Defense Health Agency: Next step to curb medical costs

March 8, 2012

by Tom Philpott

Defense officials have asked Congress to approve a new governance structure for the military health care system that, like higher TRICARE fees, would help to curb what, for a decade, have been runaway medical costs.

The centerpiece of the plan is to elevate of the TRICARE Management Activity to a more powerful Defense Health Agency (DHA), with new authorities to use more effectively the military’s direct care system and to manage more carefully purchased care through TRICARE support contractors.

The DHA also would impose new business processes and appoint market managers in areas with multi-service medical facilities so operations are streamlined. The agency also would reduce redundancies across the separate medical commands of the Army, Navy and Air Force by combining where possible functions for purchasing, logistics and information technology.

Service medical commands would continue to be run separately, a concession to those who see they providing unique strengths and expertise. But to critics, including some lawmakers, who still want a joint medical command running military healthcare, as numerous studies have endorsed, the DHA should be seen as a reasonable interim step, said Dr. Jonathan Woodson, assistant secretary of defense for health affairs.

"The Defense Health Agency will be an important pillar of any unified health command if that, indeed, were considered down the line,"Woodson explained to several journalists during a briefing on the proposed structure.

The strongest reason to keep Army, Navy and Air Force medical commands, led by separate surgeons general, is operational medicine, Woodson said. The Navy is trained to deliver care to units afloat and to deployed Marines, the Air Force has expertise in aerial platforms and Army docs are trained to deliver medical ground support in combat theaters.

"The whole idea is not to throw the baby out with the bathwater. To design a system that creates…the best quality in health care [and] access, but preserves the unique features that individual service cultures bring to the fight,"Woodson said.

A DHA, he added, will "allow us to get maximum effort and efficiency of shared services, and really creates the 70-percent solution, without having to tear the services apart in reorganizing…a cumbersome and probably more expensive"command, and doing so in wartime.

A Pentagon task force established last June drafted the new governance plan. But Congress temporarily blocked it, demanding a report from the department that describes every option studied, the potential impact on readiness of each, and their projected cost savings.

The DHA eyed would be led by a three-star officer and would report to Woodson, the department’s most senior health official. The surgeons general would focus more heavily on operational medicine and less on the garrison care and insurance benefit for troops, retirees and their families.

The Washington D.C. area, which has seen heavy realignment of medical facilities with a new hospital at Fort Belvoir, Va., and the Walter Reed National Military Medical Center consolidated at Bethesda, Md., would see another governance change. These new hospitals now fall under Joint Task Force National Capitol Reg ion Medical, which is led by a three-star admiral who reports to the deputy defense secretary. The JTF CAPMED would be replaced by a two-star run directorate , which would report to DHA.

With the plan delivered, the Government Accountability Office, auditing arm of Congress, now has 180 days to review recommendations, comment on strengths and weaknesses, and report its own estimate of cost savings to House and Senate defense committees. Lawmakers gave themselves an additional 120 days to study GAO’s findings and the task force report, and then to accept, reject or modify what the department wants to do.

After the full 300-day review period, Woodson said, "we are hopeful we will get the okay"to restructure. The savings from creating the DHA would be modest, about $50 million a year through reduced staffing, shaved off of a healthcare budget that will top $53 billion this year.

But more substantial savings –in the billions of dollars annually –are expected once the DHA is operating to eliminate waste and can impose new business processes on military hospitals and clinics, and on purchased care contracts that govern TRICARE civilian networks.

Woodson said he prefers not to release the department’s overall savings estimate for the governance plan.

"If I give you a dollar amount, then we’re kind of struck with that. I would much rather give you the conservative estimate on what the restructuring of headquarters will provide. Then we will drive that change and we will reap the benefits"on the whole system, he said.

Woodson did say that about 25 percent of on-base hospitals and clinics are underutilized. So a key goal of the DHA will be to use fully brick-and-mortar resources and reverse the exodus in recent years of patients to the more costly civilian TRICARE network.

It might appear the surgeons general are losing some authority, particularly in areas with multi-service medical facilities. But Woodson said operational medicine would gain from new governance as dollars are spent more wisely. For example, if a base hospital sees it orthopedic specialist deployed for war, a DHA-run system will have more replacement options than to send patients to a civilian specialist until the doctor returns.

A decade of war show that "unless you have a coordinated strategy that reaches across the services, we get a local solution,"which usually means patients go off base for care and they are hard to get back.

The DHA would be able to back fill for deployed staff by tapping an other service branch, reserve components or locally contracted physicians. With business plans in place, "there are all sorts of possibilities for solutions to maintaining our commitment to the beneficiary for on base care.

The DHA would develop the requirements and have the surgeons general fill them. "Unless you have this collaborative administration structure,"Woodson said, the services would continue to operate "in their own little silos"and, as current cost growth shows, "that just doesn’t work."

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