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US House Armed Services Committee

STATEMENT BY

BRIGADIER GENERAL KENNETH L. FARMER, JR.
UNITED STATES ARMY
LEAD AGENT
TRICARE NORTHWEST, REGION 11

MAY 17, 2001

          Mr. Chairman and Members of the Committee, I am Brigadier General Kenneth L. Farmer, Jr. I thank you for this opportunity to appear before your Committee. It is my privilege to serve as Lead Agent for TRICARE Northwest, Region 11 and Commanding General, Western Regional Medical Command, US Army Medical Command.

          This morning I would like to discuss the TRICARE Northwest Region 11 experience. I will frame this discussion in terms of lessons learned and my observations as a Lead Agent working to make TRICARE successful.

TRICARE Northwest, Region 11, consists of 370,000 beneficiaries in Washington, Oregon and a small part of Northern Idaho. We were the first region to be awarded the TRICARE Managed Care Support Contract in August of 1994. Health care delivery began March 1,1995. We have six years of experience with the TRICARE program. We have matured over that time to what many consider a very successful program for the delivery of TRICARE. This has come about through regional partnering relationships with all our Uniformed Services' Military Treatment Facilities (MTF) and our Managed Care Support Contractor.

TRICARE Northwest has been the test bed for many of DoD's new initiatives. We implemented TRICARE PRIME Remote as a demonstration project. We implemented the first TRICARE Senior Prime demonstration program. We were given contractual oversight over the Uniformed Services Family Health Plan in Seattle. Now we have been tasked to implement the "Pilot Project" recommended by the Defense Medical Oversight Committee and subsequently directed by the Under Secretary of Defense for Personnel and Readiness and the Assistant Secretary of Defense for Health Affairs. This two-year "Pilot Project" began on October 1, 2000. The purpose of this Project is to evaluate the role of an empowered, strengthened, Lead Agent to support regional management of the Military Health System (MHS) in Region 11.

Beginning October 1, 2000, my responsibilities were focused to serve as regional advocate, develop innovative health care practices to optimize regional resources, manage the overall cost of regional health care, implement tenets of population health, and implement an evaluation plan consistent with DoD TRICARE metrics to measure regional performance. The ultimate goal is to strengthen the management authority of the Lead Agent while retaining existing command relationships within the Services. Guidance for this project is provided through the TRICARE Northwest Executive Board consisting of the three Services' Surgeons General, the Executive Director of the TRICARE Management Activity, and the Principal Deputy Assistant Secretary of Defense for Health Affairs.

Additional direction from the Under Secretary for Personnel and Readiness provided me with a mandate to increase MTF utilization, reduce overall regional health care costs, increase MTF productivity, improve patient satisfaction and exercise clinic-level visibility of performance.

Under the mandate of the Pilot Project our TRICARE Executive Council met several times and developed a regional business plan. The basic premise of our regional plan for delivery of health care was developed consistent with my command philosophy:

"Each of us realizes that our personal success is as much determined by the success of the Region at large as by our performance at each facility."

I have charged our MTF Commanders with optimizing the productivity and utilization of their hospitals and clinics consistent with sound business practices. This means ensuring adequate support staff for clinicians consistent with nationally recognized standards. We have begun making strides towards these standards, but are not there yet. It also means making the physical improvements needed to increase efficiency. Potentially, it may mean moving resources and personnel back and forth across the Region to recapture CHAMPUS. We are focusing on business initiatives that will clearly identify the payoffs for our investment. This type of targeted investment of resources is essential to the success of the direct care system. Successful optimization will decelerate the rising cost of health care in the Region. In time, it will reduce financial pressure on the Services and the Defense Health Program, while improving access to health care and patient satisfaction.

My expanded authority and influence holds MTF commanders accountable for all Defense Health Program dollars expended specifically in their respective catchment areas and collectively in the Region. This includes responsibility and accountability not only for the direct care Operations and Maintenance dollars required to run their facilities, but accountability as well for the purchased care dollars - the CHAMPUS money spent to provide care to beneficiaries they send downtown.

Over the past seven months we implemented our regional business plan designed to optimize productivity and utilization of our MTFs. The trends identified over the past five years were: MTF purchasing power decreasing 1% annually; staffing down 2% per year; MTF visits down 3% per year; and a concurrent increase in Managed Care Support Contract costs of 3% per year. Our initiatives are based on reinvestment in the MTFs to reverse these trends. A significant challenge facing MTFs is competition with the local civilian sector for health care professionals. A specific struggle is in hiring nurses where we must pay significantly more to recruit or retain than just a few years ago. Our business plan initiatives involve the sharing of health care personnel between facilities in the region. A related initiative is our circuit-rider program, utilizing specialists from Madigan Army Medical Center who travel to outlying facilities to provide care to beneficiaries, who in the past have been referred downtown. These initiatives show great promise in enabling us to recapture CHAMPUS workloads and realize savings to the Government.

          We also implemented a regional capability to manage pharmacy expenditures and develop a regional formulary. As you know, pharmacy expenses are skyrocketing and our business plan is to selectively move the use of the pharmacy from the retail network back into the MTFs or into the National Mail Order Pharmacy (NMOP). This will be a targeted marketing program to do what is right for our beneficiaries and the MHS. We have also energized our Tri-Service Regional Business Office (TRBO) for regional standardization of medical supplies and equipment. With Regional Incentive Agreements (RIA) we will save dollars and improve processes. As identified in our business plan, a projected $6M investment in the direct care system will yield an estimated $8.7M return on investment. As our business plan is a living document we are aggressively exploring additional initiatives in all areas.

I do believe that more regional control and authority vested in the Lead Agent will lead to improved business processes in several key areas. For example, in the realm of resource management, we should align funding flow with organizational responsibility and management authority as stipulated by the Pilot Program mandates. The Lead Agent should be empowered to invest purchased care dollars to reinvest in infrastructure and to recapture workloads with the understanding that workload and dollars previously ceded to the contractor will be brought back into the MTFs. Finally, the Lead Agent must have real-time visibility on budget execution across Service lines and be prepared to serve as an advocate for budget shortfalls and out-year programming.

The Pilot Project is not exclusively the MTFs' but actively includes the Managed Care Support Contractor. The current Region 11 Managed Care Support Contract was initially awarded with five one-year options. The current contract was extended for two additional option years. The next generation of contracts needs to continue managed care concepts while encouraging contractors to utilize best industry practices to deliver health care and associated administrative services. This needs to be in a manner that focuses on customer satisfaction and is responsive to the changing needs of MTF commanders and their beneficiaries.

A major lesson learned is that localized contract management and oversight work well for health care delivery. Implementation of policy and program benefits is more effectively managed at the local level where there is the best understanding of regional needs.

Historically, the Veterans Health Administration (VHA) and DoD medical facilities have cooperated in this Region. I believe even greater opportunities exist to work more closely with the VHA, not only to improve the delivery of patient care, but to save federal health care dollars.

On April 13, 2001, I visited Doctor Ted Galey, Veterans Integrated Service Network (VISN) 20 Director, and Doctor Les Burger, VISN 20 Medical Director and several of their key staff. As evidenced by the open and positive discussions it was obvious our VHA counterparts view partnering as one of their highest priorities. Both parties expressed strong sentiment that this was the right thing to do and reaffirmed our commitment to this effort where it makes good sense.   

From our initial discussion, we explored three major categories: procurement (pharmacy, medical logistics, and contracts); contingency mission planning; and sharing of resources for health care delivery to our beneficiaries. The meeting with Doctors Galey and Burger concluded with an agreement to hold executive level quarterly meetings.

To paraphrase LTG James Peake, the Army Surgeon General, TRICARE Northwest is more than an HMO. Our system of integrated care, combining a major Army teaching medical center, two Navy community hospitals, and Air Force and Coast Guard health clinics, in teamwork with our partner, Health Net Federal Services, provides a base for the Uniformed Services and a readiness training platform to support them at home and abroad.

TRICARE Northwest stands ready to provide quality health care to the men and women who defend our Nation, their families, and to those who came before them. I would like to thank this Committee for your continued commitment and support to quality care for all our beneficiaries: soldiers, sailors, airmen, Marines, Coast Guard, their families, and for all our retired military personnel and their families.


House Armed Services Committee
2120 Rayburn House Office Building
Washington, D.C. 20515



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