Welcome to the the Office of the President

Leadership in Health Care: Lessons from the Veterans Administration

August 7, 2007

Thank you for that kind introduction. It's a privilege for me to be with you today, even though I must confess that this is a bit of an unusual audience for me. The folks who invited me to speak indicated that, for the most part, the attendees would be civil engineers. To be honest, I wasn't sure what that meant exactly, but the fact that you were mostly civil sounded awfully appealing. Seriously, who wants to address a group of uncivil engineers? The last thing that any speaker hopes to encounter is a bunch of surly folks with pocket protectors.

This whole civil engineering thing got me thinking about the titles that we use to name disciplines in medicine. Really, how is it that we could come up with designations that are so vague and confusing? Internal medicine, for example – that sounds like pretty much everything other than dermatology. To be honest, I think that we should follow your lead. The concept of a specialty in civil medicine sounds so dignified and refined. Now, I know what you're thinking - there would be very few doctors eligible for such a designation, but hey, you have to start somewhere. While there is a lot to be said for being known as an internist, wouldn't it be cool to be referred to as a civilist?

While you're thinking about that one, those of you with dual processors also may want to consider the following: "Who invited this guy to speak to us, and more importantly, why?" If it makes you feel any better, I was sort of wondering the same thing. After considerable reflection, it occurred to me that the organizers of this meeting wanted to have someone talk to you who was living the real world experience of running a large, successful health care organization, someone who had demonstrated leadership and vision, and who was able to communicate these ideas to a broad audience effectively.

Well, clearly they were unable to find such a person, so they settled on me. It is also conceivable that the absence of any current or past contracts with Halliburton might have been a factor in my favor. At any rate, when the invitation was extended, I just couldn't resist the opportunity to speak to such a well-behaved group of engineers. So, here we are.

As a place to begin, I think that we can all agree that the expression 'health care leadership' is a wonderful oxymoron. With the possible exception of higher education, there is no human activity more naturally resistant to leadership than the health care system. Well, maybe that statement needs to be qualified as referring to the American health care system, but you get my point anyway. One doesn't have to be a fan of the movie Sicko to come to that conclusion. All you have to do is work in the so-called system to come to that conclusion. Those of us in health care are like one big dysfunctional family, complete with attention deficit disorders, sibling rivalries, drug dependencies, abusive parents, and the occasional messy divorce. We would make an ideal subject for a reality TV show. The first episode might be titled: Hospital Fear Factor.

All of which is not to say that we are completely without exemplars of leadership in health care. The focus of my remarks today will be on one such model system – the Veterans' Health Administration. To be perfectly honest, I never thought that I would use the words 'model' and Veterans' Health Administration in the same sentence. It feels a little bit like an out-of-body experience – I am aware that these words are crossing my lips, but still cannot quite bring myself to believe that I have anything to do with them.

You see, having partnered with the VHA on several projects, big and small, I have gained an appreciation for how almost any good idea can be placed into a state of suspended animation indefinitely. At the VA, bureaucracy is not a management style, it is a religion. The high priests are the middle managers, who are capable of stopping virtually any innovation dead in its tracks. All they have to do is not do anything. It is a system in which the best offense can be the lack of a detectable pulse.

So, it is the height of irony for me to suggest that there are lessons that the rest of us could learn from the VA. But the fact of the matter is that the VA Health Administration underwent one of, if not the most remarkable transformations in the health care field. The story is so good that somebody should write a book about it. In fact, somebody did just write a book about it. The book was authored by Phillip Longman and is titled: Best Care Anywhere: Why VA Health Care is Better Than Yours. Mr. Longman, a former writer and editor at U. S. News and World Report, is a senior fellow at the New America Foundation. His book is a quick read, and thankfully, it is not one of those management bibles weighed down by a lot of business school jargon. Although his sales probably will plummet on the basis of this recommendation, I encourage you to read a copy.

Like most doctors in America, part of my education was administered in a VA hospital. My introduction to internal medicine occurred in 1977 on Ward 7A of the Durham Veterans' Administration Medical Center. Now, 30 years later, my guess is that they have almost recovered from my presence there, but my memories of the experience will last a lifetime. The veterans were the most grateful patients one could ever imagine and the staff members were friendly and helpful. It was a great place to learn medicine.

Unfortunately, it was not necessarily a great place to be treated. Care was focused in the hospital setting and was fragmented outside of it. Medical errors happened more often than should have been tolerated. This is not an empty statistic – to this day, I still remember a patient on our service who died unnecessarily because of an air embolus in a large venous catheter. The VA system was inefficient and information did not flow well within the hospital, much less to other facilities. The bottom line was that if a veteran could afford to get care outside of the VA system, they probably did so.

The inadequacies of VA health care were dramatized in the 1989 movie Born on the 4th of July. The protagonist of that story, Vietnam veteran Ron Kovic, had lost the use of both legs in a combat-related injury and struggled with inadequate and insensitive care at a VA hospital in the Bronx. Tom Cruise received an Oscar nomination for his depiction of Kovic and Vietnam veteran Oliver Stone won an Academy Award for his directing. Under the hot glare of Hollywood spotlights, the real Kovic indicated that: "All I'm saying is I wanted to be treated like a human being." That doesn't seem like too much to ask of any health care system.

Even the mainstream media began to jump on the 'bash the VA' bandwagon. In 1993, the Wall Street Journal ran a story under the headline: The VA's War on Health. The following year, the Washington Times wrote a story on the VA entitled: The Worst Health Care in the Nation. The system needed a savior – not a Hollywood superhero, but a real live bureaucracy battler. He arrived on the scene in 1994 in the form of the Clinton administration's nominee to head the Veterans' Health Administration. It would be an understatement to say that he was a surprising choice, as both a Republican and someone who had never worked previously in the VA system.

His name is Ken Kizer, and before proceeding further, let me offer a disclosure here. He is not a personal friend of mine; in fact, I have never met the man. It is entirely possible that if he did know me, he would not be flattered by my attention. So, we are talking behind his back here. Let's just keep it our little secret.

So here's what I know about Dr. Kizer. Orphaned at a young age, he went on to become an honors graduate of Stanford University and later UCLA. He is Board certified in six different medical specialties (maybe even in Civil Medicine). In 1984, he left work as an emergency room physician to join the California Public Health Department, attracted in part by the opportunity to take care of a population's health, with a focus on prevention. He rose quickly through the ranks and at the age of 32 became the youngest person ever to be appointed to head the California Health Department. In that role, he had to deal with a number of emerging health threats, of which the newly emerging AIDS epidemic was no doubt the most challenging. He left the Health Department in 1991 and joined the faculty at the University of Southern California. Three years later, he got the call to head the Veterans' Health Administration.

Some may have thought him an odd choice for his new assignment. On the other hand, he had served previously as a Navy rescue diver - maybe that experience prepared him well for jumping in to shark infested waters to rescue the VA. While others looked at the VA and saw only the problems, Dr. Kizer looked at the VA and saw tremendous opportunities.

At Dr. Kizer's confirmation hearing in September 1994, Jay Rockefeller, who then chaired the Senate Veterans Affairs Committee, emphasized the need "for dramatic change." Senator Frank Murkowski, the Ranking Minority member of the Committee, said that: "I believe that neither Congress nor the veterans we serve are satisfied by the status quo. I do not believe that the VA can make significant improvements by continuing to do only what it has done previously." Senator Murkowski then added a cautionary post-script: "Sadly, your reward is likely to include a generous measure of second-guessing."

Once confirmed, Kizer set about addressing the mandate he had been given to transform VA health care delivery. The system that he inherited was comprised of independently operating, and in some cases competing hospitals, which had a specialty care orientation, and were focused on treating illness episodes. That is to say, it wasn't a system of health care at all. It was a microcosm of the larger picture of medical care delivery in this country. In other words, it was inefficient, uncoordinated, highly variable, undisciplined, and poorly accountable.

Drawing upon his public health background, Kizer saw the value of moving the VA to more of a population-based perspective about its services. In order to accomplish this task, care would have to be moved away from the hospital setting and into clinics, where the emphasis could be shifted toward primary care and prevention. Since form follows finances, resources would have to be reallocated away from expensive in-patient specialty care toward out-patient primary care. This was proposed to be implemented through a capitation model, not unlike that developed in the private insurance sector.

This plan would require a massive exercise in re-engineering. I know that you have been waiting through the whole talk to hear the word re-engineering, so there, I've said it. Kizer wisely set about this process in stages. The first phase began immediately after his appointment and continued through 1995. During this phase, he and his team focused on defining the problems of the 'old VA,' and set about creating a picture of the 'new VA." In the process, they developed a strategic plan, secured Congressional approval, eliminated outdated programs, created new programs and hired new staff.

Central to this whole plan was the aim of completely reorganizing the management structure of the VA. A series of 22 regional Veterans Integrated Service Networks, or VISNs, was created. A typical VISN serves about 150,000 to 200,000 veterans and includes 7 to 10 hospitals, 25 to 30 ambulatory clinics, and a variety of other facilities. The logic behind these regional networks was described in the blueprint document entitled: Vision for Change. There, Kizer wrote that: "In an integrated health care system, physicians, hospitals, and all other components share the risks and rewards and support one another. In doing so they blend their talents and pool their resources; they focus on delivering 'best value' care. To be successful, the integrated health care system requires management of total costs; a focus on populations rather than individuals; and a data-driven, process-focused customer orientation."

One might expect to read such a 'mom and apple pie' description in a textbook on health care delivery. Making it work within a tradition-bound, highly politicized, heavily unionized, bureaucratic organization is an entirely different matter. This is where the miracle began – it was the implementation phase and it started in 1996.

The VISNs were created and became the core operating and budgetary unit of the VA health care delivery system. In so doing, the regional centers could focus on the aggregate needs of the particular population they served and had a financial motivation to eliminate duplication of services and administrative overhead. The capitated model of reimbursement was introduced and the average cost per patient fell about 25% between the five years 1994 and 1999. No doubt, you will recall that health care costs elsewhere in the country were rising pretty significantly during that same time period. When compared against the per capita costs of other health care systems, the transformed VA began to look like a bargain. For example, the cost per patient was less than half of the comparable cost that Medicare was paying to private HMOs in 1998.

When one examines the changes in the patterns of care delivery, it is not surprising that costs were lowered. Specifically, the number of patients admitted to a hospital declined by 25% between 1994 and 1999, despite an increase of 25% in the number of veterans being served. The percentage of all surgeries that were performed on an out-patient basis rose from 35% to over 75%. The introduction of a national drug formulary and a pharmacy benefits management system saved over $650 million between 1995 and 1999. Two out of every three VA forms were eliminated, reducing the burden of paperwork in the system. By delivering care more efficiently, a 12% reduction in the size of the workforce could be accommodated.

While the cost savings were impressive, it would be a mistake to focus exclusively on that end of the value equation. At the same time that care was being provided in a much more cost-effective manner, the quality of the care provided also improved dramatically. The pathway to improving quality was paved by defining standards of care, collecting data on performance, and holding managers accountable for performance. The VA had a huge advantage in this regard since it was one of the first health care organizations to adopt a system-wide electronic health record. By digitizing clinical information, the provider can be reminded to order indicated tests, standards algorithms for care can be implemented, and performance can be monitored for individual providers and for facilities and networks.

The result was a dramatic improvement in the outcomes that were measured. For example, pneumococcal vaccination rose from a baseline of 27% of patients with indications to 81% by the year 2000. The use of aspirin and beta blockers among heart attack patients both rose significantly as well. Not surprisingly, the health outcomes related to these practices also were improved. The one-year death rate from pneumonia, for example, dropped from 17% to 11%. For congestive heart failure, the one-year mortality rate fell from 23% to 17%.

A comparison of measures of performance within the VA system to the Medicare fee-for-service population revealed that virtually every indicator was better within the VA population. In some instances, the disparities were striking. For example, 94% of diabetic veterans but only 70% of Medicare diabetics had their glycosylated hemoglobin, a measure of glucose control, monitored annually. For heart attack patients, 62% of the veterans but only 38% of the Medicare recipients were counseled about smoking cessation.

Not surprisingly, veterans have noticed how dramatically things have changed within their health care system. For each of the past six years, the National Quality Research Center at the University of Michigan has found that among surveyed patients, the VA has the highest consumer satisfaction rating of any public or private sector health care system. The dramatic change within the VA also has been recognized by those outside the system. The Kennedy School of Government at Harvard, for example, gave its top prize for innovation in government to the VA in 2006. The National Committee for Quality Assurance, an employer-driven assessment for health care performance ranks the VA highest among health systems in the United States. Donald Berwick, one of the gurus in the field of health care quality, and the President of the Institute for Healthcare Improvement, has declared that: "What the Veterans Health Administration has done is stunning."

From my perspective, one of the most beautiful ironies of this story is that it happened during the Clinton Administration. One of the most remembered episodes of the Clinton Presidency, perhaps second only to the famous blue dress, was the death spiral of its health care reform plan in 1993. The free market advocates blasted the Clinton plan as 'big government' gone bad. The Coalition for Health Insurance Choice, a front for the insurance industry, led the campaign to undermine the Clinton plan. The centerpiece of the Coalition's attack was a series of television ads featuring a middle-class American couple, Harry and Louise, who were visibly shaken by the prospect of the new "billion dollar bureaucracy." Could there be a more frightening prospect for the American consumer?

In the nuclear winter that followed the Clinton health care reform debacle, the same administration would go on to demonstrate that a multi-billion dollar government bureaucracy could actually deliver the best health care in the country. And the guy who led the effort was from the other side of the political spectrum. What would Harry and Louise have to say about that? If my calculations are correct, Harry and Louise soon will become eligible for Medicare, that other big government bureaucracy – do you suppose that they are going to decline their coverage?

Hollywood could turn Ron Kovic into a national hero and Madison Avenue could bring Harry and Louise into the bosom of our families, but neither of these industries could create a Ken Kizer. Sometimes the hard work, the truly heroic work, is done quietly and without public relations agencies and media campaigns. There is a danger, of course, in painting this portrait too narrowly around Kizer. There is no way to move an organization as large and as complicated as the VA as a lone ranger. A large team of folks was involved in implementing this plan. I am fortunate to work with one of them – Dr. Jack Feussner headed the VA research program during the Kizer years, and today he is the chairman of the Medical University's Department of Medicine. Jack has given me a little bit of an insider's view of what occurred at the VA during the years of transformation.

Nevertheless, the transformation of the Veterans' Health Administration could not have occurred without steady, visionary, and courageous leadership at the top. Kizer provided that leadership and he has developed a set of principles that may be instructive to others in leadership roles. These seven guidelines may be paraphrased as follows:

1. The goals and vision for change should be stated clearly. 2. Input should be solicited from throughout the organization. 3. Internal changes should be adapted to evolving external forces. 4. The head of the organization should select the leadership team. 5. Expectations should be set at a high level. 6. Implementation should be as careful and error-free as possible. 7. New challenges should be anticipated.

Without doubt, each of these principles was critical to the transformation that took place at the VA and it is helpful to have them stated so succinctly by Dr. Kizer. On the other hand, I list them here with some hesitancy, since it risks leading to the conclusion that organizational transformation can be executed in a cookbook fashion. Nothing could be further from the truth. The process of changing an agency as large and as complex as the VA is as much a work of art as it is an exercise in management science.

There is much that the rest of us can learn from the VA experience. First and foremost, under the right circumstances, bold change is possible, even within an ossified organization. Second, just because a problem is large does not mean that it is insoluble. Third, sometimes free markets do not deliver the best quality product at the lowest price. Although Rush Limbaugh may want to take a sedative if he hears this, occasionally the government can teach the private sector how to deliver services more effectively and efficiently.

But is the public really listening? In his recent movie Sicko, Michael Moore used the health care provided to the suspected terrorists imprisoned in Gitmo as an example of the care that all Americans should expect. In a stunt worthy of Barnum and Bailey, Moore transported a group of 9/11 first responders who were struggling to get health care down to Gitmo. Floating in a small boat outside of the prison gates, with megaphone in hand, Moore pleaded that these heroes should receive the same care being provided to the 'evil doers.' When they were denied access to the prison, Moore successfully sought care for the first responders at a Cuban hospital. It was a masterpiece of Theatre of the Absurd.

I don't recall Moore once mentioning the Veterans Administration in his indictment of the American health care system. It would have been a wise choice. He could have saved his plane fare to visit the national health care systems that he praised in Canada, England, and France, not to mention his boat fare to Cuba, and just stopped by his local VA medical center. There, he would have witnessed high patient satisfaction, excellent outcomes, and cost-effective care, all delivered right here in the good old U. S. of A. by the federal government. We don't have to import some foreign system with all of the fear mongering associated with the 's' word – 'socialized.' We can be just as patriotic as the men and women who serve this country in its Armed services and who as veterans, are served by the best health care system in this country.

And you have Ken Kizer to thank for that. In return, I thank you for being such a civil audience.


Jha AK, Perlin JB, Kizer KW et al: Effect of the Transformation of the Veterans Affairs Health Care System on the Quality of Care. N Engl J Med 2003;348:2218-27.

Kizer KK: Statement by the Honorable Kenneth W. Kizer, MD, MPH Under Secretary for Health, Department of Veterans Affairs, Before the Committee on Veterans Affairs, U. S. Senate, September 22, 1998. http://www.va.gov/OCA/testimony/svac/22SE9810.asp

Kizer KW: Health Care, Not Hospitals: Transforming the Veterans' Health Administration. In Straight from the CEO: The World's Top Business Leaders Reveal Ideas That Every Manager Can Use. New York: Price Waterhouse, 1999, pp. 112-120.

Kizer KW, Demakis JG, Feussner JR: Reinventing VA Health Care: Systematizing Quality Improvement and Quality Innovation. Med Care 2000;38(Suppl I):I-7-I-16.

Longman P: Best Care Anywhere: Why VA Health Care is Better Than Yours. Sausalito, CA: PoliPointPress, LLC, 2007.

Perlin JB, Kolodner RM, Roswell RH: The Veterans Health Administration: Quality, Value, Accountability, and Information as Transforming Strategies for Patient-Centered Care. Am J Manag Care 2004;10:828-36.