D

DE PARIMIN

DEFENSE

council.

This council of senior leadership from the military departments is essential for both communicating health policy to the services and apprising me of their operations and programs.

... Throughout the past year, this committee has continued to demonstrate its keen interest in military medicine. By extending the voluntary waiver of CHAMPUS copayments for the families of our Operation Desert Storm participants and through introduction of payment provisions for disabled CHAMPUS patients, you displayed special interest in caring for our beneficiaries. At the same time, your directions for medical budget consolidation, expansion of managed care initiatives and sharing among federal agencies signal concern for the effective use of health care dollars.

Our efforts this year span all avenues of health care pursuit management, structure, organization, budget, delivery, quality and systems. In each endeavor, this committee has maintained active interest and offered constructive guidance. I believe our progress is in keeping with the spirit and intent of your direction.

and control of the assistant secretary. Exercise of those new authorities is through issuance of instructions to the secretaries of the military departments and the chairman of the Joint Chiefs of Staff.

Additionally, as the responsible official, I prepare, present, justify and defend a unified medical program and budget to provide resources for all medical activities within the defense health program. These responsibilities I have undertaken in full recognition of their prominence given the outlook for continued escalation in health care spending throughout our nation.

The Department of Commerce estimates that both hospital and physician services will increase 11 percent, and total health care spending will consume 14 percent of the GNP (gross national product) in 1992. Growth in the Department of Defense health care costs presently is programed at 3.87 percent per year through FY 1997. This increase, small in comparison to national trends, looms large in a declining defense budget.

A Defense Medical Advisory Council has been established to advise me in the execution of the department's medical missions. This council consists of a presidential appointee from each military department and a general or flag officer from each of the military services. Also, a general or flag representative of the chairman of the Joint Chiefs of Staff and the president of the Uniformed Services University of the Health Sciences round out the membership. As assistant secretary, I chair the

Coordinated Care

Finally, I was asked to implement a health care program that ensures coordination of the provision of care in our own medical facilities with that purchased through CHAMPUS. The objectives, very much in line with this committee's guidance, are to improve access and to maximize cost effectiveness in the delivery of high quality health care. The declining budget realities demand that we accomplish this coordination prudently so as to provide quality care for the greatest possible number of our beneficiaries.

Since issuance of these new directions, I have met with the service secretaries; chaired two meetings of the advisory council; expanded my budget and programs office with temporary assistance from the military medical departments in order to oversee FY 92 program execution, prepare the FY 93 medical budget justification and develop the FY 94-99 Defense Health Program Program Objective Memorandum; and issued initial guidance to the military services for implementing the Coordinated Care Program.

The department's medical portion of the president's FY 93 amended budget approximates $15.3 billion (5.7 percent). Of this amount, $9.5 billion comprises the

Strengthening Management

Attentive to the committee's concerns and with its blessing, the department has implemented significant measures to strengthen the management of military medicine. At the direction of the deputy secretary of defense, responsibility for the effective execution of medical missions of the department now rests with a single official. That official is the assistant secretary of defense for health affairs.

Medical personnel, facilities, programs, funding and other resources within the department are subject to the authority, direction

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stration projects, which test certain components of the military health services system, and the Coordinated Care Program, which encompasses the entire health care delivery system.

delivery systems and networks based on arrangements between military and civilian health care providers and organizations.

With the instructions to implement coordinated care, I have issued policy guidance to the military departments concerning enrollment, site selection, network development, specialized treatment facilities, education, communication strategies, quality management and health promotion and disease prevention. The three-year phased implementation will involve 25 percent of stateside hospital locations in the first year, an additional 50 percent in the second year and the remaining 25 percent in the third year. To the extent that the program is successful in redirecting existing CHAMPUS workload to military medical treatment facilities or network providers, funds budgeted for CHAMPUS will be realigned to support this effort.

Of the many program features detailed to date, our enrollment feature has sparked the most discussion within the department. And I believe it is one of interest to the committee. So I would like to dwell on it for just a moment.

Enrollment is the feature that will assist each hospital commander in determining the demographics of the beneficiary population for whom he or she is responsible. It is from this base that he or she will build resource requirements; the enrollment design must afford workload management. The design elements include automatic enrollment for active duty members, voluntary enrollment for all other beneficiaries (and) advantages and disadvantages to be weighed in choosing whether or not to enroll were designed in keeping with the committee's guidance of a year ago.

Essentially, beneficiaries enrolling are assured availability of care and incur lower out-of-pocket costs when using civilian network providers who have accepted negotiated rates. However, enrolled beneficiaries must select a provider from the panel of providers offered by the military hospital commander.

Beneficiaries electing not to enroll after having been offered the

opportunity to do so retain their freedom of choice of providers and may use the military hospital for emergent care and pharmacy services. They will forgo routine care in the military hospital and face higher CHAMPUS deductibles.

This committee has expressed special interest in several of our CHAMPUS alternative health care delivery programs. Most of these efforts are demonstration projects designed to test various management and delivery concepts and strategies in the CHAMPUS portion

our military health services system.

Although the final, formal evaluation of these projects has not concluded, we have incorporated the most effective and productive project features into the Coordinated Care Program. For example, the CHAMPUS reform initiative experience shows that it is essential for the contractor to work hand in hand, every day, with each commander regarding management of health care finders, coordination between the military hospital and network providers and resource sharing.

For this reason, the relationship with military hospitals is strengthened in the new request for proposals for California and Hawaii, and it is a key feature in coordinated care. As we implement coordinated care, we will continue this process.

An important characteristic of coordinated care is the ability to adapt many different organizational models of care under a management umbrella that maintains consistency and equity of the benefit and offers assurances of that consistency and equity to the beneficiaries.

There has been some confusion in the distinction between demon

Systemic Reform

The broader perspective of coordinated care represents an actual evolution from component tests to systemic reforms. It takes on particular importance in light of the recent consolidation of the department's health care resources under my purview, as well as the tremendous budget pressures faced by DoD as a whole.

Given that the medical program funds, which amount to $15.3 billion, include the new Defense Health Program ($9.5 billion), military construction ($240 million) and military personnel ($5.5 billion), I must consider the requirements of all medical programs. CHAMPUS expenditures, projected at $3.9 billion in FY 93, are 26 percent of the total medical program.

There have been many substantial improvements in the management of the CHAMPUS component. Significant opportunities exist, over time, for improving management in the remainder of the system, as well, which will use $11.4 billion, or 74 percent of the FY 93 program.

It is the reasonable and judicious course for me to capitalize on those management improvements realized in the CHAMPUS program and to incorporate them now into permanent systemic reforms for the entire military health services system. The Coordinated Care Program is the vehicle for accomplishing precisely that.

As the committee is aware, the CHAMPUS reform initiative in

The Base Realignment and Closure Act has generated considerable concern among many

beneficiaries living in proximity to a hospital scheduled for closure. For the Coordinated Care Program, have established a joint service task force to analyze strategies for possible initiatives in noncatchment areas, those areas not served by a military hospital, yet having sizable beneficiary populations. This task force will work with the military services as they develop transition plans for the delivery of health care to eligible beneficiaries remaining in areas affected by closure actions.

another project of particular interest to the committee. As required by law, we have begun negotiations for modification to the fiscal intermediary contract for assistance with network development, marketing and claims processing.

California and Hawaii is reaching the completion of its demonstration period. The department faced a dilemma when conflicting direction was received from Congress regarding this project.

To ensure objectivity, we requested guidance from the comptroller general. Meanwhile, being cognizant of the federal acquisition regulations and mindful of the myriad of activities necessary in conducting a competitive procurement, we released a request for proposals in January.

The release of that RFP (request for proposal) was in no way prejudicial to the comptroller general's opinion or the final determination. Clearly stated in the RFP was that the start date would be either August 1993 or February 1994. The comptroller general's decision now establishes that date as August 1993. Bids from interested vendors are expected by the end of May.

The scope of work in this RFP reflects our coordinated care thrust to achieve management and delivery improvements in our total system.

In New Orleans, with strong committee support, a contract was awarded last year for an out-ofcatchment area demonstration project bringing the many benefits of a managed or Coordinated Care Program to the 24,000 CHAMPUS beneficiaries in that metropolitan area. The demonstration is under way; following a six-month implementation period, services began Dec. 1, (1991).

The first tri-service coordinated care site, also known as TRICARE, in the Tidewater area of Virginia, is

Tidewater Project

Additionally, through the fiscal intermediary, a TRICARE service center will operate near Naval Hospital, Portsmouth, with health care finder, health benefits adviser and triage functions available. The Tidewater project is only one of many coordinated care site initiatives. It is unique in that it attempts to bring together three catchment areas, each sponsored by one of the three military services.

This year also has seen extensive work on the managed care plan for the uniform services treatment facilities. This plan is nearing completion, and we project an early 1993 date for the start of services under the managed care plan.

The request for proposals for implementing coordinated care in Washington and Oregon is scheduled for release this summer. The model for this project will be the CHAMPUS reform initiative successor contract for California and Hawaii.

Also this fiscal year, we will begin development of a similar contract solicitation for Florida. Because of contractual commitments to an already existing managed care project in the southeast region, the schedule is for release of an RFP in FY 1993 with delivery of services to begin in 1995.

CHAMPUS Improvements

This year, we have implemented, or continued implementation of, several new benefits for our beneficiaries as well as some less visible management improvements to the CHAMPUS program.

We implemented the CHAMPUS benefit authorizing payment for mammograms and pap smears. We are expanding further preventive care services as part of the Coordinated Care Program.

Coverage was established under CHAMPUS for lung and heart-lung transplants.

Case management of high cost or catastrophically ill beneficiaries was continued. We will be expanding this as part of our Coordinated Care Program.

Physician payment reform regulations were promulgated. When fully implemented in May of this year, payment equity will be increased, payments for overpriced procedures will be reduced, and payments for primary care services will be increased.

O Comprehensive mental health regulations were published, improving our utilization management of this CHAMPUS benefit.

We now are in the process of implementing a new mental health partial hospitalization benefit.

The military health benefit is a substantial one; one many of our beneficiaries identify as a top priority. On occasion, it is a prudent practice to consider that health benefit in the context of history as well as in contrast to the health benefits in the general population.

The military health benefit today is a very good one, and the department is continually challenged to ensure that it retains its value. As recently directed by Congress, the department has begun an evaluation of this benefit. The evaluation promises to be comprehensive, examining in addition to the benefit, delivery mechanisms, utilization, costs, quality, beneficiary knowledge of and access to care available and more.

Important for our beneficiaries is that they have access to a benefit that is as consistent and uniform as possible, irrespective of their geographic location. That is one of the fundamental principles of coordinated care. It was applied in the development of the current RFP for California and Hawaii.

The attention paid to health care today derives largely from the spiralling growth in costs, and certainly that is an issue for the department as well as a concern of this committee. Nevertheless, as the individual responsible for the effective execution of our medical mission, I am equally concerned that the health benefit offered to our beneficiaries is of the highest quality.

This year, we have developed a comprehensive quality management plan addressing quality issues for care received both within our hospitals and through CHAMPUS. We are initiating development of a quality assurance program for mental health and have continued our national program of mental health utilization management.

We are close to awarding four regional utilization management and quality assurance contracts for all of the continental United States, except the demonstration states of California and Hawaii and the southeast region. Finally, we have refined our external peer review program to identify opportunities for improving health care delivery.

Human Services in September 1990, is the implementation of what is already known about promoting health and preventing disease.

A panel of DoD experts reviewed the 383 DHHS objectives, and of these, they determined 181 to be of initial primary concern to the Department of Defense. These 181 objectives have been incorporated into Promoting Health 2000, the DoD implementation of the DHHS objectives. Some specific examples of our highest priorities include:

Reduce cigarette smoking to a prevalence of no more than 15 percent among people aged 20 and older.

Increase hepatitis B immunization levels to 90 percent among occupationally exposed workers.

Expand coverage for immunizations recommended by the U.S. Clinical Preventive Services Task Force to all beneficiaries, both children and adults.

Increase to at least 80 percent the proportion of women aged 40 and older who have ever received a clinical breast examination and a mammogram, and to at least 60 percent those aged 50 and older who have received them within the preceding one to two years.

Increase to at least 95 percent the proportion of women aged 18 and older with uterine cervix who have ever received a Pap test and to at least 85 percent those who received a Pap test within the preceding one to three years.

The Composite Health Care System will provide the clinical and administrative information necessary for the military hospital commander to assess the effectiveness of resource use within his or

her facility. Through this system, the commander can develop a local business improvement plan to increase the efficiency of the staff, assess the cost effectiveness of resource utilization and manage based on outcome of therapeutic interventions. CHCS is on the leading edge of integrated, automated hospital information systems and is the foundation for key data collecting for coordinated care.

At the May 1991 in-process review, the Major Automated Information Systems Review Committee approved a split Milestone III for CHCS. The Milestone IIIA decision meeting, next month, will evaluate most of the system for a deployment decision. In the fourth quarter of FY 94, the Milestone IIIB decision meeting will evaluate the health care professional inpatient order entry and nursing functionality.

As the committee is aware, sharing between DoD and the Department of Veterans Affairs has occurred for many years. During FY 91, there were 3,000 services shared involving over 200 military medical facility participants.

Additionally, we have a variety of joint ventures in progress where we will share facilities. Just getting under way is a joint project with the DVA (Department of Veterans Affairs) to define optimal care and rehabilitation utilization for patients with traumatic brain injury.

A second recent collaborative initiative is to improve opportunities for care for all our beneficiaries who require major prosthetic devices. And ongoing for several years is the shared procurement program in which we participate with DVA and the Public Health Service.

Health Promotion

A key component of the Coordinated Care Program is a scientifically based, quantifiable health promotion and disease prevention program. The central challenge of Healthy People 2000, National Health Promotion and Disease Prevention Objectives published by the Department of Health and