform of the VA, which transformed it from one of the biggest arguments against socialized medicine into one of the best arguments for it.
Kizer was idealistic enough about his vision that when he got the nod from the Clintons, he gave up a comfortable professorship at the University of Southern California, left his wife and kids behind, and threw himself into his new job. “Everyone said don’t take the job. Or take it if you want to have yourself a fling in Washington, but don’t delude yourself by thinking that you’re actually going to be able to do anything,” Kizer recalls. “There was universal consensus that if there was one agency that was the most politically hidebound and sclerotic, it’s the VA. But what I saw, and what I thought the opportunity was, was that they had all the pieces.”
Whatever else it was, the VA’s health-care system was a system, however ill fitted its various pieces might be. It operated 159 medical centers around the country, 375 ambulatory clinics, 133 nursing homes, 39 domiciliaries offering care to the homeless and substance abusers, and 202 readjustment counseling centers. Moreover, it had a clearly defined base of patients with whom it maintained nearly lifelong relationships, thereby opening up the prospect of effective investment in prevention and disease management.
Kizer also liked the VA’s clear mission—to keep patients healthy—and that it didn’t have to maximize shareholders’ profits or doctors’ incomes. Also, because its mission centered on patients rather than profits, a core of VA employees were highly idealistic and committed to improving quality. As Kizer saw it, the great opportunity lay in truly integrating this system and taking advantage of its potential, including investment in prevention, primary care, and highly coordinated, patient-centered, evidence-based medicine.
Kizer was not deeply experienced in the ways of the VHA, much less Washington. The Republican outsider, he was one of very few people to ever head the VHA who hadn’t come up through its ranks. After his first day on the job ended at about 9:00 p.m., he found himself locked outside the VHA’s underground parking lot and spent an hour pounding on doors trying to get someone to help him retrieve his car. When he finally did gain entry, he found his car vandalized. Weirdly, someone had stolen the headrests.
But Kizer was well prepared in every other respect. Orphaned at an early age, he had worked his way up through Stanford and the University of California at Los Angeles, becoming board certified in six medical specialties. His experience with military medicine included an internship at a VA hospital as well as service as a rescue diver in the navy reserves during the 1970s.
Adding to this background was Kizer’s academic and professional experience in public health. He practiced emergency medicine early in his career but says he was frustrated by the limitations of having to care for one patient at a time. Hoping to take a more systematic and preventive approach to health care, he joined California’s public health department in 1984 and rose through the ranks quickly. By age thirty-two he was appointed by California’s Republican governor, George Deukmejian, to become the youngest person ever to head the department.
Developing the state’s response to the new AIDS crisis was one of the responsibilities Kizer took on in that position. He also spearheaded California’s toxic waste cleanup efforts and early antismoking initiatives. The latter included banning smoking for the first time in the public health department’s own buildings, which proved sensitive. As it happened, California’s public health department was highly unionized. Sixteen different bargaining units included everyone from its scientists to the blind vendors who sold cigarettes in the lobby. Kizer’s experience negotiating with all of these bargaining units would later prove invaluable at the VHA, whose workforce is represented by five different unions. But equally important was the cast of mind that accompanies a responsibility for the health of whole populations as opposed to one patient after another.
This cast of mind tends to see health care as a system, not just a collection of individual doctors treating individual patients. Thus, eliminating medical errors becomes a matter not of finding a doctor or nurse to blame but of finding root causes of failure in a health-care system’s various processes and procedures, or the lack thereof. Similarly, this cast of mind naturally looks for data to answer basic questions that too often don’t get asked in the day-to-day practice of medicine, such as which drugs work better than others for most people most of the time. Because they concern themselves with how health care works at the population level, people grounded in the public health paradigm also tend to see health itself as overwhelmingly determined by environmental and behavioral factors. The ecology of health, in this view, includes obvious factors like smoking or lack of exercise, but also less obvious ones, such as how much patients become involved in their own treatment, or how integrated and coordinated the care they receive is.
By the time Kizer arrived at the VHA, he was well prepared to appreciate the potential of the new systematic and data-driven model of care that was already being made possible by the development of VistA. He was also well prepared to see the necessity of reorienting the VHA away from a system that emphasized acute care delivered in hospitals by specialists and toward one that put overwhelming emphasis on prevention and “patient-centered” management of chronic conditions.5 The declining population of veterans would force the VHA to undergo painful downsizing, but in Kizer’s vision this change could also be the catalyst for implementing a new and profoundly more efficient and effective model of health care.
To achieve this vision, Kizer first had to deal with politics, starting with those of the VHA itself. “The basic thesis of the transformation, when I was talking about it to people within the VA, as well as outside … was that we have to be able to demonstrate that we have an equal or better value than the private sector, or frankly we should not exist,” Kizer recalls. “That didn’t necessarily go down well, at least at first. But as a taxpayer, why should I pay for a system that provides poor quality, is inefficient, wastes money, and that the customers don’t like?”
Demonstrating the value of the system, both to himself and to others, required formal measures or metrics of quality. By the 1990s, it had become a truism of American business that you can’t manage what you don’t measure. But within American health care at the time, systematic attempts to define, measure, and improve quality were highly unusual. The British, with their nationalized health-care system, had a long tradition of systematically studying the actual outcomes of different medical procedures and systems, and acting on them. But in this country, remarkably few researchers even had the concept of what is today known as “evidence-based medicine,” and their work was largely ignored by health-care providers.
Nonetheless, Kizer insisted that the system measure itself against any and all benchmarks of quality for which consensus existed among health-care professionals. The early metrics often measured inputs or processes rather than outcomes, but their use was still revolutionary by the standards of U.S. health care at the time. How many diabetic patients received treatments based on “best practices”? How long did vets have to wait to get appointments? How often did medical errors occur, and what were their patterns? How did patient satisfaction at the VA compare with that of other health-care systems?
Kizer combined such measures into a gimmicky but effective management tool he called the “value equation,” which he formulated as Value = technical quality + access + customer satisfaction + health-care status/cost or price. Thanks to the continuing evolution of VistA and other reporting systems, obtaining the data for this measure of cost-effectiveness would become increasingly easier, but the answers were not always pleasing or expected. For example, while it turned out that the VHA was doing a respectable job of ensuring that its few aging female patients were receiving mammograms, only about 1 percent of its elderly male patients were being screened for prostate cancer, which at the time was considered an important, preventative measure.6
Armed with his metrics, Kizer began leading the VHA toward its transformation. One big, unpleasant, and unavoidable agenda item was how to rationalize the VHA’s excess capacity. Because of the changing demographics of the veteran population and the shift to outpatient care, the VHA had scores of hospital complexes and other facilities that had to be closed for lack of patients. It wasn’t only a matter of money; it was also a matter of safety. When surgeons pick up a scalpel only one or two times a year, they are bound to be out of practice, along with all of their operating team and nursing support.
To help deal with this problem, Kizer began contracting with private hospitals in areas where there were too few patients to support a veterans hospital. He also supported expanding eligibility for health benefits to veterans who were neither poor nor needed treatment for service-connected disabilities. Yet these steps were still not enough to maintain a safe volume of care at many VA hospitals. In some extreme examples, such as the veterans hospital in Grand Island, Nebraska, the average daily census of patients had dropped to just two.
A key to building enough political support to close such institutions was negotiating an unusual agreement with Clinton’s Office of Management and Budget. Under the agreement, any money Kizer managed to save by closing hospitals wouldn’t simply go back to the Treasury, as under the normal rules of federal bureaucracy, but could be used by the VHA for other purposes, such as building new outpatient clinics, expanding VistA, or ensuring that every VHA patient was assigned a primary care physician. This allowed VHA employees, veterans, and other interest groups to see that much more was going on under Kizer’s leadership than just ruthless downsizing.
Another key for cutting through political gridlock was Kizer’s decision to decentralize, reducing the authority at VHA’s central headquarters in Washington. As part of this plan, he created a series of twenty-two regional administrative districts, most of them crossing state boundaries and vested with as much power as possible in areas such as budgets and policy making. One practical advantage was simply to put VHA managers closer to those they managed and thereby create more accountability. But the measure was also politically shrewd.
For example, as chairman of the Senate’s Veterans Committee, U.S. senator John D. Rockefeller IV had considerable leverage over veterans’ issues and also had a particularly contentious relationship with Kizer. The senator found his state of West Virginia divided into five regional districts, all of which fell partly in other states. Because of the state’s mountainous terrain, people there have always been far more likely to travel to a neighboring state than to cross the state in search of care. This plan worked well for West Virginia’s veterans. But the administrative change meant that Rockefeller needed far more cooperation from veterans and politicians in other states if he wanted to save or tinker with some particular VA facility within his state.
Regionalizing the VHA power structure had other advantages as well. “It’s easier to have that dialogue with real people in the community,” says Kizer, “than it is with a congressional committee, where everyone wants to stand up for the flag and ‘do something’ for veterans, and you’ve got C-SPAN there hovering.” Decentralization combined with the VHA’s state-of-the-art information systems also meant that it became possible to hold regional administrators accountable for a wide range of performance measures, including how well they coordinated physicians, hospitals, and medical care services for a defined population within their administrative regions.
In his original blueprint for transforming the VHA, titled “Vision for Change,” Kizer wrote:
In an integrated health-care system, physicians, hospitals, and all other components share the risks and rewards and support one another. In doing so, they blend their talents and pool their resources; they focus on delivering “best value” care. To be successful, the integrated health-care system requires management of total costs, a focus on populations rather than individuals, and a data-driven, process-focused customer orientation.7
Kizer’s vision went far beyond any integration done by HMOs and other “managed care” private-sector providers, who quickly discovered that they most often lacked a “business case” for improving quality. In contrast to even the largest HMOs, the VHA could count on a relatively stable population of patients, which in turn gave it a built-in case for pursuing quality. Take, for example, the choice of drugs it uses. Many of those drugs, such as statins, which help lower cholesterol, bring about only long-term benefits to most patients—specifically, a reduced chance of one day suffering from heart attack or stroke. An HMO in which patients are constantly churning has no real financial interest in whether the particular statins it prescribes are the most effective.
For health-care providers who lack long-term relationships with their patients, even the question of whether a drug may eventually turn out to have long-term safety problems is not an urgent concern—so long as it has been approved by the Food and Drug Administration—because by the time patients begin to experience any long-term complications, they will have long since moved on to other health plans. Because of the churning of patients that occurs in nearly every American health-care system other than the VA, decision making tends to be dominated by short-term financial costs rather than by long-term benefits to patients’ health.
Realizing the unique incentives the VA had to maximize its patients’ health, Kizer set up an elaborate drug review process to establish what is known as a “formulary” of recommended drug therapies. Field investigations by VA physicians and pharmacists compared the effectiveness of new drugs with current therapies, considered any safety concerns, and decided whether the VA should include these new drugs in its formulary.
One result was that the VA would sometimes pay for pricey drugs that typically were not covered by other health-care plans, such as an expensive but effective compound used in the treatment of schizophrenia and high-quality statins used to treat high cholesterol. “If you know you’re going to have your patients for five years, ten years, fifteen years, or life,” explains Kizer, “there are both good economic and health reasons why you would want to use these more expensive drugs. You have a population of patients who are at high risk for sclerotic heart disease, and you’ve got them for life. You make a different decision about what’s on your drug formulary than you might if you knew you only had them for a year or two.”
After evaluating the safety and effectiveness of different competing therapies, the VA typically settles on a few “workhorse” drugs—such as the statin simvastatin to treat high cholesterol—that become part of the VA’s standard medical protocol. This exercise in evidence-based medicine not only brings health benefits to patients but also has the effect of further leveraging the VA’s already considerable purchasing power over drug companies, thus allowing it to negotiate deep discounts even on the highest-quality drugs.
Predictably, many drug companies hate the power the VA has over them. They fund studies claiming to find some inadequacy in its formulary, with the usual complaint being that the VA does not include enough “new and improved” drugs. One such study, for example, published by the drug industry–funded Manhattan Institute, purported to find a two-month decline in life expectancy among VA patients because the VA formulary included a lower fraction of new drugs than those typically in use by the rest of the health-care sector.8
Yet the independent and prestigious Institute of Medicine debunked the claim, finding that “the VA National Formulary is not overly restrictive.”9 As the millions of Americans who took Vioxx and other COX-2 inhibitors have learned all too painfully in recent years: just because the Food and Drug Administration approves a drug doesn’t mean it is a superior therapy, or even a safe one. It only means that in some short-run trials, usually financed by the manufacturer, the new drug proved more effective than a placebo.
According to William Korchik, a VA doctor who has participated in the VA’s drug review process, another big benefit of this policy over the years has been avoiding dangerous drugs.
We took a tough stand on the [COX-2] inhibitors by not putting the drug on our national formulary and requiring prescribers to complete a risk assessment tool on each patient before a COX-2 inhibitor could be provided.… Predictably, we were criticized up and down about our restrictiveness. But now I can say we were appropriately restrictive because there was not data [proving their safety].10
By 1998, Kizer’s shake-up of the VHA’s operating system was already earning him management guru status. His story appeared that year in Straight from the CEO: The World’s Top Business Leaders Reveal Ideas That Every Manager Can Use. Yet the revolution he helped set in motion at the VA was only beginning, even as the rest of the U.S. health-care system fell deeper into crisis.