The Business of Government Hour

 

About the show

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. The executives discuss their careers and the management challenges facing their organizations. Past government executives include Administrators, Chief Financial Officers, Chief Information Officers, Chief Operating Officers, Commissioners, Controllers, Directors, and Undersecretaries.

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Join the IBM Center for a weekly conversation about management with a government executive who is changing the way government does business.

Mark Catlett interview

Friday, September 6th, 2002 - 20:00
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Mark Catlett
Radio show date: 
Sat, 09/07/2002
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Mark Catlett
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Arlington, Virginia

Wednesday, August 21, 2002

Mr. Lawrence: Welcome to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and the co-chair of The Endowment for The Business of Government. We created The Endowment in 1998 to encourage discussion and research into new approaches to improving government effectiveness. Find out more about The Endowment by visiting us on the web at endowment.pwcglobal.com.

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation this morning is with Mark Catlett, principal deputy assistant for management at the U.S. Department of Veterans Affairs.

Good morning, Mark.

Mr. Catlett: Good morning, Paul.

Mr. Lawrence: And joining us in our conversation is another PwC partner, Greg Greben.

Good morning, Greg.

Mr. Greben: Good morning, Paul.

Mr. Lawrence: Mark, let's start by talking about the VA. Could you describe its mission and activities for our listeners?

Mr. Catlett: The Department of Veterans Affairs is responsible for providing benefits to 20 to 25 million veterans and their dependents for the country. We do eight things for veterans, from health care through providing compensation payments for those who are injured or ill from their service; pensions for those who are of low income; education benefits, very important, from when they transfer out of the military; housing benefits, insurance benefits and vocational rehabilitation. Those are the primary ones. And a burial benefit at the end of their life, where we memorialize their service. So we do a lot of very important things for the people that defend our freedom.

Mr. Lawrence: It's a large mission, it's a large organization. How many people are in the VA, and what type skills do they have?

Mr. Catlett: That's one thing I've always liked about being at the VA. I've been there my whole career. It is a very multifaceted organization. We have, in government terms, a little less than 200,000 FT average employment, but it's probably about 230,000 employees to provide this mission. And it spans the realm from all the professions in health care, through specialists in business, such as the housing program. We provide a guarantee there, which gets into credit reform and specialized accounting with that; vocational rehabilitation; psychiatrists, psychologists. So it is a very, very interesting place, and something even after 26 years, there's things for me to learn, in terms of the things, many things that we do for veterans, and how well we do them.

Mr. Greben: Mark, as principal deputy assistant secretary for management, what are your specific responsibilities?

Mr. Catlett: Greg, my office is responsible -- we're a staff function, obviously, at the corporate level for the Department. And we are specifically responsible for policy and the oversight of the budget activities, the financial activities, and the procurement activities, and the fourth one, relatively new, the capital asset function. It's been available in the Department. We've consolidated that and brought that into our office within this administration.

In addition to that policy and oversight, those responsibilities, as well, we are the office that has the direct liaison to the Office of Management and Budget, and to the committees on the Hill for the budget of the Department. That's where I began; that's still sort of my first love in terms of my role in the VA, and an important part of the value I bring to the Department. Those are very important relationships and responsibilities we have in terms of the budget. And that's the direct role that we have. And as I said, that, as well as then what we do as far as normal types of policysetting and oversight for the basic business functions.

Mr. Greben: Mark, in your 26 years, you have a rather unique background in that you've served as both a political appointee and a career civil servant. Can you tell us about that?

Mr. Catlett: Well, that is interesting, Greg. I came to Washington 26 years ago intending on being a federal bureaucrat, proud of that. I enjoy very much what I do. And in the first Clinton administration, Jesse Brown, the Secretary who just passed away, asked me to be his political appointee as the assistant secretary for management, which is basically the chief financial officer. I said no, you've got to be nuts. Why would I change? I'm a careerist. I want to be a careerist. And I was assured by folks that I could return to become a careerist. I had the impression that once you left career service and a political appointment, that was it. You know, you were on your own.

I was about 40 at the time, and said, no, I think I'll stay. But through his very persuasive capabilities, and most importantly, the assurance that I could return to a career slot, I took that political appointment for -- well, I was there -- the day Jesse left is when I returned to career service, but continued to serve in that job another 16 months, as it normally goes in the government, trying to select somebody to follow me.

So I did the job for more than 5 years, technically, just a little more than 4 of it as the political appointee, as I am doing now. I'm the acting CFO, if you will, because we're still trying to fill in this administration. The last political appointment to be filled in the VA is the chief financial officer.

And what are we, 18 months in, and we're still waiting for that to happen. So for this whole administration as well, I have been basically the acting CFO or assistant secretary, even though my title is, as Paul read, I'm the deputy for that function. But I'm the guy in the spot right now.

And the other point I'd make, sort of that distinction, is that I think I'm very lucky, as many of us are. The VA is a very, very flat organization. There's not much hierarchy there. And while I was in the political position, I didn't see my job a whole lot different than it is now, as a careerist trying to do the same thing. You know, the business opportunity is there. Fortunately, from my view, I wasn't required to do a lot of political activities. I did a very few of them, but wasn't required to and wasn't expected to. So I wasn't the normal political appointee who came off the campaign trail, you know, and came in, and still obviously was interested not only in doing a job there for my department, but also having an interest in serving that president, and the re-election of that president.

I was never expected to do that. I didn't come from that. And fortunately, I walked into it not sort of getting the guarantee about that. But fortunately, I found that it wasn't expected of me, and I didn't want that. I'm very interested in politics and follow it. But I'm a careerist at heart, and like I said, was very much glad and pleased with the fact that I could try to do the job one step above from my former job as the budget officer, trying to do the job of bringing about better business practices and better management in the Department as the political appointee, even though, as I said, most of my time, almost all of my time, was spent on the business of the VA, and not on anything overtly political.

Mr. Lawrence: Tell us about your career prior to that. Sort of how long have you been at VA, and what --

Mr. Catlett: Well, as we were saying, and kidding as we started here, I'm sort of a landmark there. I've been at the VA now over 26 years, came there in '76. And I was through the Budget Office. The corporate budget office for the VA is where I was until 1989, when I moved up to, if you will, to the front office for the first time of the Office of Management. And then, with '93, with the political appointment.

So I basically looked at all the budget oversight for all the programs of the VA over my first 13, 14 years there. So I've got a good background. Again, I'm a Washington type, been in Washington my whole career. But I did have a good overview. And that's one thing I find in government; as some people complain about, particularly the folks on the Hill, budget seems to drive everything, particularly in this era. And the reason I see that is that that's the one time of year when the Executive Branch has to put down on a piece of paper and commit to what they're going to accomplish in the next year.

We've made some steps with the Results Act and better planning documents. But until that time, the planning documents meant very, very little. The budget was where you really committed. So as the budget officer, and as a budget analyst before that, that's where the crunch came in terms of a department and an administration making a commitment to what they intended to accomplish. We've gotten a whole lot better with identifying results that we intend to achieve, and the metrics that go with that. But like I said, over this era, I think budget has become what focuses.

And like I said, I was lucky. I fell into it. I came to town in '76. It was the Bicentennial Year, so every convention was in town. I was a graduate student, came to walk the streets. It was 95 degrees that week in April. I walked the streets with a couple of buddies, interviewing, and fell into the job at the VA.

I was literally on the bus going back to Connecticut Avenue, to my hotel, had to make a change on the bus, had time. There was a guy sitting beside me at rush hour, a young guy. I said, where do I change buses? And fortunately, we had 5 minutes until we got there. And he worked at the VA. We started talking, and the next day, he had an interview for me. He said, I know a guy that needs somebody. He said, give me a number, I'll call you tomorrow. So I fell into the VA, and great for me. I've been very, very fortunate, I think, to be at the VA.

Mr. Lawrence: That's very interesting. Now, you spent your whole career one place, and in the public sector. Have you ever thought about changing?

Mr. Catlett: No. When I was 15 years old, I knew I wanted to come to Washington. I lived 90 miles away. I wanted to come to Washington and be part of the federal government. It was a fascination with me, an interest. And I just wanted to be a part of it. I had no idea if I wanted to be involved politically or bureaucratically. But it's something I've wanted to do. I feel strongly about. I think public service is a great thing, and I'm very pleased, and feel very fortunate to be the part I am of it, at the VA.

Mr. Lawrence: And you've been around a lot of different leaders in your career, and I'm curious. What are the good characteristics of effective leaders?

Mr. Catlett: Well, really, in a nutshell, there's two things: passion and persistence. I think you have to have passion for your mission, for what you want to -- and I say mission, or what you want to accomplish. Jesse Brown, again, not just because of his passing, but was one that, you know, as the leader that I worked directly for, exemplified that the best, in terms of not just his advocacy for veterans, the broad theme of his life, basically, but as well, the things that he wanted to accomplish, that he had a passion for.

And then persistence. I mean, like any bureaucracy, I think either public or private, there's a lot of competing interests. And you have to stick to it, to see through the things that you want to bring about. And so, to me, like I say in a nutshell, I would say those are the two characteristics that are most important for good leadership.

Mr. Lawrence: That's interesting. But it's a good stopping point. Rejoin us in a few minutes as we continue our conversation with Mark Catlett of the VA.

The VA and the Department of Defense serve many of the same people. What's the relationship between the two? We'll ask Mark when The Business of Government Hour returns.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and today's conversation is with Mark Catlett, principal deputy assistant secretary for management at the U.S. Department of Veterans Affairs. And joining us in our conversation is another PwC partner, Greg Greben.

Mr. Greben: Mark, you were part of a task force at VA which was commissioned to look at the procurement process. Can you tell us more about the goals of the task force and your role in it?

Mr. Catlett: When the Secretary, Secretary Principi, came, obviously, he had a lot of things he wanted to accomplish. He knew the VA, and a lot of things he knew needed to be done through his previous role as deputy secretary, his commission work under the other administration, commissioned by the Hill in looking at veterans benefits.

And in our area, the one thing that he was most interested in was procurement reform. I mean, we have a good track record. Many people know about what we do with our formulary and competing prices for the pharmaceuticals that we provide veterans, and getting excellent prices in that. And he wanted to see that emulated across the rest of our activities.

We spend close to $6 billion for all types of medical supplies, including the pharmaceuticals and all other types of supplies and requirements to serve veterans. And he wanted to see changes there that would bring about the efficiencies and the competitiveness in the pricing that we were getting in pharmaceuticals. So that's it in a nutshell.

I served as the deputy chair, if you will. Dr. Bob Weeb from California, one of the network directors in our health system, was named as the chair. Obviously, as with most things, you have these competing interests. Obviously, trying to strive for efficiency in the pricing process, in the procurement, you have to be careful that you don't shortchange the quality of the material.

And so it was important to have a health leader lead the team, and we had strong representation from other field folks, and some clinical folks on the team as well, so that we maintain that balance. While we are striving from guys like me for, you know, better pricing, we have to make sure that we do that correctly.

The focus of the task force that we've reported and that we're now implementing were some basic things: standardization, which I've implied, as we have done in pharmaceuticals in the creation of a formulary. Bringing that to what we call the med, the medical and surgical supplies as well.

We've been attempting that over the last 5 years, but not very successfully. And again, it's sort of a physician's desire to use the product lines that they like. And so that's the competition we have. And they'll always discuss quality of care if you try to direct it too much. So we have to bring about standardization, and find a way that the physicians standardize. We can't, as procurement officials and budget types, say okay, you have to standardize and choose this product line. They know best, in terms of the care. So we have to have it physician-led, and that's what we're trying to get done.

The other broad area that we knew we have a concern about and what we have to address is basically the role of data, both for our customer and then for us as providers.

First for the customers. It's one thing to standardize, if we can, all these product lines. But they don't know where to buy it. They don't know where to go to buy it. Cataloguing that, we're trying to use GSA's Advantage System, trying to get where it's in real-time on screen, at their touch, where they can go to find in a good catalogue, find the product lines they need. If we standardized and said you've got to buy this, they have to know how to get to it. And we've made some progress there, but there's a lot of room to improve.

Secondly, for data as well, as the providers, we need a National Item File. We need to standardize the way, the nomenclature that we use for all of these tens of thousands of things that we buy. We need to standardize that, so that we -- I mean, we need to have a standard language for that nomenclature, so that we know how to bid that in the market competitively. We have to roll up and decide where is our best opportunities to get competitive pricing? So we have to know what we're buying.

So those are the primary focuses of the task force.

Mr. Greben: Clearly the procurement reform will promote better management. What are the direct benefits to the veteran?

Mr. Catlett: Well, the direct benefits to the veteran are in this way a little indirect, I guess is the way I approach it. We hope, as we are faced now, we have more in the broad scheme for health care -- and this is focused on health care, which is where our big bucks are. We have more patients than funds we have, resources we have to treat them.

So we have to stretch our resources that get the bang for the buck, basically. So the better we buy, as long as we don't compromise quality, the more efficiently we buy, means there's more resources for staffing, which is still our primary resource in providing health care. You know, 60 percent of our costs is payroll. We have to squeeze as much as we can out of the supply side, the non-payroll side, so that we can hire more physicians and nurses to provide care.

We are swamped with patients, and we are in a tough -- like I said, we're a victim of our own success if you look at the way VA has changed in the last 5 years. We've made access; we've made ourselves accessible with hundreds more clinics, and we have improved the quality of the service. We've made it the way it should be in terms of health focus, and not a hospital focus, so that means the care is out there, as it's being provided.

So we have more than doubled the number of veterans getting care from us, and probably by 2-1/2 times the number seeking care from us in the last 6 or 7 years. So we have to be as efficient as we can in order to provide as much service as we can within the dollars we have.

Health care is, for us, a discretionary expense. It's subject to availability of funds. A lot of the other things we do for veterans are mandatory, which means that whatever the demand is, the money is to be provided to them. There's transfer payments for compensation and pension, provide the guarantees for housing, find vocational rehabilitation. These are all mandatory. If the demand doubles, the money has to follow.

On health care, it's not that simple. We get an annual appropriation, and we have to live within the resources. And we are pressed to the point now of thinking about having to restrict the number of veterans who come to us for care, which we haven't had to do in the past, because the demand is so great.

Mr. Lawrence: The Department of Defense and Veterans Affairs have operated separately, even though the departments serve many of the same people. And I'm curious what the state of cooperation is between the two departments.

Mr. Catlett: With this administration, I think I have seen -- again, being around for a long time -- we've had efforts. And we always have efforts at core collaboration, and cooperation. As one example, we have probably 140 of our medical centers are or have a contract to be a TriCare provider. But literally, less than $10 million of care is purchased by DoD from us. So it's very, very minimal in that regard.

The thing that's improved with this administration is obviously, the President first established a task force to look at it. And there was an interim report just released within the last couple of weeks. But there will be another year before they report. And clearly, Secretary Principi was not satisfied with waiting more than 2 years to try to improve that.

The deputy secretary, Dr. Leo Mackay, and Dr. David Chu from DoD have formed a Joint Executive Council. Dr. Kaiser, in the last administration, formed a Health Council with DoD. And there was a lot of work on specific projects and activities. That's been incorporated now under this broader council at the top, with the deputy secretary, the number two guy at the VA leading it for the VA and bringing in a benefits council.

And now we're talking about creating a Facilities Council that would be something that I would be probably co-chairing, looking at how we better coordinate the expansion and the improvement of our facilities. I mean, that's where we can make the biggest bang. As we know, there's a lot of people that we overlap. But many, many more don't need DoD and VA.

There's about 600,000 military retirees who are those who could get care who are duly eligible. They can get care from the VA or from the military, as a retiree. But most veterans who leave the military don't have a career at the VA, aren't at the military, aren't retirees. So they don't have an option with DoD. They're at the VAs.

And then, with the military as well, you have many, many dependents, hundreds of thousands of dependents of current service members. So actually, the group that is the smallest piece of their population and ours, if you split it in two, are the ones where we have commonality, or where they have dual eligibility.

But still, 600,000 is significant. And to put it in proportion, that's out of about 6 million that are now enrolled with us. We have better, much more forceful leadership from the top to bring about -- and we are meeting quarterly in that group, and we have an agenda set. In effect, the next step is to create what we're calling our strategic plan for this group. We'll be meeting next week to try to lay out what we want to accomplish over the next 5 years.

I mean, they've laid out an agenda for this next year. We want to make it a little broader so we can reach agreement on that.

Mr. Lawrence: What's taken so long for this to come together? Are there historical issues?

Mr. Catlett: I would say the broad issue, as I tried to indicate, is the numbers of people that really have dual eligibility aren't all of them. It's the minority of the folks that get health care through DoD, and at the VA.

But most importantly probably I think is the military's concern with maintaining a military presence for preparedness when there is a conflict in which there would be a huge number of casualties. I mean, we have a backup role there. But, you know, practicing battlefield medicine and all of that intensity that goes with that, and the
follow-through with that, is something that we don't do.

And I feel that DoD military and DoD medicine wants to protect that. I mean, there's been some that say, ah, you ought to make it one system. Merge it. It's all veterans. What the heck? But I think it's DoD interested in making sure that they have a system of sufficient size so that you can have, keep the skill level up for the people who are needed when they're needed. So that, in effect, you have to have docs, you know, practicing their skills here -- and you can't practice, obviously, battlefield medicine. But still, surgery and some of the basics of health care, you have to have them doing something for when the time comes, and it's needed.

So, to me, that's it in a nutshell.

Mr. Lawrence: That's a good stopping point. It's time for a break. Come back with us in a few minutes as we continue our conversation about management with Mark Catlett of the VA.

What steps is the VA taking to get the green on OMB's management scorecard? We'll ask Mark when The Business of Government Hour continues.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And today's conversation is with Mark Catlett, principal deputy assistant secretary for management at the U.S. Department of Veterans Affairs.

And joining us in our conversation is Greg Greben, another PwC partner.

Mr. Greben: We've read a lot about the Capital Asset Realignment for Enhanced Services, the CARES program. Can you tell us about CARES?

Mr. Catlett: Sure can, Greg. It's of special interest for me, in terms of the changes that the VA needs to undertake. CARES focuses on our health care element. Obviously, that's our large infrastructure with our medical system. We have over 170 medical centers. We've opened, as I noted earlier, hundreds of new clinics in the last 5 or 6 years.

But as GAO has noted over the years, and the Congressional committees, and we ourselves, we need to change. We have an infrastructure that's from really almost 50 years ago. And medicine is not practiced the way technology has advanced that. And to put in context for me, again, I have referred to Dr. Kaiser and his excellent leadership in the health administration in the Clinton administration.

He brought about that change with some help. We got an eligibility act out of the Congress that allowed us to treat the patient and not -- I mean, we literally had rules before whereby you would have to be an in-patient to get certain services. So we were inefficient. In order to give care, docs who wanted to give the care would have to admit patients so that they'd give them some services, because the law over time, although well-intentioned, had been segmented. And they were basically trying to dictate medical practice in law.

And as anything happens in that over time, it accumulates. And things change. Particularly, technology changed medicine. It was outdated. We got that change. Kaiser was the forceful leader to bring about a focus, as he said, on health care and not on hospitals or not on the infrastructure. And we opened these clinics, and created these access points.

So we gained huge efficiencies out of that so that we could give more care. As I noted earlier, we've doubled the number of people getting care. But we've nowhere doubled our budget is because we squeezed out the inefficiencies that went with practicing medicine in a hospital setting.

We've moved the staff out. Now, the second thing awaits us, and that's what CARES is about. We've got to right-size, and I'm not trying to be cute about the word -- this infrastructure. We don't need it. We have tens of thousands of acres, and we have millions of square feet of space that we don't need. And in some cases, we don't need the entire facilities, because it's not the way medicine is practiced.

We have completed the one study we've completed in Chicago, or Chicago and the Wisconsin areas north of that in one of the 21 regions in the VA. I'm very pleased that the Secretary, in approving that last spring, we will be hopefully releasing that press release this third week of August, in which we are going to the implementation plan for that. We have $125 million appropriated now that we're going to release to Chicago.

We have, through one of our innovations that we're overseeing, called Enhanced Use Leasing, whereby the private sector financing is used to build that, we have underway nearly $100 million of improvements at our Chicago facilities right now. We're in the middle of them in Chicago twice in the last couple of months, signing the deals with the energy companies for cogeneration plants.

We have another enhanced use lease to be signed in September. And as well, then, we are going to seek, and we're going to close one of the four Chicago hospitals, lease that as invaluable property, downtown Chicago. And we intend to use those resources from that lease to help build out the hospital 6 miles west, still in Chicago, that we want to be our tertiary care facility in Chicago.

So, I'm very excited. We will be devoting, in the next 15 months, over $300 million in resources from all our means of financing to the Chicago and the broader network in that area, in that region, to bring about this infrastructure change. We'll be eliminating one facility; we have a second one of four in Chicago that basically we're ready to outlease, hopefully we'll be outleasing that to the military. The Navy's there in North Chicago. We're looking to that.

So CARES is about, as I said, we have dispersed the staff. Now, we have to manage this infrastructure. And if we can pull this off -- and we are underway with the studies now for the rest of the country. And in the next 2 years -- in the next year, basically, by next spring or summer, we want the plans proposed and approved by the Secretary that says this is how we need to change this infrastructure, where we need to get rid of it.

And I would be very careful of it, because it's very sensitive in veterans issues and politics here. Getting rid of buildings is not about eliminating care. It's about, again, as we talked about in procurement reform. We have to have more of our resources devoted to hiring physicians and nurses. And we are spending too much money on the infrastructure and the staff, the indirect care staff, the wage grade staff, to maintain that infrastructure.

We need to have more money for doctors and nurses. And that's what this is about. So we're excited that we've got to -- it took us a while. Chicago was our test. We've learned. It took us 2 years to get through it. But we've approved it. And we're going to devote hundreds of millions of dollars now to that. And our big challenge now for CARES is everyone � the Congress and OMB, everyone has been hyped and hopped, saying let's go. But I'm, as the budget officer, saying, where's the money?

We've got to finance. We're going to spend 300 million in Chicago in that region. I doubt if we'll spend anywhere near that in many other regions. But we need hundreds of millions of dollars for a system of our size to right-size, and to bring about the change. Everyone has said, yes, conceptually, buy it. But where do we get the money in financing that? Our budgets have to be supplemented to do that. And we will use not just appropriations, as I said, but this Enhanced Use Leasing Authority, which is a very interesting concept.

Again, we sort of led the way. We've had it for 12 years; we were slow starting it. But we are expanding that significantly, where we use private sector funding to improve the buildings that we need, or if we don't need them, where we generate a revenue stream for us, to help support our health care system.

Mr. Lawrence: It seems pretty clear the reasons why you don't want to have the ability to shift money to provide more direct health care from infrastructure.

Mr. Catlett: Right.

Mr. Lawrence: What have been some of the management challenges to get to that point?

Mr. Catlett: I would think it's the normal challenge. It's just the fear of change and the inertia that goes with it. The expectation, again, is sort of the thing I love about government is, you've got a lot of competing interests, and it takes a while to come to a conclusion and move. That's why I would envy the private sector. Say, when a business and a corporation decide to take a direction, obviously they're at risk to stakeholders, stockholders, and everyone else. But they move out as a unified team.

Here, we've got a board of directors that's unbelievable, from not just the Congress, but with the many different perspectives on the Congress, from appropriations to authorizers. Within the administration, you've got several points of use. So, with us, with a strong advocacy group, a lot of people are saying is this just the way to cut back on the health care, instead of improving the health care by redirecting the resources?

So overcoming that suspicion on some people's parts and I think just the general fear and inertia. As I said, another piece of it is, this will be dislocating a lot of our employees. We have tens of thousands of people that are wage grade employees, blue-collar employees that take care of our facilities, that do the food service, the engineering staff. If we get rid of facilities, we're not going to need those folks. And the transition for those folks, you know, and how we best do that to care for our employees, at the same time to bring about the change, you're talking about a very interesting and a very tough set of issues, because there's a lot of different interests here.

Mr. Lawrence: How did you overcome all those issues?

Mr. Catlett: Well, we haven't yet. But in Chicago -- and again, I think part of it is, again, it's tough as people look at it. But again, the basic dynamic that's underway now is that we have so much demand for care that everyone understands intellectually, we have got to get on.

We don't have the luxury of waiting and working through this issue. We have to speed this up. I mean, our appropriation is not unlimited. We will do as much as we can with this special authority we have to access private financing. But that will be a supplement only. It can't replace the idea of coming up with more money.

And so we have to, with a base of now 25 billion we have for health care, that we'll spend this upcoming year on health care, we have got to get it concentrated as much as we can in direct care, and physicians and nurses who are providing that care.

So, like I said, these issues have been with us for 2 years. They're going to be with us through this CARES study that's now being completed for the rest of the country. And like I said, all those dynamics and all those influences will play out as we try to get to a set of plans that we need to start financing in the 2004 budget, and the couple of years following.

Mr. Lawrence: With regard to your role in financial management, what steps is VA taking to improve its financial management scorecard grade, to get to green?

Mr. Catlett: The biggest change for us -- the scorecard has a lot of components. The financial management is one of the five common denominators for all of government agencies. For us, it's a big change, a huge change, as we're replacing our financial system and our procurement data system, our procurement system, in the field and centrally.

Like I said, I've been around a long time. This financial system, we brought up in '95, when I was the assistant secretary, the political appointment previously. It took us a while to do that. And we're now at the point where it needs to be replaced. That was the big change. And now what we hope to do is replace the two front ends out there in the field for the financial system and the procurement system for tracking our inventory with a new, integrated system, with our core financial system.

So we've been underway with that 2 years to study and develop. We have begun the pilots for that. And over the next 18 months now, we'll need to roll that out. So that is absolutely the largest challenge we have as the Office of Management within this department to bring about a new financial system -- well, I should say a new financial and procurement system for tracking this $60 billion a year that we're responsible for.

If we pull that off, then we deserve a green. I mean, that's our goal, to get that done. And this is bigger than anything that we've tried before, in terms of trying to get to basically one system.

Mr. Lawrence: That's a good stopping point. Rejoin us after the break as we continue our discussion about management with Mark Catlett of the VA. This is The Business of Government Hour.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers. And today's conversation is with Mark Catlett, principal deputy assistant secretary for management at the U.S. Department of Veterans Affairs.

Joining us in our conversation is Greg Greben, another PwC partner.

Mr. Greben: Mark, we spoke earlier about VA's challenge in updating its core financial and logistics system. Can you speak to us about some of the challenges faced and lessons learned?

Mr. Catlett: Yeah, Greg. Like you said, it's sort of a work in progress here, what we're doing. We're 2 years into the planning and design of that, with a lot of help and support, after choosing a system, from a lot of contract help. I guess there's two things I would say. One is, frankly, I guess it's not a surprise. But we get overpromised a little bit in terms of what these systems can do. I mean, obviously, we want to try to avoid -- over my career, you know, the lessons learned, or a big one is, you know, don't try to retrofit this new technology, this new software to the way you've done things in the past. You need a change your business practice to match the software.

But what they promise a lot isn't there. I mean, in particular, we've stopped a new payroll system, basically because they couldn't meet the load test. And again, VA's a big place, and maybe that's it. I mean, we have within that case, with 230-240,000 employees, the ability to process in real-time that much of a payroll. The system couldn't handle it that we were trying to bring up.

So, that and other reasons. But that was the primary reason we had to leave there. I think we're looking at, we're edging up on some of those same issues now, as we bring up the core financial and logistics system. It is, can they handle the capacity that we have to put through here? The tens of thousands of people that we'll have online at any time, trying to input into that system, is something new for a lot of the software and the companies trying to pitch us here.

So that's a big concern for us. That's not necessarily a lesson learned for everybody. But that is one thing. The biggest thing I think within the government setting when you try to bring about a change like this is communication. I mean, you just cannot have enough communication. And in particular, in our case with the field. I mean, you can get folks involved. You set up teams, you set up committees, you get people in full-time. We have folks in Washington brought in full-time to work with us to manage, from the field perspective, how to bring about this change, and hear them out in terms of the things that they need and how we do it.

But even with that, you can never plan. So you should, not just in terms of the time it takes to complete it, but your ability to identify -- I would call it the communication/training it takes to get to a system. In fact, with this system, with all these sites of care and of other benefits, hundreds of sites we have, the thing that we have learned in the middle of this, what we're trying to bring about now is a consolidation and a centralization of our financial and procurement activities in the field.

We don't want to bring this thing, this system up at 170 medical centers. We want to bring it up at 21 regional centers. And obviously, you're going to still have folks at each medical center doing some financial things. But the basic management of finance, we want to regionalize.

Some of our health networks have done that already. And we're pushing to standardize that for a lot of reasons. And one of them is, when we roll out this new financial system, we don't want to have to be dealing with the tens of thousands of people that we would have to if we were trying to put this system up at every one of our medical centers, our regional offices, and our clinics, as I said.

So the lesson there is communication, and making sure that you oversubscribe what you need to do in terms of as you look forward in trying to bring about a change like this.

Mr. Greben: Part of improving budget and performance integration is being able to provide the necessary financial information to managers in a timely manner. What plans are in place to improve in this area?

Mr. Catlett: This sort of touches on something near and dear to me. I've often described myself to VA audiences as sort of a Results Act nut. I think it is one of the better things that happened to government. I mean, Congress did it. In '93, they gave ourselves 5 or 6 years to pull it off. That was as required.

People could look at that and think government must be terrible, that it takes 5 or 6 years to bring about a change. But the change affects everybody. It's just not the way we manage, it's the way Congress oversees what we do, and the questions they ask.

So performance and budgeting and linkages has been a special interest of mine. And in fact, we are going to change our appropriation accounts structure with our next budget that we submit. I think we're the first HCR department to do it in total. We're totally going to change -- we have about 45 accounts. We want to get down to less than 20, and we want one for each -- I've described earlier in this conversation about the eight things that we do for veterans. We want an appropriation for each of those that would include all the costs, whether it's the entitlements, the mandatory payments or services to veterans, the administrative costs, the capital costs. All that together.

So in an oversight role, where even from the public perspective, they can look at us and say, hey, here's the things you do for veterans. Where do you spend your money? If you look at our account structure now, you cannot figure it out. You have to be a bean counter like me and 25 other people at the VA, or 50 other people who write these six books every year and submit a budget. And we're the experts, and somebody's got to ask us to figure what's going on there. We wanted to make it plainer and simpler to folks that this is where we spend the money.

But now, after my advertising, to get to your question. Actually, the interesting part of it is the financial data is not the problem. We have financial data, even with our current system, pretty much available as we need it to look at, particularly in the execution and tracking of this. And again, a nice thing that's happened at the VA, again, with strong leadership from our deputy secretary, we have monthly performance meetings, where the under secretaries, and the leaders of every organization are there to present. You can't delegate this to someone else to submit a nice little report. You have to be there, present, and explain the operation and the performance.

The problem we have right now is not the financial data, but it's the performance data, to getting that in terms of any real-time; getting, you know, the metrics that we're setting in place to determine the quality of the service that we're providing, the amount of service even. All those things which we call the performance data, they have come out of systems that are informal even, and end up folks calling to the field, tell us what you're doing, sort of collecting this by hand, if you will, or by e-mail, instead of having it standardized in the system.

So performance data is our bigger problem than financial data, towards having the data we need for real-time execution, tracking and adjustments as you look to try to implement your programs.

Mr. Lawrence: When you think out over the VA as a whole, what do you consider to be the biggest challenges over the next 5 years?

Mr. Catlett: There would be two things, Paul, that I would speak to there. I'll give you the first one, which is the coordination of health benefits. I think that, again, I want to get beyond just the health in terms of VA because there's another challenge there for us.

But health benefits, as we talked about, there's a lot of focus on our linkage with DoD. The bigger nexus is with Medicare. I mean, the 10 million-plus veterans over 65 who are non-service-connected, who are eligible to get care from us -- and a million and a half of them do, or are enrolled to get care from us -- they're all eligible. Or 95 percent of them are eligible for Medicare.

And we proposed in the last administration to try to get a coordination of payments on that. And again, the huge sort of small paid political opposition, inertia, you know, fear of the change or the inertia of sticking with what we've got, the fear that we'd be raiding the trust fund, the Medicare Trust Fund with all the pressures on it to manage and manage its costs. But that's the bigger coordination that has to happen. That's much more important than what happens between us and DoD, in my opinion. But from all three elements, that has to come about.

But the second thing over 5 years alludes back to the discussion we've had about CARES and our infrastructure shift. But it isn't limited to our health system. Technology has changed the way. I mean, we need to get to the Information Age in the way we provide service to veterans. We have 57 regional offices where you come and apply. We are doing that on the web now, obviously. But you still can walk up to the counter. And most veterans still interact with us by phone.

But we need to get that infrastructure, much less significant and much smaller than our health. We don't need it in the future, if we get to an Information Age service delivery mechanism. And so I think the infrastructure shift across the VA, both for all benefits as well as their health care system, is the thing we have to do.

We can pull CARES off for the health care system. I think the regional office, and, you know, the shift to infrastructure can follow as well in the next year, over the next 5 years. If we can pull that off, then our money will be much better utilized for providing service for veterans across the board, from benefits to health care.

Mr. Lawrence: What advice would you give a young person interested in career and public service at perhaps the VA?

Mr. Catlett: The advice I'd give is, despite sort of the allure of the previous up cycle in the economy, and the dot com frenzy that happened there, and everything and all the opportunity they have there, that it's interesting. And what I've seen, what I've alluded to, I've been very lucky to have, in a government career, I've been very pleased, almost beyond expectations at times, at the opportunity I had to move up in the organization, and to do new things and different things, and to be more responsible for what goes on.

But I think government gives a lot of opportunity. You're not going to get rich there, obviously. But you can make a nice living. And like I said, you have to come with the idea that you're there for the public service. Not to play a clich� here, but I think public service is something that has to appeal to you, in terms of being part of something bigger than you and a broader good for the public and for our society in general.

But with that, like I said, I think it's surprising folks will find how many opportunities there are to do things. At least, I find it in Washington. I know a lot of folks in the VA who work in the field can't wait to get back to the field when they come to Washington.

But if you're in Washington, you know, in the bureaucracy, and you can handle the ambiguity and all the competing interests, that's to me the fun of it, is to see something through when you've got to manage it through a structure that, at this time, is very unstructured in terms of who's in charge at this moment? Who's got the power to make things happen? Because there's nothing that ever can be completed when you have the Congress and the administration, particularly in this era of a split government, basically, as we've had.

So to me, being a bureaucrat can be exciting. I've found that more so than I expected.

Mr. Lawrence: Mark, I'm afraid we're out of time. Greg and I want to thank you for joining us this morning.

Mr. Catlett: Thank you very much. I enjoyed it.

Mr. Lawrence: This has been The Business of Government Hour, featuring a conversation with Mark Catlett, principal deputy assistant secretary for management at the U.S. Department of Veterans Affairs.

Be sure and visit us on the web at endowment.pwcglobal.com. There, you can learn more about our programs, and you can also get a transcript of today's conversation. Again, that's endowment.pwcglobal.com.

This is Paul Lawrence. See you next week.

Mark Catlett interview
09/07/2002
Mark Catlett

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