trol is one example. Controls such as grade escalation hinder our ability to recruit and retain high quality personnel. Senator CRANSTON. You were in the VA system for over 10 years, I know. Can you tell us what caused the reduction in the average daily patient census in late 1970 and early 1972? Dr. RICH. I really can't give you information about the system, but I can find out. Our hospital didn't have a drop. Senator CRANSTON. Would you find out and let us know? Dr. RICH. Yes. [Dr. Rich subsequently supplied the following information:] Question: What were factors that caused the drop in VA hospital census in 1971-72? Answer. The drop referred to is the decline from the seasonal high average daily census of 87,667 during February of FY 1971 to 79,865 during June of the same fiscal year. This was followed by a census which increased to a peak of 83,662 for February in FY 1972. During February of fiscal year 1971, average daily census allocations for FY 1972 were released to the hospitals. These were based upon the estimated census of 79,000 contained in the budget for FY 1972 submitted to the Congress. Consequently, hospitals' actions, in addition to the expected seasonal decline, were to move downward toward the target for FY 1972. Senator CRANSTON. Could you comment on the impact of a onetenth of a grade rollback required in fiscal year 1973? What impact does this have on hospital morale and on patient care, or in any other way? Dr. RICH. The effect on morale is devastating in several ways. It interferes in an arbitrary and illogical way with selection of wellqualified people for many positions necessary for patient care and for management of the hospital. Senator CRANSTON. What is the effect, in terms of patient care, of the grade rollback? Dr. RICH. I can't comment on the effect of that rollback at our hospital. I will find out for you and add it to the record. [Dr. Rich subsequently supplied the following informations:] There are basically four specific points. 1. The most important point is as mentioned in my testimony; namely, it does cause a general lowering of morale when employees cannot advance in grade commensurate with their skill and performance. 2. It causes a higher turnover, since employees who cannot be advanced in salary will leave and work elsewhere. This costs more money in the long run and is an expensive expedient. 3. As a consequence of grade deescalation, the better trained, more talented people, and long-term employees will leave and work elsewhere where they can get better pay. Thus, it forces us to lose our most highly trained and valuable people. 4. Because of grade deescalation the VA is forced to hire less well-trained and less-qualified individuals. Grade deescalation affects General Schedule employees, which in the Palo Alto hospital number 1,300, and primarily has adverse effects on the Nursing Service, since it involves nursing aides and assistants and a large number of professionals and non-professionals in Dietetics, Fiscal, Personnel, and Admitting. Senator CRANSTON. How do you feel about the need for the VA to play a leadership role in continuing education? Dr. RICH. I might say that everybody in medicine now is keenly aware of a tremendous need to upgrade continuing education. The need is generated by the tremendously increased rate of acquisition of knowledge that directly can be applied to care patients. The VA is one of the major medical systems in the country and certainly ought to be very expensively involved. If the VA hospitals in their partnership with medical schools were to be involved, we could mount a very important postgraduate educational program. Senator CRANSTON. There is an awareness, I think a widespread awareness, of the need for VA participation in continuing education. But how much is being done about it? Dr. RICH. In those hospitals I know of, the staff of the VA hospitals participate along with their fellows in the faculty of the medical schools and makes a considerable contribution in that way. Senator CRANSTON. How does a hospital doctor go about reducing the patient level when he is ordered to do so? Dr. RICH. I don't have personal experience to report. Senator CRANSTON. Could you look into that and find out what really happened? Dr. RICH. I would be very glad to. [Dr. Rich subsequently supplied the following information:] Rarely, if ever, has our Hospital Director had occasion to achieve a lowered bed census. The level of operational beds is contingent on the "funded" beds set by Central Office. Funded beds may be reduced because of lack of demand, lack of funds, or increased efficiency, i.e., increased turnover due to better funding and increased staffing to do the job. Senator CRANSTON. How does the staff ratio at the VA Palo Alto hospital compare with the ratio at the community hospitals and the ratio of staff at the university hospital? Dr. RICH. The VA, nationwide, has approximately half the nursing staff of community hospitals. The Palo Alto hospital-I can provide you with exact figures later-has better staffing than the average for VA hospitals. On the other hand, it is much less well staffed as Stanford University Hospital. [Dr. Rich subsequently supplied the following information:] These figures, of course, are very hard to interpret in any but general ways, since these hospitals all have varying efforts with respect to emergency room care and outpatient care. Stanford, for example, no doubt has a larger OPD and emergency room proportionate patient census in terms of bed ratio than does the Palo Alto VA. Similar variations have occurred to the above-named hospitals and also would be true to any national average used. Nevertheless, even taking these factors into account, it is perfectly clear that the staffing patterns of the Palo Alto VA Hospital, compared to neighboring hospitals, are grossly less than the surrounding hospitals of Northern California. VA budget projections for FY 1975 will provide a system-wide SR of 150 staff for 100 patients (1.5), but this is based on internal distribution of an average of 105 staff for each 100 patients in psychiatric bed sections, 163 staff for each 100 beds in medical bed sections, and 203 for each 100 patients in surgical bed sections. There are three principal reasons why meaningful direct comparison of VA and non-VA hospitals cannot be made by use of SR's. They are: the methods for computing SR's differ; the needs of the patients served differ, and the ad ministrative practices differ. For example, most community hospitals use the "total payroll" method. That is, all paid employees in FTE terms working in the hospital, regardless of function, are included in computing the SR for community hospitals. On the other hand, the VA includes in its SR computations only those employees (also in FTE terms) who are engaged in functions that either provide or support provision of care to inpatients. Thus, if both hospital systems would use the same method, the discrepancy in SR statistics would be lessened. For example, in 1970 the VA made intensive comparison of the staffing ratios of one of its general medical and surgical hospitals with that of an adjacent community hospital. The staffing ratio of the VA hospital, by VA's method, was 1.68 to 1. The staffing ratio of the non-VA hospital, by its method, was 3.27 to 1. In the VA's case, out of the total FTEE's of 1,647, only 987 were included in the computation. Using the non-VA method, as nearly as possible, the VA's SR rose to either 2.66 or 2.37 to 1, depending on whether the FTE was determined on the cost report basis or the cost distribution report basis. Senator CRANSTON. So the veteran that has to go to the veterans' hospital for some reason is at an automatic disadvantage in anticipated quality of care for that one reason alone, let alone other reasons? Dr. RICH. VA hospitals such as the Palo Alto VA Hospital have a very acute service involving many, very sick patients. Such services should have at least the community hospital staffing pattern. Generally they run about 60 percent of that. Senator CRANSTON. On the basis of your really great experience in and out of the VA system, do you have any thoughts to give us now or in writing later, as to where we might make some cuts in the VA budget? Dr. RICH. I would be glad to consider that and to communicate with you later. [Dr. Rich subsequently supplied the following information:] From the previously submitted information, I do not see how there could be any cuts. In fact, the cuts already made in VA/DM&S are very damaging. I do not have any special expertise on the other VA budget. Senator CRANSTON. Do you have any thoughts on where else we should cut into the overall budget, to make room for the increases that are needed in the VA budget? Dr. RICH. I don't believe that I am competent to make that kind of an assessment. Senator CRANSTON. Well I think that every citizen is quite competent and has some ideas on the subject. If you get any ideas later, why Dr. RICH. I will comment on that later. [Dr. Rich subsequently supplied the following information :] Question. What source of funds in the federal budget do you believe could be used to increment the VA/DM&S budget? Answer. In view of our recent withdrawal from a war in Vietnam and, particularly, considering the needs of a large number of veterans returning from this war, it would be entirely appropriate to use funds which would have gone to fight this war and which still are expended for war in Asia to improve the quality of medical care that the VA can provide to returning veterans in this country. I comment below on questions asked in a letter of April 24, 1973. Question. 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? By what percentage do you estimate that research funding must increase in fiscal year 1974 just to maintain existing program levels? Answer. Price escalation in research is higher than in most other fields of endeavor, in part because of an approximately 15 percent per year increase in the cost of scientific equipment. In addition, salaries will increase by 5.5 percent. Therefore, in order to prevent a reduction of support to research, there should be a 10 percent increase in the 1973 budget, from $76.8 million, to $84.5 million, in 1974. Moreover, there will be a number of new hospitals and new affiliations started, each of which will require additional support at an average of $400,000. These 19 new affiliations will require an additional $7.6 million in 1974. Finally, the VA research program has been underfunded now for several years and quite appropriately could be increased overall by 10 percent more than what I have indicated above. Thus, a maintenance research budget for the fiscal year 1974 would be $91.2 million, but a more realistic budget would be 10 percent greater than this, or $101.3 million. Senator CRANSTON. Thank you very, very much. You have been very helpful. [The prepared statement of Dr. Rich follows:] STATEMENT OF DR. CLAYTON RICH, DEAN OF THE SCHOOL OF MEDICINE, Mr. Chairman and Members of the Subcommittee: I am very glad of this opportunity to appear before the subcommittee during its consideration of the President's fiscal 74 budget for the medical program of the Veterans Administration. It might be useful for me to describe my background as it relates to the remarks I will make in the next few minutes. First, I am Vice-President for Medical Affairs and Dean of the School of Medicine of Stanford University. Our school maintains and is dependent upon a very close and effective affiliation with the Palo Alto Veterans Administration Hospital. Second, during the decade from 1961 to 1971, I served as a full time staff physician of the Veterans Administration Hospital in Seattle, Washington. During much of that time I was Associate Chief of Staff for Research and for the last two years, I was Chief of Staff of the hospital. Accordingly, I address the subcommittee as one who has had a long association with the VA, both as an employee and now as the Dean of an affiliated Medical School. I will start with some remarks of a general nature about the Veterans Administration budget and then turn to the area of my specific professional competence, and examine the relationship between the physician-staffs of VA hospitals and the quality of the medical programs conducted in these hospitals. Both the staffing and the quality of the medical programs are strongly influenced by the budget now under review. The medical programs of the Veterans Administration have earned the respect and admiration of both lay and professional publics throughout the entire interval since World War II. Despite sporadic criticisms that are inevitable in an enterprise of this size and complexity, VA hospitals and clinics have consistently delivered a high quality medical service to eligible beneficiaries. Every effort has been made to see that this service is accessible and acceptable. In recent years considerable progress has been achieved toward a broader, more comprehensive VA medical service, and all of these gains have been contained within a cost structure that has kept expenditures well below that of comparable programs in the private sector. The VA Dept. of Medicine & Surgery has reduced its bed capacity and inpatient census annually for more than five years in response to dollar shortages or limitations invoked by the Office of Management and Budget. A relatively small part of these cuts can be ascribed to the increasing use of ambulatory care or other changes in the delivery process. In the same interval there have been increasing demands for inpatient care, as indicated by a continuous increase in the number of applications received at VA hospitals. In evidence of efficient use of resources, VA hospitals have been able to treat more patients in fewer beds each year since 1968. In view of these and other evidences of productivity it is disappointing to note and VA medical programs are threatened by reduced levels of funding, impoundment of appropriated funds, externally imposed personnel ceilings, grade control of its employees, limitations on inpatient census and similar restrictive measures. In the face of demonstrable needs for medical care in our veteran population and its further emphasis by the influx of many thousands from the Vietnam war, it is difficult to understand this strategy of containment. Such actions appear grossly inconsistent with this nation's traditional commitment to the welfare of its veterans and the many statements of concern that have emanated from the Administration. I comment next on the effects underbudgeting will have on the quality of the professional staffs of VA hospitals. I will restrict my remarks to the effects on the affiliated hospitals because I have personal knowledge and experience of these hospitals and because they are a very large component of the medical operation of the Veterans Administration. In fact, this group represents 87 of the 168 hospitals of the VA. Of the 786,000 admissions to VA hospitals last year, 576,000 were to affiliated hospitals. They are critical to the Administration and to the Veterans it serves, both for qualitative and quantitative reasons. The quality of care in this group of hospitals now generally is at the top level of quality of care delivered anywhere in the nation. This quality is expressed, not only in the high level of diagnostic and therapeutic skills available for patients in the hospitals, but by the personalized care and service the patients receive. In addition, an enormous amount of education of health-personnel is carried out in VA hospitals; of medical students, residents, nurses and others. Almost all medical students and most residents educated in this country now receive a significant part of their training in VA hospitals. Many medical schools, ourselves included, are absolutely dependent upon our joint programs with the VA if we are to maintain the quality of the education process. A third major contribution to the health of the nation is made as a consequence of the VA's research program. This program concentrates upon improving methods of diagnosis and treatment and also contributes substantially to fundamental knowledge of health and disease. The present and continued success of the VA in these activities of patient care, education and research are absolutely dependent upon the quality of the physicians who serve on the staffs of the VA hospitals. This dependence is because the basic decisions about the direction that diagnostic and therapeutic efforts will take necessarily are made by physicians. Without exceedingly able physicians, the quality of these decisions will be low. Without effective scientists. the direction of research will be inadequate. Under such conditions, it doesn't make much difference whether the nursing staff and technical back-up are good or mediocre; if the wrong disease is being treated or the wrong question is being investigated, good technical support cannot be of much use. Because of this crucial relationship between quality of the physician staff and quality of a hospital operation, it is fair to say that the key to the success the VA has had in upgrading its medical program since World War II has been its ability to attract and retain exceedingly able physicians. The continued excellence of the VA medical program will be dependent upon the agency's continued ability to attract outstanding physicians. The basis of this success was the decision at the end of World War II to enter into a partnership with Medical Schools. The result has been that VA hospitals have shared with the Medical Schools, to an increasing degree, a class of exceedingly able, highly motivated and industrious physicians that would not otherwise have been available. It is important for the future of the VA to understand why this occurred and what will be necessary if the VA is going to continue to be attractive to this group of outstanding physicians. At the risk of oversimplification, let me say that the majority of physicians who are highly qualified have certain characteristics in common; these are independence, a high level of self-respect, strong motivation, and a capacity for hard work. In fact, these are the characteristics that are necessary for success in gaining technical mastery, keeping current with the rapidly developing field of medicine and for effectiveness in discharging professional responsibilities that often involve difficult judgments under conditions of uncertainty. Again risking oversimplification, I will subdivide this group of the most able physicians into two classes. The first and largest class can be characterized as |