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1 Introduction On October 1, 2010, the Captain James A. Lovell Federal Health Care Center (FHCC) came into being in North Chicago, Illinois. The Lovell FHCC is the joint effort of the Department of Defense (DoD) and the De- partment of Veterans Affairs (VA) to provide health care to DoD and VA beneficiaries in northern Illinois and southern Wisconsin through a consoli- dated delivery system intended to be more accessible and of higher quality for patients and more cost effective for taxpayers than would operating separate VA and DoD health care systems. North Chicago is the home of the Naval Station Great Lakes, which is currently responsible for the initial (boot camp) training and much of the advanced training of the enlisted personnel of the Navy. Historically, the U.S. Navy provided health care to active duty servicemembers and their de- pendents through its own facilities (the Naval Hospital Great Lakes), while the VA provided health care to military veterans in its own medical center located less than two miles from the naval hospital (the North Chicago VA Medical Center). As in other locations around the United States where DoD and VA health care facilities are located near each other, there was both local and national interest in sharing equipment, facilities, and staff to reduce costs, while providing patients with a broader range of services and more coordinated care. Over time, VA and DoD health care facilities have developed a large number of sharing and exchange relationships ranging from the simple, such as sharing the cost and staffing of magnetic reso- nance imaging equipment, to the complex, such as collocating and sharing the use of the outpatient center of one department and the hospital of the 21

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22 LOVELL FEDERAL HEALTH CARE CENTER MERGER other department. Examples of these joint activities are discussed later in this report. The Lovell FHCC differs from other DoD/VA health care collaborations in several significant aspects. It is intended to be a single organization—a federal health care center rather than a military treatment facility or a VA medical center—that features a single chain of command, a consolidated funding source, and, to the extent possible, health care service delivery that is seamless for the patient, regardless of whether he or she is a VA or a DoD beneficiary. The hope is that the design of the FHCC will overcome some of the barriers to cost reduction and integrated service delivery remaining in even the most functional joint ventures and other sharing and exchange arrangements between DoD and VA health care facilities. The Lovell FHCC was planned to be a 5-year demonstration of what can and cannot be accomplished with an integrated organization, but pres- sure to establish additional federal health care centers is strong and increas- ing. It is driven partly by the desire for a seamless transition of the wounded and injured from the wars in Iraq and Afghanistan who can no longer serve from active duty to veteran status. It is also driven by the desire to reduce the costs of health care for active duty and retired servicemembers and their dependents and for military veterans, a desire that will only increase as the United States struggles to reduce the federal budget deficit. In 2010, the acting assistant secretary of defense for health affairs asked the Institute of Medicine (IOM) to undertake and report on an evaluation of the Lovell FHCC by December 29, 2012. The formal DoD statement of task is found in Box 1-1. In response, the IOM established a 15-member committee with the ap- propriate expertise to determine the following: 1. if the integrated health care system represented by the FHCC in North Chicago has been beneficial in terms of access to, quality of, and cost of health care; mission readiness of Navy personnel; patient and provider satisfaction; clinical education and training; and research opportunities; and 2. whether the FHCC would be a good model for similar mergers around the country where VA and DoD medical facilities are in close proximity. The committee membership includes experts in executive medicine (including former DoD and VA health care executives), clinical medicine and nursing, health care organization and management, health care quality, health information technology, graduate medical education, and health care program evaluation. Short biographies of the committee members and staff are found in Appendix A.

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INTRODUCTION 23 BOX 1-1 Statement of Work The purpose is to conduct a study to evaluate whether the integrated De- partment of Defense/Department of Veterans Affairs (DoD/VA) James A. Lovell Federal Health Care Center (FHCC) located in North Chicago is more beneficial to DoD and VA than their independent facilities in serving the needs of their eligible populations. A panel that is comprised of independent, neutral, nongovernmental subject matter experts shall be convened to do the following, but is not limited to: 1. Establish criteria for near-term and longer-term assessment of the suc- cess of facility integration that can be used in follow-on assessments. Determine if success criteria would be different if the partner DoD health care facility was supporting operational units instead of basic/ advanced training units, such as the Navy Health Clinic Great Lakes. 2. Evaluate whether performance benchmarks that DoD and VA have established in their executive agreement have been achieved. 3. Examine the lessons learned from similar mergers elsewhere in the federal and private health sectors that may be applicable to DoD/VA mergers. 4. Evaluate the most pressing concerns of the stakeholders,* and recom- mend ways to mitigate or eliminate these concerns. 5. Evaluate the specific impact of the merger on the level and quality of training received by active duty medical personnel and VA providers. 6. Prepare a written report with findings, conclusions, and recommenda- tions for DoD and VA that will be available to the general public. * Stakeholders include all groups affected directly and indirectly by the merger, such as the leadership of the merging units and their line of command/authority, the employees, active duty and civilian, eligible beneficiaries, local citizens, and labor unions. The committee held five face-to-face meetings between February 2011 and March 2012, supplemented by conference calls and email exchanges. Two of the meetings were held in North Chicago, where the committee received presentations from the staff of the FHCC and area stakehold- ers affected by the integration effort. Stakeholders include leaders of the Navy Recruit Training Command, the affiliated medical school (Rosalind Franklin University of Medicine and Science), unions, patients, and vet- erans organizations. The presenters and their affiliations are listed in the Acknowledgments. The committee also toured the FHCC facilities for half a day, including naval branch clinics located on the naval base. In the process of its deliberations, the committee created a framework (see Table 1-1) to guide its evaluation of the Lovell FHCC merger that

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TABLE 1-1  Framework for Evaluating Department of Veterans Affairs and Department of Defense Health Care 24 Collaborations* Organizational Intermediate National and Local Capabilities and Implementation Outcomes Long-Term Impact Contexts Readiness Initiatives First 2 Years 3–5 Years • Department of • Shared vision • Combining • Increased operational • Operating efficiencies Veterans Affairs • History of working departments and readiness for recruits • Costs per patient and Department together services • Expanding patient • Patient functional health of Defense (DoD) • Culture • Transferring volume to critical status measures policies, goals, • Leadership personnel mass to maintain • Increased market share in objectives • Information • Orienting employees competency local area • Number and location technology • Communication/ • More in-house • Other of facilities capabilities education surgery—added • Size and number of • Care management • Developing policies posttraumatic stress people served • Care improvement • Developing shared disorder unit • Local health care • Performance electronic health • Increased professional market—public and measurement records opportunities for staff private sectors • Training and • Other • Residency • Local labor market human resources opportunities • Other development • Healthcare • Financial reserves Effectiveness Data • Other and Information Set, DoD, Joint Commission benchmark measures • Employee satisfaction • Patient experience measures • Other * It is important to evaluate shared services, joint ventures, and partial and full mergers, etc., against their own stated goals and objectives in addition to those expected by external parties, including accreditation bodies, payers, and others.

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INTRODUCTION 25 may prove useful to assess future collaborations between the DoD and the VA, whether these take the form of shared service arrangements, joint ventures, or partial or full mergers. The five major categories for consider- ation include (1) national and local context, (2) organizational capabilities and readiness, (3) implementation initiatives, (4) intermediate outcomes, and (5) long-term impact. A detailed description of the conceptualization of this framework is found in Appendix B. The lessons learned from the VA/DoD joint ventures reported at the annual joint venture conferences are summarized in Chapter 5, and short profiles of the joint ventures and their reported lessons learned are in Appendix C. The committee was also informed by a commissioned paper authored by Thomas D’Aunno on the experiences of joint ventures and private-sector health care mergers (Ap- pendix D).

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