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I will comment primarily on the affiliated hospitals, in part, because this is where my own personal experience had been, and in part because this group represents a very major portion of the entire Veterans’ Administration medical system.

Comprising 87 of the 168 hospitals and 176,000 of the 786,000 admissions per year, this group of hospitals is critical for the VA and for the patients it serves. It is an extremely important component of the system, both quanitatively and qualitatively. I believe it is fair to say at this point that these hospitals now generally provide care at the top level of quality of care delivered in this country. This quality is expressed, not only in the high level of diagnostic and therapeutic activities, but also in personalized service to the veteran patients.

In addition, these hospitals are responsible for an enormous amount of training of medical students, residents, nurses, and other health workers. Our medical school, for example, simply would not be able to maintain either the quality of its present programs or the size of its medical student and residency, programs if we did not have the affiliation with the Veterans' Administration hospital.

A third major contribution of the VA hospital system, which has more than proved itself, are the research programs carried out in the VA hospitals. It is worth noting that although they do contribute to fundamental knowledge about health and disease to a very substantial extent, these programs do concentrate mainly on diagnosis and treatment. They do relate directly and intimately to the care of patients that is carried on in the wards in this group of hospitals.

Let me say that the present and continued success of VA in maintaining the quality in these different programs is absolutely dependent upon the ability and quality of the physicians who serve on the staffs of the hospitals. This dependence of medical care on the quality of physicians occurs because it is the physicians who make judgments about diagnosis and treatment. If the judgments are of low quality, then backup by nurses or technical backup can be to very little avail.

Because of the critical relationship between the physician staff and the services received by the veteran patient, it is fair to say that the key to success that the VA has had in upgrading its medical programs since World War II has been its ability to attract and retain exceedingly able groups of physicians.

The basis for this success was the decision of the VA at the end of World War II to enter into a partnership with medical schools. The result has been that the VA hospitals have shared to an increasing degree with the medical schools, a class of exceedingly able, highly motivated physicians, which would not otherwise have been available to it.

I would like to comment on why I view these affiliations as having been critical in this success, since these factors will be important in maintaining the quality of VA programs in the future.

At the risk of oversimplificaition, let me say that the majority of physicians who are highly able and effective as physicians, have certain characteristics in common. These include independence, a high level of self-respect, strong motivation, and a capacity for hard work.

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These are the characteristics that are required if one is to become technically competent, to stay abreast of a rapidly changing field such as medicine and to make the kind of judgments that physicians often have to make under conditions of considerable uncertainty.

These exceedingly able physicians can be subdivided into a majority who work as independent entrepeneurs, who satisfy their self-respect as a result of the quality of the care they deliver and financial reward. A second, smaller group, who work in medical schools, are oriented more toward intellectual achievement in patient care, research, education, and are oriented more toward identification with the institutions where these activities are carried out, than toward financial reward.

It is the second group that the VA shares with the medical school as a consequence of the policy of affiliation that has been underway now since World War II. I make the point because it is quite important if the VA is to continue to be able to retain and recruit these physicians, that the services provided in the hospitals be such as to characterize VA hospitals as first-class institutions, with which they can identify.

These men and women identify with institutions and would not possibly continue to make career decisions in favor of institutions which they don't consider to provide adequate clinical and academic services.

I will touch briefly on four policies which appear to me to have been instituted at the end of World War II and which, I believe, have been particularly important in the success that VA has had in recruiting and retaining physician staffs of high caliber. Several of these are threatened by budgetary restraints at the present time. I will close with a couple of examples from my knowledge of the programs of the Palo Alto VA hospital, that illustrate, to some extent, these points.

Senator CRANSTON. I will be particularly eager to hear about that. Dr. Rich. I will get to them shortly. The five policies are, first, the affiliations with medical schools. This has allowed physicians to have faculty appointments and to work in an academic setting.

Second, and exceedingly important, has been the improvement in the nursing staff pattern of the hospitals. This improves the quality of care and is important both for the patients and for the physicians in the VA hospitals.

The third policy is the development of medical student and residency programs in the VA. This makes it possible for VA physicians to carry out patient care activities in a teaching setting.

The fourth policy is the provision of facilities and operational support for research. This has an obvious and absolutely essential role in maintaining an effective academic environment.

As a result of these policies and practices, the VA has steadily increased its reputation in the past 25 years and is now recognized widely as a system which maintains high quality institutions. As a result, it can recruit topflight professional staffs, not only in the affiliated hospitals, but to an increasing degree, in the nonaffiliated hospitals as well.

I believe that the VA now has a great chance to make impressive advances in the quality of staffing in its hospitals. This chance occurs because of the financial and cultural crisis of medical schools and because, at the same time, there are a substantial number of well trained young physicians with a high level of commitment to clinical excellence who would see the VA as definitely attractive for a ca

reer.

If, at this time of acute uncertainty in the academic world, the VA could show it continuing participation in a partnership with the medical schools, the result would be an increased confidence in the VA, improved morale and the acquisition of some able junior staff physicians.

İn view of this opportunity, it is intensely disappointing to see that events are likely to move in exactly the opposite direction. That is, in the proposed budget for the VA, the patient care portion of the budget is so restricted that instead of being able to increase the staffing pattern in VA hospitals, there almost certainly will be reduced staffing in VA hospitals.

Senator CRANSTON. Do I interpret that that you are not too impressed by the VA testimony on these points of what they can do with all these lesser amounts of money?

Dr. Rich. It is hard for me to understand how that would come about. I was not here this morning, Senator Cranston, but I have heard some of this testimony.

The overall budget does go up a couple of percent, but the increase is smaller than the cost of salary increases, which are being absorbed within it; smaller than the general trend of the cost of living which hospitals share. As you know, the escalation of the price of medical care certainly is quite as rapid as any other price escalation in the country, and this occurs at a time when the VA hospital system is about to open five new hospitals, which will have to be funded by that same inadequate appropriation.

Moreover, the VA also is establishing 15 to 19 new affiliations with medical schools around the country. These cost money because they involve the VA in supplying additional staff and to upgrading the research activities in these hospitals.

All of these new expenses will have to come out of the budget that is increased only by about 2 percent altogether. It seems to me very unlikely that this can be achieved without having some of the new hospitals completely underdeveloped and some of the new affiliations at a standstill.

Finally, although the quality of care is good in the affiliated VA hospitals, the nursing patterns and the professional support patterns are stretched extremely thin; there is no way that significant change in financing could occur without causing disaster in these affiliated hospitals.

Senator CRANSTON. When you were giving all of those smallers, we might add a smaller rate of increase at a time there is a rise in demand from service-connected veterans, a rise in complexity of injuries. And the degree of treatment required, isn't that correct?

Dr. Rich. I can add a few others.
Senator CRANSTON. Add all you've got on the list.

Dr. Rich. At the present time, we are seeing a large influx of veterans from the Vietnam war. The President's budget makes surprising little provision for the needs of these people. We, at Palo

a

Alto, find that a large number of these patients are coming to the VA hospital in need of care.

Second, the VA should provide comprehensive care other than episodic care. The failure to provide comprehensive care is not the fault of the leaders in the VA. They have been very anxious to develop programs that will allow eligible veterans to have comprehensive care, but have neither authorization nor funds.

Senator CRANSTON. May I ask you one other thing related to what you said. What is the first year's startup cost of a new affiliation ?

Dr. Rich. I can provide more details—the new affiliation at Martinez. The figures I have indicated an on-going cost of $1.5 million for additional personnel and an additional $800,000 for temporary quarters for new research laboratories. There would be some additional amount for start-up funds for research.

Senator CRANSTON. There are 19 new affiliations which cost $27.5 million, right?

Dr. Rich. They could cost considerably more than that.
Senator CRANSTON. You weren't giving an average figure, then?
Dr. Rich. No; I wasn't.

Senator CRANSTON. Could you give us a figure which could be an average figure?

Dr. Rich. I would be glad to develop a figure for you. I think it would be very unreliable, if I did it right here.

Senator CRANSTON. I don't want you to do it here. Include in that the cost of the research that would be connected with it.

Dr. Rich. I would be glad to provide you with some data on that point.

[Dr. Rich subsequently supplied the following information:] Question: What is the first year start-up cost for a new medical school affliation? Include fund estimate for research.

Answer: Estimated average cost based on VA experience: Patient care

For upgrading staff and facilities—includes provisions for 100 full-time equivalent staff, $1,200,000. Education

For stipends, space, minor construction improvement, supplies and equipmentincludes 25 house staff, $525,000. Research

For program support including initial equipment, $400,000.
Initial estimate. $2,125,000 for each new affiliation.

Dr. Rich. I would like to close then, with two examples which I have drawn from my knowledge of the medical school-VA relationship at Palo Alto. These illustrate, at the local level, how critical small amounts of money can be in providing for long range excellence in the professional programs of the hospital.

The objective in our affiliation at Stanford and Palo Alto is to have the same quality of staff at the VA hospital and at the Stanford University hospital. Some services have largely achieved this at the present time. We and the VA are recruiting together for two key members of the staff of the Palo Alto VA hospital, the chief of the pathology service and the chief of the neurology service.

One should bear in mind that the penalty of having a second-rate person to run a hospital service is very great, since the service itself

is thereby doomed to inefficiency, poor development and inadequate leadership over the period of time that such a person runs it.

At the present time, we have outstanding candidates at the very top rank, nationally, for each of these two posts. However, in order to bring either of these persons to the hospital, we absolutely need to convert some space that is available, to research laboratories, at a cost of about $280,000.

One part of this project, incidentally, is now under review in the central office and the other part shortly will be reviewed. I am not speaking about the outcome of that review, but describe it simply to illustrate that if the current minor constructions projects budget is inadequate; if we don't get those projects funded, the individuals who now are ready to join our staff simply won't do it. They won't come without research laboratories, they couldn't.

If so, we will have to turn to less able people. This would doom these two key services in the hospital for one or two decades to mediocre leadership.

Thus, a relatively small investment at this time in this hospital will have a major effect on the excellence of its programs for the next 2 decades. I am certain that there are many other instances of that sort throughout the Nation.

In fact, the minor construction budget of the VA proposed in the 1974 President's budget is very small compared to the need. There is in the neighborhood of $60 million for this, VA wide. The backlog of projects is in the neighborhood of $330 million, so there is an enormous discrepancy. I would say that this kind of discrepancy in a system with many hospitals that are old and many hospitals that are in need of remodeling, is particularly disturbing.

The other example concerns the department of psychiatry at Palo Alto Veterans' Administration Hospital. Unlike the rest of this hospital, which is totally affiliated, only 50 of the 300 psychiatric beds at Palo Alto have been affiliated. There would be very strong advantage to the hospital to extend the affiliation to the entire service.

At this time the staff in the department of psychiatry and the administration of the VA hospital are eager to do this. However, the cost is not neglible. In order to have this done in an effective way, there would have to be an increased numbers of nurses, resident physicians, staff physicians, and other support personnel.

The on-going cost would be in the neighborhood of three-quarters of a million dollars a year, in addition to some initial remodeling expense. I give more detailed information about this project at the end of my testimony.

The administration of the hospital and a central administration of the VA, both are most enthusiastic about this project. But because of the inadequate VA budget, it may be very difficult or impossible to achieve it.

These two examples are drawn from experience of one hospital. I believe they illustrate the general point that the VA can improve its programs only if it is able to maintain or modestly advance its level of financial support.

If the budget continues to be reduced and impounded, not only will these present opportunities be lost, but in my view, the gains of the last 25 years could be compromised. I say this because a group

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