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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.
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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-
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and technical matters. Dr. Ralph J. Cicerone is president of the National Academy
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dent of the National Academy of Engineering.
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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
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ences in 1916 to associate the broad community of science and technology with the
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Functioning in accordance with general policies determined by the Academy, the
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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
