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The second, a private nonprofit hospital with about 500 beds, a county hospital of limited purpose, mainly for alcoholism, for kidney dialyses and a few other types of special programs, a psychiatric hospital under the State division of mental health of New York and the VA.

We have the trainees, residents, interns, and students who spend portions of their time in each of these institutions. They are now feeling very acutely the lack of assistance, the lack of their ability to deliver that which they believe to be the highest quality of patient care in the VA hospital.

I believe our veterans are getting very good care, and that we have an excellently managed system. I think that the leadership in the VA, the Department of Medicine and Surgery, and the leadership in the hospital is superior. But I think we are at the border line of this falling apart, where the high quality care cannot be delivered, where we will not be able to have the same high quality of teaching

Secondarily, because of that, we are going to have greater restiveness of young physicians who might come in and serve the system.

Senator CRANSTON. I wish that the people responsible in all the VA hospitals could give the same pleasant report about the current state of the care, because there are many, where the inadequate funds have already caused real, real problems in the quality of care.

Dr. SCHMIDT. We in Syracuse are rather lucky because there is a great deal of patient care that the Veterans' Administration does not pay for. We don't object to this. We pay quite a few salaries of people who spend significant portions of their time at the VA in research or in patient care.

We also utilize the VA hospital as a major resource for our educational program. I think the ratio, however, of the employees to the numbers of patients we have, and the mission is right at the verge of collapse. Our house staff is a little more militant perhaps than I tend to be. Which, speaking of militancy, I would not have burned my draft card if I were the proper age, I might have boiled it.

They are getting rather restive of what they feel to be their lack of ability to get things done as fast as they think it should be.

Senator CRANSTON. What does your house staff say in reference to this militancy about staffing?

Dr. SCHMIDT. They feel there should be more nurses, there should be better staff in the ambulatory program. They feel this to be true in the special programs, including intensive care.

At the present time they are on our backs. These are young people who work 68 hours a week. They are on our backs about the night staffing pattern, the pharmacy, the wards, and the various clinics. The Administration there is responsive to their needs, but has a limit beyond which it can not go further.

Senator CRANSTON. Do you have more to say on your own views on staffing needs ?

Dr. SCHMIDT. No, sir.

Senator CRANSTON. Do you have any recommendations on the cuts that might be possible in the budget?

Dr. SCHMIDT. I have difficulties seeing how, but I have to look at it from the microsome in Syracuse. I would have great difficulty in seeing how we could make significant cuts and maintain any semblance of quality.

Senator CRANSTON. What about elsewhere in the budget, the VA budget!

Dr. SCHMIDT. I don't think it could come out of research. I think it is another of the decisions about benefits to the veterans other than those of medical care. I don't see that this is a fat budget at all.

Senator CRANSTON. If we have to make some cuts somewhere else in the budget to permit us to do what we need to do for veterans within the spending ceiling, which means no taxes, no deficit and no inflation, where would you make those cuts?

Dr. SCHMIDT. I think you pointed out some of these this morning, and I would very much agree with what you said in your opening statement.

Senator CRANSTON. Thank you on that point. I have some more questions.

In your written statement, you say “it is my perception that veterans hospitals are funded largely on the basis of hospital bed occupancy.” It used to be so, now a mixed formula is used that takes into account outpatient care. Has there been a noticeable effect on the ability of the hospital with which you are associated to provide quality care to veterans in the face of the average grade reductions of VA staff mandated by OMB!

Dr. SCHMIDT. We have not begun to feel this effect yet, but I think we will.

Senator CRANSTON. Well, the last question, I will repeat it, washas there been a noticeable effect on the ability of the hospital with which your university is affiliated to provide quality care to veterans in the face of the average grade reductions of the VA staff that have been mandated by OMB?

Dr. SCHMIDT. We have not seen this effect as yet, to my knowledge. I know that we are concerned about it, and expect this effect not to be good.

Senator CRANSTON. If you could amplify in writing to us what you feel would happen if that happened, it would be helpful.

Also, in your statement you refer to legal barriers impeding the improvement of the VA medical care system. What legal barriers are you referring to?

Dr. SCHMIDT. Dealing in part with eligibility and the modality and the delivery of services. Theoretically, at least, under the current legal authority as I understand it, provision of care for nonservice-connected illness centers depends upon need for hospitalization. He may be given ambulatory treatment under the classification of pre-bed care and, of course, may be continued ambulatory treatment after an episode of hospitalization. It is called posthospital care. It is

my belief that if the veteran is eligible for care he should be eligible for care, period. It should not require the expectation for hospital bed occupancy to occur. The services that should be delivered are comprehensive in accordance to need, and in the setting where that need is most appropriate.

These have been imaginative approaches toward modernization of the system, but as I understand it the laws still revolve around the

hospital and need for hospitalization being the key in determining eligibility.

Senator CRANSTON. Our bill S. 59 goes a long way toward accomplishing that.

Thank you very much, you have been very helpful, and I apologize for my erratic behavior during your particular testimony.

QUESTIONS SUBMITTED BY SENATOR CRANSTON SUBSEQUENTLY TO

DR. SCHMIDT

Q. 1. For the first time since World War II, there is a potentially reduced level of funding for VA medical research programs. In Fiscal Year 1973, the VA appropriation for medical and prosthetic research was $76.8 million and in fiscal year 1974, the requested appropriation amount is $71.0 million.

What do you believe the level of funding for VA research programs should be in fiscal year 1974?

A. With respect to the level of funding for the V.A. Research Program in fiscal 1974, it is my considered opinion that reduction in the appropriation to 71 million dollars would be a serious blow to an exceptionally well developed and productive research program in the Veterans Administration. The actual reduction in research capabilities is reflected well beyond the difference in dollars. Thus, to my knowledge there are at least two new hospitals which could be expected to develop research programs and this will further effectively be reduced by the increased costs of conducting research because of inflation.

More specifically, I believe that the original request coming from the leadership in the Veterans Administration would be entirely appropriate at the level of 87.5 million dollars.

Q. 2. By what percentage do you estimate that research funding must increase in fiscal year 1974 just to maintain existing program levels ?

A. I estimate that research funding must increase in fiscal year 1974 by at least ten percent to maintain existing program levels. I have reached this figure by examining increased costs within our own institution which include salary raises and price increases for supplies, equipment and animal care.

[The prepared statement of Dr. Schmidt follows:] STATEMENT OF DR. RICHARD P. SCHMIDT, DEAN OF THE COLLEGE OF MEDICINE,

UPSTATE MEDICAL CENTER, STATE UNIVERSITY OF NEW YORK, SYRACUSE, N.Y. Mr. Chairman, members of the Committee, my name is Richard Penrose Schmidt, My position is Vice President for Academic Affairs and Dean of the College of Medicine at the Upstate Medical Center, a unit of the State University of New York in Syracuse. I have previously served on the medical faculties of the Universities of Louisville, Washington and Florida. Immediately before accepting my present position in August 1970, I served as Chief of Staff of the Gainesville, Florida Veterans Administration Hospital.

The contributions of the Veterans Administration to health science education have been great and have been amply documented by others. Suffice it to state that a very large proportion of practicing health professionals in the United States have had portions of their education and training with Veterans Hospitals. In turn, the partnership between the Veterans Hospitals and Academic Health Science Centers has materially benefited the veteran patient in terms of the quality of his care. Largely because of this partnership, patients in veterans hospitals have had available to them most of the skills and resources that modern scientific medicine and technology can offer. This partnership has not been free of stress or critics and there are admitted points of weakness. In my testimony, however, I would prefer to dwell on opportunities, especially as they concern the three major missions of patient care, education and research. These three are interdependent and no one of them can be of highest quality without each of the others.

PATIENT CARE

The emphasis of the entire program is and should be the delivery of high quality services to the veteran patient in whatever circumstances he may be found. For the aim to be anything less is, to me, personally repugnant. Perceptions of the meaning of high quality service may vary and there may be real

istic limitations and the necessity for priorities to be established but there can be no compromise with the basic objective. One of the greatest concerns now facing us in health care is a change from a concentration on episodic treatment of illness to that of comprehensive delivery of services including those of prevention. Furthermore, there is a shifting emphasis toward improvement of services to the ambulatory patient with the hospital becoming to an increasing extent a center for intensive care of the seriously ill. This has a rather interesting side-effect which some 'have difficulty in understanding. The costs of a hospital rise because of more intensive care and more serious illness but our means of recognizing this in budgeting are inadequate. It is my perception that Veterans Hospitals are funded largely upon the basis of hospital bed occupancy. I believe they should be funded as a care-system with the incentive more toward comprehensive medicine on an ambulatory basis. If a veteran or his dependent is eligible for care, I believe that he should be eligible for comprehensive care whether or not hospitalization is required.

Costs of medical care have increased tremendously and will continue to rise, especially with technological advances which improve the ability to diagnose and treat. The American public demands the best but the best is very expensive. The most efficient medical care system I have seen is that of the Veterans Administration. As I observe the microcosm within my personal view, however, I believe there are some real and inherent dangers because of a general anemia of funding that does not provide adequate numbers of staff to perform the mission of high purpose to the same level of quality the purpose portends. If the veteran is, indeed, to receive care of the highest type, the acute care hospitals must be more adequately funded and special programs reflecting scientific advance supported.

Significant changes have been made and the leadership of the Veterans Administration has worked hard and effectively in developing means by which the care system can be progressively improved. I believe that any legal barriers that may exist should be removed. There should be a continuation and strengthening of the concept of sharing resources with other institutions in the public and private sectors and there must be sufficient freedom for unique or novel arrangements. One of the more interesting challenges we face are the cooperative arrangements among those who function under widely varying regulatory systems, federal, state, and private.

EDUCATION

The Veterans Administration Hospitals in cooperation with universities, have served as a major resource for education of health professionals needed to serve our nation. The capacity of our country to educate young people for careers in medicine and the health related professions has expanded tremendously. In medical schools alone, there has been an approximate 50% increase in entering students in the past five years. I welcome the opportunity for an increased participation of the Veterans Administration in this task, especially as it may increase the capability of existing institutions to meet the demands. We need space, teachers and the appropriate philosophic climate for this to be done.

I will not dwell long upon the value of an educational program to patient care. My career has been devoted to medical education and I have always believed that excellence in care and excellence in clinical teaching go hand in hand. I believe strongly that the veteran patient has benefited from the remarkable foresight of those who were the planners of the association of hospitals and medical schools after World War II.

RESEARCH

I need not speak to this Committee of distinguished senators of the current debate with respect to federal support for biomedical research and research training. I know that each of you has been amply supplied by rhetoric as well as by reasoned arguments from the affected scientific community and from others.

The Congress has acted wisely in providing funds for research within Veterans Administration Hospitals and there has been ample documentation of the value of this research in terms of pay-offs such as in the evaluation of the treatment of tuberculosis and the development of the cardiac pacemaker. More difficult to demonstrate, perhaps, are the indirect benefits. A research program brings with it a spirit of active enquiry which, in turn, is reflected in the quality of education and of patient services. An institution with active research attracts the best staff and those who are at the forefront of abilities and knowledge.

Perhaps the greatest economic and human impact will be from the discover. les of basic biomedical research but this is now under the greatest liability of damage in the emphasis placed upon directed research. One cannot question the motivation behind this change but many of us fear the results if it is not balanced by fundamental investigation. A fundamental breakthrough in molecular biology could unlock the mystery of cancer and lead to the saving of millions of lives and billions of dollars. The bed-rock of technological development is pure scientific research and we must not shift too far in diverting support to the former lest the latter crumble.

It is my belief that the Veterans Administration should continue to support research on a broad base extending from that of basic biomedical science to that of clinical trials and patient management. There must be an equal demand for quality and accountability at each level.

CONCLUSION I have directed my remarks to general principles which ultimately must be brought into practical terms of law, policy, finance, and rules. We have many problems facing the health care system in our country and none of us has a simple or cheap means for solution. The problems, however, are also opportunities and as the largest organized health care system in the world, the Veterans Administration is in a unique position to provide leadership. It must be responsive to need and it must have the resources to meet the needs perceived by our people and their leaders. I am sure that there will be many changes and that there will be much resistance to each. I believe deeply that measures which can strengthen the partnership with Academic Health Science Centers will be of mutual advantage and will serve the veteran and the public responsibly. We do have the very real problems of conflicting perceptions of purpose and disparate systems of identification, regulation and control. Without our own microcosm in Syracuse these are much in evident with a medical center including hospitals with five different management systems and health professionals who are paid by strict salary, modified salary or the entrepreneurial fee-for-service basis. Fundamental to much of our future will be our ability to amalgamate these successfully with a lessening of the gross differences in rewards among them.

Senator CRANSTON. Our next witness is Dr. Clayton Rich, vice president for medical affairs and dean of the school of medicine, Stanford University.

Dr. Rich, I am particularly delighted to welcome you from California and appreciate your coming all the way back here.

STATEMENT OF DR. CLAYTON RICH, DEAN OF THE SCHOOL OF

MEDICINE, STANFORD UNIVERSITY, STANFORD, CALIF. Dr. Rich. I am very pleased to have the opportunity to address this subcommittee. I might say, as additional background for the remarks I will make, that I spent the 10 years between 1961 to 1971 as a full-time VA physician. I was the Chief of Staff for the last 2 of those years, at the VA hospital in Seattle, Wash.

I plan to comment principally on some relationships that are related to this professional experience, and to draw on it as dean of a medical school that is very closely affiliated with a VA hospital. I will comment on the relationship between physicians of the staffs of VA hospitals and the quality of the medical programs conducted in these hospitals. This is a relationship which is very dependent upon the budget and which is jeopardized by the 1974 President's budget for the Veterans Administration.

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