1970s: Expansion of Acute Care Capacity

Beginning in 1974, the NCVAMC began to return psychiatric patients to the community and to expand its acute care capacity. The overall number of beds fell from 2,500 in 1969 to 1,728 in 1978, reflecting a 35 percent decrease in psychiatric beds (from 1,313 to 849). By contrast, the number of general medical-surgical beds increased by 78 percent (from 388 to 689). In recognition of the shift away from psychiatric services, the NCVAMC was designated a general medical and surgical hospital by the VA in 1975. A 1978 General Accounting Office (GAO) report was very critical of this shift in mission, based on its modeling of demand, which found that the medical center would need only 105 beds in 1985 (GAO, 1978a).

In 1973, the NCVAMC proposed an affiliation with the Chicago Medical School, on the basis that the school would relocate from downtown to VA land adjacent to the hospital, and the medical center would maintain 450 to 500 acute care beds to enable training and education of medical school students and residents. The VA approved the affiliation, and the medical school, now part of the Rosalind Franklin University of Medicine and Science, moved to its present site in 1980.

1970s and 1980s: Abortive Attempts to Consolidate

In 1978, the GAO issued an in-depth report on obstacles to sharing of health resources between federal agencies (GAO, 1978b). In response, Senator Charles Percy of Illinois, chairman of the Senate Government Affairs Committee, introduced a bill to promote interagency sharing of health care resources that eventually became the VA/DoD Health Resources Sharing and Emergency Operations Act (Public Law 97-174) in 1982. After the Navy surgeon general testified at hearings on the bill that the NHGL had an average occupancy rate of less than 20 percent (120 of 656 beds), Percy asked the GAO to conduct a “review of the opportunities, the potential for savings and improved patient care, and the obstacles associated with sharing medical resources between the Veterans Administration Medical Center (VAMC), North Chicago and the Naval Regional Medical Center (NRMC), Great Lakes, Illinois” (GAO, 1980, p. 1).

The GAO found that, earlier in the 1970s, local VA officials had been interested in using the NHGL if a cross-servicing agreement could be reached, but that an effort to negotiate an agreement was never initiated. Instead, the VA spent $9.3 million on construction and equipment to upgrade the acute medical/surgical capability at the NCVAMC.

In late 1979, the Navy surgeon general and the VA's chief medical officer formed a working group of local, regional, and central office officials from both departments to explore the possibility of consolidating inpatient care at the naval hospital. The surgeon general suggested three alternatives:

1.

Navy assumes the VA's workload on a reimbursable basis.

2.

VA leases the Navy facility and provides services to Navy beneficiaries on a reimbursable basis.

3.

Navy/VA operate jointly (GAO, 1980, Enclosure 1, p. 3).

The working group concluded that consolidating acute medical and surgical services at the naval hospital was possible and desirable. From the Navy's perspective, the benefits included

1.

expansion of its services for its beneficiary population,

2.

increased accessibility to care,

3.

an opportunity for a portion of the local staff to remain in place during mobilization,

4.

more efficient use of the existing facility, and

5.

cost savings to the government and the Navy beneficiary population (GAO, 1980, Enclosure 1, p. 6).

From the VA's perspective, the naval hospital was more modern and better addressed the population's health care needs. The VA could close two 50-year-old psychiatric inpatient buildings that were expensive to maintain and operate and move the patients into the main hospital facility, Building 133, which was 20 years old, after renovation that would be less costly than upgrading the building to acute-care standards.

VA and Navy officials also noted that such a major sharing agreement could set a precedent and provide a model for additional VA/DoD sharing arrangements. The officials also pointed out, however, that the VA/DoD sharing act (Public Law 97-174) did not address a number of administrative and personnel issues that would have to be resolved.

• How would the consolidated hospital be managed? Who would control the joint medical/surgical service and ancillary service? Would the Chief of Medicine, for example, be from the VA or the Navy?
• With different employee pay and benefit systems, which agency would control the consolidated service arrangement?
• With dissimilar forms and records, which ones would be used?
• How would the upward mobility of VA employees working in the Naval facility be affected?
• How would union actions be addressed for VA employees working in the Naval facility?
• How would the Navy maintain command and control over military people working side-by-side with essentially civilian VA employees subject to different rules and regulations? (GAO, 1980, Enclosure 1, p. 17).

The same issues confronted the planners of the Lovell FHCC and, in some instances, had to be resolved by special legislation (see Chapter 3).

By the time the GAO reported on the situation, both the Navy surgeon general and the VA's chief medical officer had retired. Although the VHA regional director continued to favor a joint enterprise, the plan to use the NHGL to treat veterans was not implemented.

1990s: Department of Veterans Affairs Efforts to Rationalize Services in the Chicago Area

By the early 1990s, the VA health care system was encountering serious problems with quality of care and inpatient overcapacity. In 1991, the NCVAMC itself was in the national news when the VA inspector general reported that six deaths at the center were caused by poor care (New York Times, 1991). In 1992, inpatient surgery was discontinued at North Chicago and moved about 40 miles south to the Hines VA hospital.

Despite problems with inpatient surgery, Building 133 was renovated in 1996 at a cost of $139 million to consolidate all outpatient services except mental health in one building (DAC Bond, 2010). The renovation also included 150 medical and 25 acute psychiatric beds (Lovell FHCC, 2006). The GAO reported that the number of beds was not based on any analysis of need but on an assumption that if the beds were there, people would come. In fact, the NCVAMC suffered chronic overcapacity after the 1996 renovation (Lovell FHCC, 2006), which was an incentive to accept patients from the nearby naval base rather than face closure for lack of demand.

In 1995, the VHA adopted a new organizational structure. All veterans health care services in North Chicago were organized and regionally managed under the Veterans Integrated Service Network (VISN) 12, one of 21 VISNs nationwide. The VA had already begun the process of consolidating the VAMCs in some local areas, but the reorganization of services in the Chicago area was left to the new VISN director. There were four VAMCs in the area. Lakeside and West Side were 7 miles apart in the city. Hines was just west of Chicago. North Chicago was north in an outer suburb.

The GAO, at the request of the Illinois congressional delegation, began to report on developments in Chicago. In 1997, for example, the GAO reported that the VA could save $20 million a year in operating costs if there were three rather than four VAMCs in the Chicago area (GAO, 1997). In 1998, the GAO reported that, because of overcapacity, the VA could close one of the two downtown medical centers without reducing access. The same report noted that the average daily census at the NCVAMC had decreased from 470 in 1994 to 240 (27 medicine and 213 psychiatric) in 1997 and that the facility had closed 244 beds during that time period (GAO, 1998).

A committee representing the local stakeholders, including the medical schools, was unable to reach agreement on a restructuring plan. In response, the VHA chartered an internal committee composed of leaders and managers from outside of Chicago, headed by the director of the Central Arkansas Veterans Healthcare System. The committee considered six alternatives and, in September 1999, chose one that would save $188 million per year by consolidating most inpatient services at the Lakeside VAMC (U.S. House of Representatives, 1999). In its report, the VISN 12 Delivery System Options Study, the committee recommended that inpatient care at the NCVAMC be ended and shifted to Lakeside and that the center provide only outpatient care along with long-term and residential treatment (domiciliary) care. The VA undersecretary for health found that the committee's findings and recommendations provided a good foundation for further study, but were significantly limited because they did not account for (1) the geographic location of veterans living in VISN 12, (2) the modeling of future demand for health care services, (3) objective evaluation criteria to assess the value of each option, and (4) the lack of stakeholder input into the process.

Veterans groups in North Chicago strongly opposed the proposed changes, objecting to having to travel 60 minutes or more to Lakeside or Hines for hospitalization. Local unions representing NCVAMC employees also protested (Kuczka, 1999a). Senator Richard Durbin and Representative John Porter, the local congressman, told veterans that they would fight to keep the NCVAMC open (Kuczka, 1999b). The save-the-NCVAMC campaign was followed closely by the Chicago-area press (e.g., Flink, 1999).

1999–2000: Saving the North Chicago Veterans Affairs Medical Center

Within weeks of the leak of the VISN 12 options report in September 1999, Durbin and others in the Illinois congressional delegation developed a plan to save the NCVAMC. Rather than have the Navy spend millions of dollars to renovate or replace the 40-year-old NHGL, they proposed that the Navy use the nearby VA facility instead (O'Matz, 1999). In February 2000, Durbin was able to announce that agreement had been reached that the NCVAMC would provide psychiatric inpatient care and certain outpatient services to Navy personnel stationed at Great Lakes, and that the NHGL would provide certain surgical procedures and some diagnostic testing to veterans being seen by doctors at the NCVAMC. He characterized the agreement as “a first step toward what we hope will be a very positive partnership that is good for veterans, active-duty personnel and taxpayers” (Presecky, 2000).

Porter retired in 2000 and was succeeded by his longtime legislative assistant, Mark Kirk, who made saving the NCVAMC a major part of his election campaign. Soon after his election, Representative Kirk told local veterans in a meeting at the NCVAMC that the best way to keep the center open was to combine it with the NHGL, saying “that would obviate the need for a new naval hospital, it would decrease the cost for taxpayers, and it would ensure the survival of this institution” (Chicago Tribune, 2001). Kirk, a Naval Reserve officer, was assigned to the House Armed Services Committee, which helped him in working with the Navy to close a deal (Dunn, 2010). In June 2001, Kirk led a bipartisan group of congressional staffers on a tour of the NHGL and the NCVAMC to build further support for combining the facilities (Flink, 2001).

Local veterans groups favored a merger to save “their” hospital. At a rally at a Veterans of Foreign Wars post, for example, the head of the McHenry County Veterans Assistance Commission stated: “Surgery is their strong suit at Great Lakes; medical treatment is theirs at North Chicago. It would be a good thing for all of us” (Barnes, 1999).

The 2001 Veterans Integrated Service Network 12 Capital Asset Realignment for Enhanced Services Report

In response to the intense negative reaction of the various Chicago stakeholders to the 1999 VISN 12 options study, the House Committee on Veterans' Affairs Subcommittee on Health asked the VA to develop and adopt objective, measurable criteria for formulating and evaluating options for restructuring the delivery of health care (U.S. House of Representatives, 2000). In response to that request, the VHA developed an improved evaluation framework and study methodology for assessing facility needs, called the Capital Asset Realignment for Enhanced Services (CARES) process. CARES addressed the deficiencies in the original VHA internal committee methodology and incorporated the “all or none” decision-making model of DoD's BRAC process. The VA engaged Booz-Allen & Hamilton (BAH) to pilot the CARES process in VISN 12.

Meanwhile, as described above, the Navy was sponsoring studies of the follow-on to 200H, the obsolete NHGL building. Those studies explicitly considered alternatives that included shifting inpatient care to the NCVAMC.

BAH, using a private sector model to forecast demand through FY 2010, concluded that if no VAMCs had ever existed, that is, there was a clean slate, only two hospitals would be needed in the Chicago area, one near the existing West Side VAMC in downtown Chicago and the other 5–10 miles west of Hines. “We would not plan to construct an inpatient facility at North Chicago. … North Chicago is, however, a reasonable location for a multi-specialty ambulatory care clinic” (Booz-Allen & Hamilton, 2001, pp. 5–6). However, the four VAMCs did exist. BAH developed four options for the Chicago area, each featuring a different treatment of the West Side and Lakeside VAMCs. Each option treated the NCVAMC the same, however, allowing it 27 acute medicine and 30 acute psychiatric beds and suggesting a sharing agreement with the Navy.

The nearby Naval hospital is in need of extensive renovation, and some consideration has been given to building a new one. With four empty acute wards and a state-of-the-art intensive care unit at the North Chicago VAMC, an opportunity exists for the VA and the DoD to share this underutilized acute care resource. Therefore, in Option A, as in all the options in the Southern Market, a sharing agreement between the VA and the DoD is proposed. If that agreement were reached, the acute medical and surgical workload provided by the Navy, currently estimated to be about two wards or 60 patients, when added to the VA acute care workload, would provide a critical mass of acute care beds sufficient to justify ongoing acute inpatient care.

Even if a VA/DoD sharing agreement is not reached, all four options propose keeping a small acute medical service. With approximately 248 nursing home beds and approximately 100 psychiatric beds, acute medical beds will be needed on an ongoing basis to accommodate those long-term care patients who “decompensate.” Given the size of this campus and the spectrum of services, the incremental cost of these added acute beds is relatively small and clinically appropriate. This option also preserves the affiliation with Chicago Medical School. (Booz-Allen & Hamilton, 2001, pp. 5–12)

Each of the four options recommended 57 acute care beds (27 medical and 30 psychiatry) at the NCVAMC, in part to serve the needs of patients in the 541 non-acute beds it recommended that the NCVAMC have (248 nursing home, 67 long-term psychiatry, 186 domiciliary, and 40 residential rehabilitation treatment program) (Booz-Allen & Hamilton, 2001, pp. 5–12). According to the BAH report, the NHGL's average daily census in its medical-surgical beds was 24 and in its acute psychiatric beds was 22, which BAH judged could be easily absorbed by the VA (Booz-Allen & Hamilton, 2001, pp. 8–20).

The VA secretary issued his decision on the restructuring of health care in VISN 12 in February 2002. The announcement focused on the decision to close inpatient care at the Lakeside VAMC and move all acute inpatient services to the West Side VAMC; the only reference to the disposition of inpatient and other services in North Chicago was the statement that “sharing opportunities between the North Chicago VA Medical Center and the adjacent Naval Hospital Great Lakes will be enhanced” (VA, 2002b). Before and shortly after the VA secretary's announcement, serious discussions were opened between the VA and the DoD on the futures of the NCVAMC and the NHGL.

2001–2002: Deciding on a Consolidated Federal Health Care Facility

By 2001, the director of the NCVAMC and the commanding officer of the NHGL were discussing how to proceed (Kuczka, 2001). The two facilities had done some sharing over the years. For example, in the late 1980s, the NHGL purchased a computed tomography scanner. The NCVAMC provided two technicians in return for use of the scanner. In the early 1990s, when the NHGL found it difficult for contracting and pay reasons to recruit psychologists, psychiatrists, pharmacists, radiologists, nurses, and other professionals, the NCVAMC agreed to hire 75 staff using its Title 38 authority to work at the hospital, although that arrangement was subsequently determined to be illegal by the Navy's judge advocate general (Harnly, 2005). In the mid-1990s, the NCVAMC was using the NHGL for total joint replacements, which tripled the volume of cases for the Navy orthopedic surgeons.

According to the VISN 12 CARES study, the VA and the DoD signed an agreement in March 2000 permitting active duty servicemembers and their dependents to receive specialty care at the VA and veterans to receive care at the NHGL (Booz-Allen & Hamilton, 2001, pp. 8–19). In 2003, 2–3 veterans per week were undergoing orthopedic and surgical procedures at the NHGL (Hagen, 2003).

In July 2001, the VA/DoD Health Executive Council became involved. It appointed a North Chicago VA–Great Lakes Naval Training Center Task Force to “explore short and long term options for improved coordination of health care delivery, including review of the possibility of establishing a joint medical facility serving both veterans and Navy personnel” (Mackay, 2002, p. 61). The task force was to report in the late spring of 2002 with the “facts and figures that are necessary to make a good business decision” (Chu, 2002, p. 33).

In February 2002, VA Deputy Secretary Leo Mackay and Secretary of the Navy Gordon England traveled to North Chicago to sign a “landmark” capital asset sharing agreement. The agreement was for the VA to transfer 48 acres to the Navy to build recruit barracks and a drill hall in exchange for which the Navy would purchase electricity and steam from a VA-sponsored cogeneration energy center (VA, 2002b).

In October 2002, the DoD and the VA agreed on the basic plan for structuring the VA/DoD health service system in North Chicago. According to the plan,

• the Navy would use the NCVAMC for inpatient mental health care.
• the VA would renovate the NCVAMC surgical suite, post-anesthesia care unit, and emergency department.
• the Navy would transfer its inpatient medical/surgical workload to the NCVAMC after the renovation.
• the Navy would construct a new Ambulatory Care Center on the NCVAMC campus for joint use (Cox and McCready, 2005).

According to the VA press release announcing the agreement, the Navy would

construct a new ambulatory medical facility for outpatient services. The North Chicago VA Medical Center will provide comprehensive surgical care. The Navy, through partnership with North Chicago VAMC, will use the VA hospital for its inpatient medical and surgical needs. Additionally, Navy surgical teams will work at the North Chicago VAMC, enabling them to maintain their surgical competencies. (VA, 2002a)

William Winkenwerder, the assistant secretary of defense for health affairs, explained the purpose of the agreement as follows:

With this agreement, the Navy gains a modern ambulatory care center at a cost less than building a new hospital. VA beneficiaries gain increased access to surgical care closer to their homes and families, and the overall operating expenses of both departments should be reduced. (VA, 2002a)

Summary Through 2002

A number of factors led to the effort to consolidate health care services provided by the Navy and the VA in North Chicago. A major factor in the proposed changes was driven by the national private and public health care delivery trend away from hospital care toward delivery of more services in the ambulatory medical, surgical, and psychiatric health care settings. Some other long-term health care, military, and political factors added pressure for change and others were events that helped to shape the changes that occurred. They included the following:

• The 1993 BRAC recommendation to close the naval training centers at San Diego and Orlando and consolidate all recruit training at the NSGL. This substantially increased the demand for health care services from DoD beneficiaries in North Chicago.
• The 1999 VA working group report on ways to address excess capacity in Chicago-area VAMCs, which recommended that the NCVAMC be converted into an ambulatory care center. That threat of closure provided an incentive to accept the NHGL's inpatient workload.
• Political pressure beginning in 1999 from local veterans organizations through the Illinois congressional delegation to keep the NCVAMC open.
• The 2001 VISN 12 CARES report, which recommended increased collaboration with the Navy to justify keeping the NCVAMC open.
• The 2001 report by the SRA Corporation on the need to replace the Navy hospital building, built in 1960, to meet Joint Commission life safety standards, which could be avoided by using the NCVAMC for inpatient and emergency services.
• Sustained oversight by and funding from the VA/DoD Joint Executive and Joint Health Councils beginning in 2001 for the establishment of a combined federal facility in North Chicago.
• The 2002 report by CNA on Navy health care options in North Chicago, several of which involved using the NCVAMC for inpatient care.
• Persistent congressional interest in piloting an integrated VA/DoD health care center at some location.

Some of the trends facilitating collaboration included the following:

• Shifts in beneficiary utilization. Demand for inpatient services was falling off sharply, reflecting changes in health care delivery, but that was offset by increases in the number of active duty enrollees due to the global war on terror, the number of veterans eligible for VA health care due to the Veterans Millennium Health Care and Benefits Act of 1999, and the demand from retirees and their dependents with the implementation of TFL in 2001.
• The reduced and constantly changing number of active duty providers resulting from deployments made after 2001, which would be mitigated by using VA providers who do not deploy.
• The need to maintain the clinical skills of active duty providers, which would be enhanced by treating a larger number of patients with a great range of high acuity medical conditions.
• The high and increasing cost of health care for DoD beneficiaries, which provided an incentive to expand direct care to avoid sending patients to more expensive community providers.

The main motivation for collaboration, however, was the confluence of the need to replace the NHGL and the constituent pressure to keep the NCVAMC open (Cox and McCready, 2005). In that context, a consolidation of services seemed to be a win-win solution. Developing a combined delivery structure would almost certainly reduce construction and operating costs, probably reduce the disruption of deployments of Navy clinicians, and possibly increase access and quality of care, patient satisfaction, medical education and research opportunities, and the ability of Navy clinicians to treat more complex cases.