Date: December 10, 2001

Subject: FY 2002 Network Budget Execution Policy Direction

To: Network directors (10N1-22)

1. Recognizing that Fiscal Years 2002 and 2003 will be challenging budget cycles, the following policy direction is provided to facilitate network and local budget execution decisions.  My previous Outlook message on the restriction of all non-emergent expenditures remains in effect until the Deputy Secretary is briefed and accepts Network Expenditure Plans (briefing currently projected for January 22, 2002).  Discretion and good judgment should be used to distinguish between non-emergent and critical funding needs.  Network and facility Directors will adhere to the priorities expressed in the Secretary-s outline of general priorities in his recent Senior Leadership Retreat.  They are as follows:

·        Preserve Quality Care

·        Reduce Waiting Times

·        Serve SC and Low Income NSC Veterans

·        Maintain Specialized Disability Programs (SCI, Blind Rehab.,etc.)

·        Research on Veteran Specific Health Care

·        Emergency Response

2. In addition, the following policy direction is provided:

·        Central Program Managers and Network Directors much develop execution plans to support the Secretary’s FY 2002 priorities within their budget allocations

·        VHA will implement the Secretary’s FY 2002 enrollment decision

·        Prosthetic requirements above Specific Purpose allocations much be absorbed within Network General Purpose allocations

·        VA Nursing Home capacity will be increased to 50 percent of the assigned FY 2003 target

·        Assessment of Community Based Outpatient Clinics (CBOC’s_ (addressed below in the Tier II initiatives_ per new VHA Policy Directive 2001-060

·        Manage FTEE within budget allocation

3. Certain initiatives have the potential of saving or generating significant dollars and are a high priority for initiation early this FY.  Each Network will be expected to implement those items listed below by April 1. A status report on these items will be requested early in the second quarter.  These mandatory initiatives are:
1. Implement a Pharmacy Benefits Management Program and compliance with standardization in drug classes
2. Prescribe Sensori-Neural (hearing aids and eyeglasses) aids to Priority 7 veterans as defined by CFR Part 17.149 (Information Letter is under development_
3. Implement the recommendations from the September 2001 Revenue Cycle Improvement Plan to achieve increased MCCF collections:

i.      Collection contract for bills over 90 days old ii.      Consolidate billing function iii.      Enforce national documentation policy  iv.      Pre-registration of veterans    v.      Provide Billing Activity with access to VistA ancillary packages  vi.      Use of electronic medical records vii.      Use of encoder software (3M or Quadramed)

                            

4. Reduce prosthetics inventories in excess of 30 days
5. Review of fee basis bills and contract care for compliance with MEDICARE rates
6. Consolidate procurement of supplies and services to achieve best price (includes Network-level BPAs , mandatory quantities on BPAs and may include organizational re-alignment of contracting staff Network-wide, etc.)
3. Over and above the mandated actions, Attachment 1 outlines other mandated initiatives.  Other recommended actions are identified in Attachment 2.  Many of the administrative recommendations ave been demonstrated in several networks to reduce costs and should be evaluated by each network for implementation.  Some of the recommendations may be dependent on local situations and not all may be appropriate for every site.  These administrative recommendations are listed in alphabetic order.  Your status in these areas, as well as the mandated activities, will be requested early in the second quarter.
4. For sites that have effectively addressed mandatory actions and other administrative recommendations but still anticipate budget shortfalls, the next level of initiatives identified as Clinical and Other Recommendations may be required.
5. Because up to 70 percent of dollars spent locally are on employee salaries, it is recognized that Networks will not be able to execute the FY 2002 budget within available dollars unless FTEE is reduced.  A monitor has been established to measure FTEE against FY 2001 Pay Period 16.  Although it is hoped that most FTEE reductions will occur by attrition, networks anticipating the need for a RIF should initiate discussions with my office early in the year.
6. In addition to initiatives to reduce or save dollars, networks should also address their capabilities to increase revenues such as ensuring clinicians are properly identifying billable medical conditions and services in general (specifically, billable conditions related to prescriptions issued), increasing the types and volume of existing sharing agreements and identifying additional excess capacity that may be utilized to generate additional revenue.
7. Several actions should be avoided due to their impact on the direct provision of healthcare to veterans.  They include establishing patient waiting lists for clinic appointments or inpatient admission; termination of direct clinical staff (e.g., physicians, nurses, etc.) unless the recruitment was specifically for approved program restructuring or cyclic workload increases; and bed closures in NHC or Special Disability programs.  In addition, Title 38 staffing adjustments are still prohibited, pending the outcome of further legal actions.
8. Previous guidance on stakeholders (labor, veterans service organizations, congressional, etc.) and employee communication regarding proposed changes should be adhered to.
9. VHA and VA leadership recognize the significant challenges we face and also acknowledge that the leadership in each Network has been responsible for our significant achievements over the last several years.  The expectations outlined in this memorandum are designed to standardize and consolidate our achievements and to build the base for further difficult actions as they become necessary.

/signed/

Laura J. Miller

OTHER MANDATORY ACTIONS

v     Case management of high cost patients: Utilize DSS database to develop information abut high cost patients and develop mechanism to assign their care coordination.

 

v     Assure facilities do not pay more than the MEDICARE maximum amount for prosthetics devices

 

v     Utilize the Prosthetics Clinical Management Program at all facilities

 

v     Centralize the approval of management consultant contracts to minimize duplication and maximize utilization (Network-wide for consistency: Administration-wide for economies of scale, etc.)

 

v     Utilize Federal Suppy Schedule (FSS) for procurements where applicable

v     Consolidate laundry production services where cost beneficial

 

v     Consolidate reference laboratory functions, multi-VISN or contract where cost beneficial

 

v     Improve inventory management of medical/surgical and other supplies

 

v     Network-wide review of all recruitment actions to ensure Agency, Administration and Network goals and objectives are met

 

v     Consolidate engineering supplies and/or establish storeroom controls to minimize inventory levels, reduce redundant purchases, lost supplies, etc.

 

Note: One potential source of information on the implementing the actions identified above is the Lessons Learned database of the Virtual Learning Center Innovations located at:

http://vaww.va.gov/med/osp

RECOMMENDED FOR CONSIDERATION

Administrative:

ü                   Consoidate space and mothball buildings to minimize fixed overhead costs to maintain space.

 

ü      Consolidate selected Human Resource Management functions to maximize HR staff utilization (also recognized need for selected local HR staff requirements and HRLinks)

 

ü      Employ Network-wide benchmarking efforts to identify best practices and support financial and mission decisions

 

ü      Explore Enhanced-Use and enhanced sharing opportunities where feasible to maximize revenues

ü      Explore food factory concept/cook chill

ü      Improve CMOP utilization in collaboration with CMOP Director (National CMOP planning targets an 80% utilization level, this requires phasing with expanded CMOP capacity)

ü      Maximize energy conservation efforts and opportunities (e.g., ESPC)

ü      Institute oversight by Networks of position classification

ü      Review service contracts for potential consolidation and cost savings

Clinical and Other:

Ø      Evaluate the utilization of CBOCs per VHA Directive 2001-060.   Requests to close CBOCs should be forwarded to your Heath System Specialist Liaison in my office.

 

Ø      Review level of care for certain programs (i.e., determine if program could function as a domiciliary program, residential treatment or outpatient program rather than as an inpatient program: requires compliance with programmatic review to assure appropriate program plan and clinical care coordination)

Ø      Utilize available nursing home care/long-term care funds to provide for allocated ADC nursing home requirements as first priority

Ø      Consider tele-services (e.g., teleraiology, telepathology, etc.)

Ø      Consider consolidation of certain high cost, high tech capabilities within a network such as cardiac surgery, neurosurgery, and radiation therapy

 

Ø      Develop proposals for facility mission changes that include major bed closures (includes facility integrations and network-wide service consolidations)