The U.S. Department of Veterans Affairs could become a competitive threat to private providers in communities where it hires private-sector clinics to deliver primary care to veterans or opens new outpatient clinics, a congressional investigative agency said.
Under a 1995 directive, VA hospitals and networks were encouraged to open more freestanding community-based outpatient clinics that would help make the government-run and -financed healthcare system more accessible to veterans.
Half of all veterans live more than 25 miles from a VA hospital, and more than one-third live 25 miles or more from a VA outpatient clinic, according to a General Accounting Office report.
The directive is part of a general overhaul of the $17 billion VA healthcare system. The VA has streamlined administrative functions into 22 healthcare networks across the country that are seeking to reduce the system's dependence on inpatient care and increase its emphasis on primary care.
As a result of the 1995 directive, 12 new community-based clinics have opened, the GAO said. Six were in Texas, two each in New Mexico and New Jersey, and one each in California and Illinois.
More than 250 more were in the works and could be open by December, the GAO said. Hospitals and networks must finance those clinics within their existing budgets.
Of the 12 that had opened, the GAO said, eight were operated by county health agencies or private providers and were paid a capitated fee for each veteran they enroll in their clinics.
The capitated rates negotiated by two VA hospitals with their contract clinics were less than the estimated yearly cost to deliver primary care in those hospitals, the GAO reported.
The GAO said the Amarillo, Texas, VA hospital estimated primary-care costs of $304 a year per veteran, while the Big Spring, Texas, hospital estimated costs of $277 a year per veteran. In both cases, the GAO said, the hospitals negotiated lower capitated rates with the community-based clinics even after including a 15% charge for overhead costs. The report did not say exactly what those capitated payments were.
The GAO reported, however, that at least one physician who did not win the VA business complained about losing patients to a newly opened contract clinic.
The GAO warned that the VA may increase its market share in communities where it opens new community-based clinics by luring new patients into its facilities and enrolling them in primary-care plans.
In particular, the GAO said new clinics in densely populated areas in which many veterans live are a significant threat to steal patients from private providers.
The VA maintained, however, that a contract arrangement will be less disruptive to local healthcare markets than opening a new VA-owned and
-operated clinic that competes with all providers and duplicates services.
The GAO also credits the program for maintaining public health access in rural communities. The report said the VA contracts have given an economic boost to some struggling, underutilized primary-care clinics in remote communities with dwindling populations.
The report said an official with one clinic told GAO researchers that the VA contract helped the clinic pay its fixed costs without adding much to variable costs. Another official said a clinic would not have survived without the VA contract.