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Committee on Evaluation of the Lovell Federal Health Care Center Merger Board on the Health of Select Populations

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THE NATIONAL ACADEMIES PRESS   500 Fifth Street, NW   Washington, DC 20001 NOTICE: The project that is the subject of this report was approved by the Govern- ing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineer- ing, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropri- ate balance. This study was supported by Contract/Grant No. HT0011-10-C-0002 between the National Academy of Sciences and the Department of Defense. Any opinions, find- ings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project. International Standard Book Number-13:  978-0-309-26279-8 International Standard Book Number-10:  0-309-26279-8 Additional copies of this report are available for sale from the National Academies Press, 500 Fifth Street, NW, Keck 360, Washington, DC 20001; (800) 624-6242 or (202) 334-3313; http://www.nap.edu. For more information about the Institute of Medicine, visit the IOM home page at: www.iom.edu. Copyright 2012 by the National Academy of Sciences. All rights reserved. Printed in the United States of America The serpent has been a symbol of long life, healing, and knowledge among almost all cultures and religions since the beginning of recorded history. The serpent ad- opted as a logotype by the Institute of Medicine is a relief carving from ancient Greece, now held by the Staatliche Museen in Berlin. Suggested citation: IOM (Institute of Medicine). 2012. Evaluation of the Lovell Federal Health Care Center merger: Findings, conclusions, and recommendations. Washington, DC: The National Academies Press.

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“Knowing is not enough; we must apply. Willing is not enough; we must do.” —Goethe Advising the Nation. Improving Health.

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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Acad- emy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding en- gineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineer- ing programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Charles M. Vest is presi- dent of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Insti- tute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sci- ences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Charles M. Vest are chair and vice chair, respectively, of the National Research Council. www.national-academies.org

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COMMITTEE ON EVALUATION OF THE LOVELL FEDERAL HEALTH CARE CENTER MERGER MICHAEL M. E. JOHNS (Co-Chair), Chancellor, Emory University, Atlanta, GA STEPHEN M. SHORTELL (Co-Chair), Dean of the School of Public Health, Blue Cross of California Distinguished Professor of Health Policy & Management, and Professor of Organization Behavior, School of Public Health and Haas School of Business, University of California, Berkeley NANCY R. ADAMS, Senior Partner, Martin, Blanck & Associates, Falls Church, VA GEORGE K. ANDERSON, Executive Director, Association of Military Surgeons of the United States, Bethesda, MD PETER B. ANGOOD, Chief Executive Officer, American College of Physician Executives, Tampa, FL LAWTON R. (ROBERT) BURNS, Chair of the Health Care Management Department, James Joo-Jin Kim Professor, and Professor of Health Care Management, Wharton School, University of Pennsylvania, Philadelphia EMMANUEL G. CASSIMATIS, President and Chief Executive Officer, Educational Commission for Foreign Medical Graduates, Philadelphia, PA TIMOTHY C. FLYNN, Senior Associate Dean for Clinical Affairs, College of Medicine, and Chief Medical Officer, Shands Hospital, University of Florida, Gainesville LARRY M. MANHEIM, Research Professor in the Institute for Healthcare Studies and the Department of Physical Medicine and Rehabilitation, Northwestern University Feinberg School of Medicine, Chicago, IL JOHN E. MAUPIN, JR., President and Chief Executive Officer, Morehouse School of Medicine, Atlanta, GA KAREN L. MILLER, Senior Vice Chancellor for Academic and Student Affairs, University of Kansas Medical Center, Kansas City FRANCES M. MURPHY, President, Sigma Health Consulting, LLC, Silver Spring, MD J. MARC OVERHAGE, Chief Medical Informatics Officer, Siemens Health Services, Malvern, PA SUSANNE TROPEZ-SIMS, Associate Dean of Clinical Affiliations and Professor of Pediatrics, Meharry Medical College, Nashville, TN CAROLYN (CINDY) WATTS, Professor and Chair of the Department of Health Administration, Virginia Commonwealth University, Richmond v

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Consultants DAVID K. BARNES, Advanced Policy Solutions, Bethesda, MD THOMAS A. D’AUNNO, Executive Vice Dean, Mailman School of Public Health, Columbia University, New York, NY IOM Study Staff MICHAEL McGEARY, Study Director SUSAN R. McCUTCHEN, Senior Program Associate LaVITA SULLIVAN, Senior Program Assistant FREDERICK (RICK) ERDTMANN, Director, Board on the Health of Select Populations

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Reviewers This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Research Council’s Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. We wish to thank the following individuals for their review of this report: Elizabeth H. Bradley, Yale School of Public Health Timothy G. Buchman, Emory University School of Medicine Jon B. Christianson, University of Minnesota School of Public Health Audrey C. Drake, Department of Veterans Affairs (Deputy Chief Nursing Officer Emeritus) Nancy E. Dunlap, University of Alabama at Birmingham Richard G. Frank, Harvard Medical School Kyle L. Grazier, University of Michigan School of Public Health James E. Hastings, Department of Veterans Affairs Pacific Islands Health Care System Richard E. Oliver, University of Missouri School of Health Professions Jonathan B. Perlin, Hospital Corporation of America vii

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viii REVIEWERS Lawrence M. Riddles, American College of Physician Executives Paul H. Rockey, Accreditation Council for Graduate Medical Education Hector P. Rodriguez, University of California, Los Angeles, School of Public Health James M. Walker, Geisinger Health System Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations, nor did they see the final draft of the report before its release. The review of this report was overseen by Charles E. Phelps, University of Rochester, and David R. Challoner, University of Florida. Ap- pointed by the National Research Council and the Institute of Medicine, they were responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the institution.

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Preface An important experiment in federal health care delivery is taking place in North Chicago, Illinois. In 2010, the Navy and the Department of Veter- ans Affairs (VA) consolidated their medical centers, which had operated 1.5 miles apart from each other for many years, into a joint health care center named the Captain James A. Lovell Federal Health Care Center (FHCC) after the well-known astronaut who lives near the facility. In a time of se- vere fiscal constraints and heightened concern about smoothing the transi- tion of injured military servicemembers from active duty to veteran status, the possibility of providing better care at less cost by combining military and VA medical centers in the same health care market has great appeal. The outcomes of the Lovell FHCC experiment, therefore, are of significant interest to federal policy makers. The 1995 Defense Base Consolidation and Realignment Commission decided to consolidate Navy recruit training, then in three locations, at the Naval Station Great Lakes, located near the city of North Chicago. This de- cision gave more urgency to the need to replace the old and obsolete Navy hospital with a new hospital, an action the Navy had planned for 2007. In 1999, a VA task force proposed converting the North Chicago VA medical center from a hospital to an outpatient facility, which was strongly opposed by veterans, community leaders, and their representatives in Congress. The solution reached by the VA/Department of Defense (DoD) Health Execu- tive Council (HEC) was to have the Navy use the VA hospital for inpatient and emergency services rather than to build a new Navy hospital. The new arrangement was expected to reduce costs for the Navy and the VA while ix

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x PREFACE increasing the patient workload enough to justify keeping the VA hospital open. The Navy began to use the North Chicago VA medical center for acute inpatient mental health services in 2003 and for all inpatient medical, surgical, and pediatric services in 2006. In 2002, the HEC directed the Navy to build an outpatient facility next to the North Chicago VA medical center, so that all care for veterans and Navy servicemembers and other DoD beneficiaries could be provided in one location. This model had been pioneered in Albuquerque, New Mexico, where the VA medical center provides inpatient services to DoD benefi- ciaries, who receive their outpatient care at the Air Force ambulatory care center next to it. Similarly, veterans in Hawaii and south-central Alaska receive outpatient services from VA ambulatory care facilities built beside the Army and Air Force hospitals in Honolulu and Anchorage, respectively, where they go to receive inpatient services. These cooperative arrangements, in addition to several other similar, extensive VA/DoD health care sharing arrangements in various locations around the United States, are called “joint ventures.” In joint ventures, the VA medical center and the military medical center agree to reimburse each other for services received. In 2005, the HEC made the momentous decision to go beyond the joint venture model and create the first “integrated” FHCC in North Chicago, which was characterized by a combined medical staff organized in a single set of clinical departments under one chief medical executive, a single set of administrative units, and a single chain of command under one FHCC chief executive. The date set for full integration was October 1, 2010, barely 5 years in the future. The decision was based on the idea that a single organization should be able to provide better care for patients at lower cost for taxpayers than would a joint venture. The care should be better because it would be more comprehensive and coordinated, and the financial costs should be reduced because of economies of scale, reduced duplication, and other efficiencies. Local Navy and VA leaders fully embraced the concept of the Lovell FHCC, especially the idea of having one staff and one system wherever possible rather than having two side by side. The systems in question included qual- ity assurance, patient medical records, provider accreditation, budgeting and accounting, personnel management, purchasing, and physical plant management. A long and complicated process ensued, which included accommodat- ing the separate but overlapping missions of the DoD and the VA health systems; reconciling the different policies and procedures, performance measures, and organizational cultures of the Navy and the VA; and over- coming several statutory limitations on interdepartmental integration, such as strictures on transferring property and personnel. Chapter 3 in this re- port reviews this implementation process, identifies the main issues that had

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PREFACE xi to be resolved between the Navy and the VA, and documents how they were resolved—sometimes fully, sometimes partially, and sometimes not at all. Some areas of incomplete or nonintegration, such as having to operate the provider accreditation systems of both departments, have resulted in continued duplication and thus are reducing potential efficiencies. Others affect patient care. Most critically, the VA and the DoD electronic health record (EHR) systems are not compatible, and few of the software pro- grams created to make them interoperable—that is, to make it possible to enter one EHR system (or an interface) and view and enter information in both EHR systems simultaneously so that care can be optimized—were operational when the Lovell FHCC opened. To ensure, at a minimum, that patient safety is not compromised by harmful drug interactions or allergies, the Lovell FHCC had to develop costly manual pharmacy workarounds. When DoD patients are seen by VA specialty, inpatient, and emergency medicine providers, manual workarounds are necessary to enter the clinical information recorded in the VA EHR system into the DoD EHR system. We should note that this problem has been recognized and was part of the reason that in early 2011 the DoD and VA secretaries committed their departments to developing a joint EHR system, beginning with the single pharmacy system that is greatly needed at the Lovell FHCC. In Chapter 4, our committee assesses the results of the integration experiment, to the extent they can be ascertained after less than 2 years of operation. Clearly, the leaders of the North Chicago FHCC initiative have succeeded, through tremendous effort, in creating a single organization serving both beneficiary populations. However, the degree of integration of clinical and administrative services varies across the organization, mostly because of external constraints. Nonetheless, the more important questions are whether the creation of the FHCC in North Chicago has been worth- while and if it is a good model for merging the VA and the DoD health care delivery systems in other locations where they have facilities in close proximity. The Lovell FHCC has not been in operation long enough to determine the benefits accrued and to assess whether it has been cost effective. Appen- dix B contains an evaluation framework that would be useful for the DoD and the VA to adopt so that at the end of the 5-year demonstration period for the Lovell FHCC these organizations will be able to decide whether the merger is worthwhile and whether it can be replicated elsewhere. In the meantime, our report recommends some ways that the departments could facilitate integration by resolving differences in department policies, procedures, and systems at the national level. We would like to thank many people who helped with this study. Most are listed in the Acknowledgments section of the report; others contributed by agreeing to give confidential interviews, which were extremely helpful.

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Contents ABBREVIATIONS AND ACRONYMS xxiii SUMMARY 1 1 INTRODUCTION 21 2 HISTORY AND CONTEXT 27 Federal Health Care, 27 North Chicago Background, 32 References, 43 3 IMPLEMENTATION 47 The Implementation Phases, 48 The Task Group Process, 56 Issues Affecting the Integration Process, 57 Summary of Implementation Challenges, 94 References, 97 4 INITIAL RESULTS OF THE INTEGRATION DEMONSTRATION 103 Degree of Integration, 103 Performance Measures, 122 Outcomes, 124 References, 142 xvii

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xviii CONTENTS 5 LESSONS LEARNED FROM OTHER FEDERAL AND PRIVATE-SECTOR COLLABORATIVE APPROACHES TO HEALTH CARE SERVICES 145 Department of Veterans Affairs/Department of Defense Resource Sharing and Other Joint Initiatives, 145 Lessons Learned from Department of Defense/Department of Veterans Affairs Collaborations, 149 Outcomes and Best Practices of Private-Sector Collaborative Ventures, 155 Lessons Learned from Other Federal and Private-Sector Collaborative Approaches, 161 References, 163 6 FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS 165 Study Tasks, 165 Recommendations, 171 References, 178 APPENDIXES A Biographical Sketches of Committee Members and Staff 179 B Framework for Evaluating Department of Veterans Affairs/ Department of Defense Health Care Collaborations 193 C Department of Veterans Affairs/Department of Defense Joint Ventures: Brief Histories and Lessons Learned 199 D Collaboration Among Health Care Organizations: A Review of Outcomes and Best Practices for Effective Performance 227

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Tables, Figures, and Boxes TABLES 1-1 Framework for Evaluating Department of Veterans Affairs and Department of Defense Health Care Collaborations, 24 3-1 Workload Categories and Measures, 73 3-2 Issues Likely to Be Encountered in Creating an Integrated Department of Veterans Affairs/Department of Defense Joint Health Care Center, 94 4-1 Projected Fiscal Year 2011 Lovell Federal Health Care Center Full- Time-Equivalent Clinical Providers by Specialty (North Chicago Veterans Affairs Medical Center)/Clinic (Naval Health Clinic Great Lakes), 111 4-2 Clinical Integration Status of the Lovell Federal Health Care Center, 114 4-3 Department of Defense Patient Satisfaction Scale for the Lovell Federal Health Care Center, 135 4-4 Veterans Administration Patient Satisfaction Scale for the Lovell Federal Health Care Center, 135 5-1 Application of Best Practices to Collaboration Among Health Care Organizations: Technical and People-Focused Leadership Tasks, 160 xix

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xx TABLES, FIGURES, AND BOXES B-1  Framework for Evaluating Department of Veterans Affairs and Department of Defense Health Care Collaborations, 194 D-1  Key Variables in Collaboration Among Health Care Organizations, 231 D-2  Summary of Empirical Studies of the Effects of Hospital Mergers, Systems, and Alliances on Hospital Financial Performance and Quality of Care, 232 D-3  Summary of Empirical Studies of Outcomes of Collaboration Among Health Care Organizations, 237 D-4  Application of Best Practices to Collaboration Among Heath Care Organizations: Technical and People-Focused Leadership Tasks, 248 FIGURES 3-1 Lovell Federal Health Care Center leadership organization chart, 61 4-1 Selected HEDIS results for the Lovell Federal Health Care Center, 2005–2011 (percentage of patients) (Part 1), 126 4-2 Selected HEDIS results for the Lovell Federal Health Care Center, 2005–2011 (percentage of patients) (Part 2), 126 4-3 Selected HEDIS results for the Lovell Federal Health Care Center, 2005–2011 (percentage of patients) (Part 3), 127 4-4 ORYX results for heart attack patients at the Lovell Federal Health Care Center, 2008–2011 (percentage of patients), 127 4-5 ORYX results for heart failure patients at the Lovell Federal Health Care Center, 2008–2011 (percentage of patients), 128 4-6 ORYX results for pneumonia patients at the Lovell Federal Health Care Center, 2008–2011 (percentage of patients), 129 4-7 Selected SCIP results for the Lovell Federal Health Care Center, 2008–2011 (percentage of patients), 130 4-8 TRICARE patient ratings of the Lovell Federal Health Care Center, 2011 (100-point scale), 132 4-9 TRICARE patient ratings of access to care and physician-patient communication at the Lovell Federal Health Care Center, 2003– 2011 (100-point scale), 132 4-10  RICARE patient ratings of aspects of care at the Lovell Federal T Health Care Center, 2003–2011 (100-point scale), 133 4-11  epartment of Veterans Affairs outpatient satisfaction scores, fiscal D years 2009–2011, 134

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TABLES, FIGURES, AND BOXES xxi 4-12  epartment of Veterans Affairs inpatient satisfaction scores, fiscal D years 2009–2011, 134 4-13  ovell Federal Health Care Center patient satisfaction scores, L October 2010–June 2012, 136 4-14  verage ratings of organizational effectiveness of their workplace A by active duty and civilian staff at the Lovell Federal Health Care Center, all Navy facilities, all Department of Defense facilities, and all federal civilian workplaces in 2012, 137 4-15  verage ratings of organizational effectiveness of the Lovell Federal A Health Care Center by its active duty and civilian staff in 2011 and 2012, 137 4-16  ercentage of enlisted students not under instruction for medical P reasons, November 2009–April 2012, 139 D-1  Conceptual framework of collaboration among health care organizations, 229 D-2  Three key activities for effective organizational change, 244 BOXES S-1 Substantive Study Tasks, 11 1-1 Statement of Work, 23 2-1 TRICARE Prime and Other TRICARE Programs, 28 3-1 Joint Incentive Fund Awards to North Chicago, Fiscal Years 2004– 2007, 52 5-1 Currently Active Department of Veterans Affairs/Department of Defense Joint Ventures, 150 5-2 Checklist for Effective Implementation of Collaborative Ventures Among Health Care Organizations, 159 6-1 Substantive Study Tasks, 166 D-1  Checklist for Effective Implementation of Collaborative Ventures Among Health Care Organizations, 239

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Abbreviations and Acronyms 200H Naval Hospital Great Lakes (also referred to as NHGL) ACC ambulatory care center AHLTA Armed Forces Health Longitudinal Technology Application ANACI Access National Agency Check with Inquiries APC ambulatory payment classification APN advanced practice nurse ARC Allocation Resource Center BAH Booz-Allen & Hamilton (former name for Booz Allen Hamilton) BHIE Bi-directional Health Information Exchange BRAC Base Realignment and Closure BUMED Bureau of Medicine and Surgery CAC common access card CAP community-acquired pneumonia CARES Capital Asset Realignment for Enhanced Services CCQAS Centralized Credentials and Quality Assurance System CHAMPUS Civilian Health and Medical Program of the Uniformed Services CHDR Clinical Data Repository/Health Data Repository CMOP Consolidated Mail Order Pharmacy CMS Centers for Medicare & Medicaid Services CNA Center for Naval Analyses xxiii

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xxiv ABBREVIATIONS AND ACRONYMS CO commanding officer CPRS Computerized Patient Record System CR continuing resolution CTG clinical task group DMHRSi Defense Medical Human Resources Systems-internet DMLSS Defense Medical Logistics Standard Support DoD Department of Defense DOS disk operating system DSS Decision Support System DWV dental weighted value EA executive agreement eDR enhanced document referral ED emergency department EDM executive decision memorandum EHR electronic health record ESA executive sharing agreement FHCC federal health care center FHCF federal health care facility FLITE Financial and Logistics Integrated Technology Enterprise program FMS Financial Management System FTE full-time equivalent FY fiscal year GAO Government Accountability Office (since 2004) or General Accounting Office (prior to 2004) GIP Generic Inventory Package GLAC Great Lakes Acquisition Center HEC Health Executive Council HEDIS Healthcare Effectiveness Data and Information Set HR human resources ICTB Inter-facility Credentialing Transfer Brief ICU intensive care unit IDC independent duty corpsman IDES Integrated Disability Evaluation System iEHR integrated electronic health record IM information management IM/IT information management/information technology

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ABBREVIATIONS AND ACRONYMS xxv IOM Institute of Medicine IPO Interagency Program Office IT information technology JEC Joint Executive Council JFURSWG Joint Facility Utilization Resource Sharing Working Group JIF Joint Incentive Fund JMFDF Joint Medical Facility Demonstration Fund LTG leadership task group MAXIMO Department of Veterans Affairs asset management commercial, web-based software program MHS Military Health System MOA memorandum of agreement MRI magnetic resonance imaging MSPT mission specific pass-through MS-RWP Medicare severity relative weighted product MTF military treatment facility NACI National Agency Check with Inquiries NCOD National Center for Organizational Development NCVAMC North Chicago Veterans Affairs Medical Center NDAA National Defense Authorization Act NFEC Naval Facilities Engineering Command NHCGL Naval Health Clinic Great Lakes NHCU nursing home care unit NHGL Naval Hospital Great Lakes (also referred to as 200H) NME Navy Medicine East NMLC Naval Medical Logistics Command NRMC Naval Regional Medical Center NSGL Naval Station Great Lakes OHA Office of Health Affairs OMB Office of Management and Budget OPM Office of Personnel Management ORYX Joint Commission’s performance measure PA physician’s assistant PACS picture archiving and communication system PIV personal identity verification PSC personal services contract

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xxvi ABBREVIATIONS AND ACRONYMS RTC Recruit Training Command RTC Recap Recruit Training Command Recapitalization Program RVU relative value unit RWP relative weighted product SAC Stakeholder Advisory Committee SCIP Surgical Care Improvement Project TFL TRICARE for Life TRICARE military health care insurance system TSC Training Support Center USS United States ship VA Department of Veterans Affairs VAMC Department of Veterans Affairs medical center VHA Veterans Health Administration VISN Veterans Integrated Service Network VistA Veterans Health Information Systems and Technology Architecture