Thank you, Senator Durenberger, for that kind introduction.

It's a great honor to be here.

For many of you who work in this building or who know the VA well, some of what I have to say today will not come as a surprise.

But for most Americans, the story I have to tell is almost impossible to believe at first hearing. It's a story that contradicts almost everything we think we know about the way the world works, and in particular, about how health care works. But it's a true story, and one that we all need to get are minds around if we're to have any hope of solving American health care crisis.

Let me share with you how I came upon this unlikely story. Several years ago, the editors of Fortune magazine summoned me to New York for a sumptuous lunch and what turned out to be a serious discussion.

At the end of the meal, I found myself with a plum, but difficult freelance assignment. It was no less than to figure out who had the best solutions for America's health care crisis.

Put simply, what the magazine had in mind was that I find the Jack Welsh of health care-a take-charge of CEO whose leadership pointed the way of 21st century medicine.

I accepted these marching orders with much trepidation, but also great curiosity and passion. The biggest reason was personal.

Five years before, I had lost my wife, Robin, to breast cancer. I never blamed her doctors for her death. But what I saw of the American health care system during the 10 months between her diagnosis and demise had caused me to stop regarding health care as a mere abstraction. I had become personally engaged in the question of how the American health care system actually worked, or all too often, didn't work.

Robin was treated at the prestigious Lombardi Cancer Center, which is part of Georgetown University's hospital, in upscale Northwest Washington, D.C. Every time she and I entered the facility through its posh lobby, we passed a poster-sized blowup, mounted on an easel, of a recent cover of U.S. News & World Report. The cover story had ranked Lombardi as one of the best cancer treatment centers in the country. Since I worked at U.S. News at the time and respected the team responsible for these annual rankings, this was particularly reassuring.

Robin and I both felt blessed that our gold-plate insurance allowed us unfettered access to all the doctors and specialists we would care to see, and that we lived within just a short drive of Lombardi's world-class facilities. I particularly remember Robin's saying how grateful she was that we hadn't chosen to try saving money by enrolling with an HMO. We were lucky yuppies, and we knew it.

Yet the more time we spent in the Lombardi Center, the more I was disturbed by the way they managed "the little things."

On the day Robin underwent her lumpectomy, for example, I had to explain to her afterwards as best I could why I wasn't there to offer her support and comfort when she awoke. The reason, though hard for both of us to believe at the time, was that no one in the hospital could tell me, despite my increasingly frantic inquiries, where she was. I had imagined that every hospital, particularly a prestigious one attached to a major university in the nation's capital, operated with advanced information technology systems that kept track of every patient's location and condition. Not true, it turns out.

I was similarly shocked at how little the various specialists involved in her care seemed to consult with one another, or to keep up to date on the results of tests.

In one emotionally devastating meeting, for example, the discussion began with various members of Robin's "team" optimistically discussing her prospects for reconstructive surgery. Robin and I were both thrilled that the lumpectomy was an apparent success and that her chemotherapy seemed to be working to contain the cancer. But well into the meeting, one doctor began to fidget, finally asking if anyone had looked at the results of a recent liver scan. The team quickly departed, leaving Robin and me in an empty examining room for 30 or 40 minutes. Eventually, a grim-faced oncologist returned. The cancer had metastasized to her liver. It looked as if she was terminal.

As I said, I never blamed her doctors for her death, but seeds of doubt sprouted in my mind about the system in which they were operating. Most of the doctors were sympathetic enough, and all were highly credentialed. But there seemed to be little attention given to managing information and coordinating care. It was as if, upon arriving at an airline gate, you were informed that the airline had lost track of the plane, couldn't find its passenger manifest, and couldn't say if it had passed its last inspection. At any given time, Robin's medical records and test results seemed to be scattered in paper files kept by different departments. If any one doctor played the role of pilot, much less air traffic controller, I had no idea who he or she was.

I could go on and on, but I won't. Suffice it to that I set off in great earnestness to deliver on Fortune's assignment.

My assumptions going in were typical of those held by many Americans, particularly those with conservative, pro-market views.

For example, I assumed that the biggest single cause of the American health care crisis was that too many of us pay for most of our care using other people's money. Hadn't the big explosion in health care cost started after the enactment of Medicare and Medicaid, along with the vast expansion of tax-subsidized employer-provided health insurance plans?

Another under-examined assumption I brought to this project was that American health care, as inequitable as it may be, was nonetheless the most scientifically advanced in the world. Didn't tens of thousands of rich foreigners fly in desperation to the United States every year in search of treatments they could not get at home?

Outside of veterans hospitals and a relatively few, chronically mismanaged and under-funded "St. Elsewhere's," the American health care system seemed the envy of the world, even if it cost too much and left too many uninsured. And I believed this was true precisely because it was the least "socialized."

Yet as I started asking experts for suggestions about who was delivering the highest quality, most cost effective, innovative, and scientifically driven health care in America, I kept hearing an answer I could not believe.

It contradicted all that I thought I knew about health care and medical economics, indeed, about markets and governments in general.

Yet these experts backed up their assertion by pointing me to study after study, all published in prestigious, peer-reviewed journals. These, too, I found literally incredible at first. If their claim was so true and obvious, why did so few Americans know about it? Why was there no talk of it in all our health care debates?

Yet the hardcore data was overwhelming. Over the last ten years or so, there have been more and more studies of the actual processes and outcomes of different health care systems. The metrics are many.

They include such easy to understand criteria as how well do providers manage high blood pressure, or adhere to such protocols of evidence-based medicine as prescribing beta-blockers for patients recovering from a heart attack.

They also include rates of medical errors, patient safety measures, prevention programs, patient satisfaction, and of course, properly adjusted mortality rates.

And who do you suppose keeps emerging on the top in these comparisons of quality. I would have guessed the Mayo Clinic, or maybe Massachusetts General, or some other prestigious and expensive health care system. But that's not the answer I was hearing.

Incredulous, I started visiting its facilities . Frankly, what I expected to find images like this:

But that's not what I saw. One thing I noticed right away was that its hospitals operated unlike any I ever seen before, and believe me, I've seen many.

Doctors made their rounds with lap top computers, from which they could draw their patients' complete medical records going back as far the mid-1980s. They could even monitor the weight, blood pressure and other vital signs of patients at home.

There was no scrambling around searching for misplaced X-Rays or the results of other medical test-as I'd seen often during my late wife's battle with cancer.

Nurses also carried lap tops with software that prevented them from dispensing the wrong medicine, or the wrong dosage, to the wrong patients. In other American hospitals, according to the Institute of Medicine, patients experience an average of one medication error a day. But in these facilities such errors are virtually unheard of anymore.

I also noticed that the patients I talked to seemed unusually happy with the quality of care they were receiving. Some were angry about what it taken to get enrolled in the system, but all were highly grateful that they had made it in.

Slowly, I began to trust the evidence of my own eyes. Moreover, when I reflected on all that Robin and I had experienced during our ordeal-the fragmented care and record keeping, the difficulty in keeping track of patients, the amount of effort devoted to gaming insurance paperwork, and above all our lack of a long-term relationship with the institutions that provided her care-it all started to make sense.

At first I was depressed by what I learned because it was so counter-intuitive, so against the received wisdom of America's business class, and of Americans in general for that matter, that I knew the editors of Fortune would never feature it on their cover. And I was right. We agreed on a kill fee with no hard feelings. Business is business. But as I pondered the deeper implications of what I had learned, my depression lifted and I became excited.

A solution to America's health care crisis does exist, I realized. Better than that, you don't have to rely on mere theoretical speculations or econometric simulations to see how it might work, nor do you have to wait around for a revolution in technology. You don't even have to travel to some far off foreign country like Sweden, or even Canada, to see it in operation.

Instead, all you have to do is take a look at how the VA delivers health care

For six consecutive years, the VA has had the highest rate of consumer satisfaction of any health care system in America, according to independent surveys.

According to the Journal of the American Medical Association, the VA the "bright Star" in American medicine when it comes to promoting patient safety and reducing medical errors.

It is a world leader in the use of electronic medical records and in the use of information technology to develop evidence-based medicine. Its VistA software program, written by doctors for doctors in open-source code, is widely regarded as the best in world, and is currently in use in countries ranging from Norway to Uganda.

And perhaps, most stunningly of all, it is holding down costs even as becomes the highest quality provider in America.

As Harvard's John F. Kennedy School of Government gushed, in awarding the VA a top prize in 2006 for innovation in government: "While the costs of healthcare continue to soar for most Americans, the VA is reducing costs, reducing errors, and becoming the model for what modern health care management and delivery should look like."

Based on everything I've seen in researching this book, I have to agree, though it's meant I've had to put aside many strongly held believes that previously informed my worldview.

What makes the VA the bright star of the American health care system? In my book, I chronicle the stories of many courageous doctors and other VA employees who, often acting on their own, began to develop a new model of care VA, often in the face of horrible resistance.

In the late 1970s, one VA doctor, Kenneth J. Dickie, was busy building the nation's first electronic medical record system. He did his work secretly in the basement of the Washington Medical Center. One day, someone literally set his computer set on fire In the early 1980s, many other VA doctors were fired for using personal computers to in their practice. It was an ugly struggle.

One of the things I enjoyed most in writing this book was learning about and talking to so-called "Hard Hats." As many of you know, they were a loose, underground network of pioneering VA doctors, pharmacists and technicians who, beginning in the 1970s, wrote the software that became VistA, the VA's world class health care information system.

Gordon Moreshead and Wally Fort in Salt Lake City began developing a clinical psychology data system to use in their own facility.

Bob Lushene in St. Petersburg, Florida, developed online psychodiagnostic tests.

Richard Davis in Lexington, Kentucky, was writing a nutrient analysis program for the treatment of diabetics; and Joe Tatarczuk in Albany, New York, was working to computerize nuclear medicine.

Another key programmer, named George Timson, worked out of San Francisco by remote access ("quite unauthorized and quite unpaid-for," he states) with a Massachusetts firm to develop an elegant and highly effective file-sharing protocol that could tie all these programs together.

The Hard Hats had one crucial advantage: they were creating software either for their own use or for their colleagues.

"I spent the whole weekend in Minneapolis sitting right next to a pharmacist," Greg Kreis remembers. "I would program it and try various things, and I would say, 'How does it look?' and he would say, 'Okay, let me check it.' He would check it and try and he would give me some ideas, and we coded furiously all weekend long to try to get some ideas working and make it speed up."

The story of how VistA first came to be is inspirational on many levels. For one, it is a shining example of a time when committed, front-line employees won and their hidebound bosses were humiliated. Indeed, one of the ironies is that if the VA's leadership of the era hadn't been so moribund for so long, the revolution that led to VistA would probably never have happened.

A more "with it" leadership at the VA probably would have contracted out with some private software developer to provide its information systems. The most likely result would have been computer programs imposed on, instead of created by, doctors and other medical professionals, costing billions of dollars and written in a buggy proprietary code that ordinary users would have no ability to improve, modify, or integrate.

This is a familiar story in the world of American health care, where what few electronic medical information systems are in place often inspire resistance and fail

The hard hats represented a revolution from below. Then, in the 1990s came a revolution from above.

Dr. Ken Kizer took over the VA as the VA's undersecretary for health system under Clinton, and performed a wonder of reengineering that is also chronicled in my book.

Kizer was controversial. He closed a lot hospitals. He made a lot of VA employees and veterans groups mad. Many VA doctors quit. And eventually, Kizer himself was run out of Washington on a rail.

But Kizer left behind a VA system that veterans groups now applaud, even if they complain that it's too hard to get in, and that more and more health care experts say is the model of what 21st century health care should look like. Ken Kizer is the Jack Welsh of health care in my book, and he deserves to be on Fortune's cover. I think one day he will be.

What are the deeper lessons we can learn from the VA's transformation? What structural reasons explain why the Hard Hats and later Ken Kizer could engineer a revolution in health care that has yet to occur anywhere else in American medicine?

Above all I think the reason is this: Unique among health care providers, the VA has a near life-long relationship with its patients. It starts when they leave the service, and last until the end of life, including, for many, long-term nursing home care.

This means the VA, as an institution, has incentives for investing in prevention, evidence-based medicine and effective disease management that are weak or lacking in the rest of the health care system.

• If it doesn't learn how to manage the care of its diabetic patients for example, those patients go on to present the VA with expensive liabilities for dialysis or amputations.
• If it doesn't have effective smoking cessation programs, it incurs huge expenses for treating patients with cancer and heart disease.
• If it subjects patients to unnecessary or unproven surgery, which is a huge problem elsewhere in American medicine, it doesn't make money; it loses money.

These incentives for quality care are lacking elsewhere in the health care system. There, patients churn from one insurance company to the next, and from one provider network to the next. This means the patient is alone in having any financial interest in his or her long term well being.

The benefits of investing in electronic medical records, or in preventive medicine, for example, wind up going not to the health care system that makes the actual investment, but to a competitor. Because by the time the benefits are realized, the patient has moved on another plan.

In short, from the provider's point of view, there is little or no business case for quality.

This, more than any other factor, explains why market forces don't perform the magic in health care that they do elsewhere in the economy. And it explains why-against all expectation-- a sprawling, unionized federal bureaucracy turns out to have highest quality metrics of any U.S. health care system.

Historically, to be sure, the VA has faced many challenges, and still does. Unlike Medicare and Social Security, it has no trust fund to assure adequate and predictable funding. In building or closing hospitals it faces intense micromanagement from Congress. Its patients are older, poorer, and far more prone to addiction, traumatic injury, and chronic illness than the population as a whole. It is subject to intense, and not always helpful scrutiny from the press, veterans services organizations and other special interest groups. And while the VA is not a monopoly, many of its patients are too poor to be able to switch to competing providers.

Yet all these factors have not been enough to prevent the VA from emerging as the bright star of the American health care system, which ought to tell you something big. Particularly these days, when long-term chronic illness is the dominate threat to the health of the American population, a system of care under which the provider has a stake in the patient's long-term interest more than overcomes any other structural features that might cause problems, even including being a rule-bound, unionized, government bureaucracy.

What are we to make of this strange reality? Once you can get your head around it, many win-win opportunities become apparent.

For example, despite all the strains created by the wars in Afghanistan and Iraq, VA has enormous surplus capacity in many parts of the country, and will have more in the future as the World War II and Korean War vets pass on. This means many VA hospitals will have to be closed unless eligibility is expanded.

In the book, I lay out a plan for expanding the VA model of care-first to cover all veterans and then to all their family members. For every patient who switches from Medicare to the VA, the taxpayers will save about half to two-thirds, even as that patient receives higher quality care.

More ambitiously, I sketch out a plan for expanding the VA model of care to cover the wider population, including the 47 some million who are now uninsured.

Today, the uninsured receive their treatment mostly in the emergency rooms of assorted "St. Elsewheres." Across the country, thousands of public hospitals face bankruptcy and foreclosure because of the cost of the uncompensated care they provide to the unisured

For the past eight years, the New York State's hospitals as a group, for example have lost money. Under a terms of a special "hospital closure" commission, as many as a quarter will soon be gone.

Here's a better idea. Let's say to failing St. Elsewheres, if you will install the VA's electronic medical records system, and adhere to the VA's protocols of evidence based medicine-including its emphasis wellness, prevention, effective disease management and patient safety-we will guarantee you a pool of patients.

This pool will include people who have become subject to a mandate that all citizens carry health insurance, just as we now require all drivers to car insurance. Massachusetts has already passed such an individual mandate. California and Utah are also seriously debating the issue.

The enactment of such mandate creates a pool of patients that we can offer to assorted St. Elsewhere's who agree to adopt the VA protocals of care. Some will be able to pay a full premium; others will require at least some government subsidy. We can say to assorted St. Elsewhere's who join the network, if you treat these patients well, they are likely to stay with you for a long, long time and you'll make a fair profit.

Many will be young people who will be attracted by the low cost of joining this network. Others will be older, but will lack the means to jump easily to your higher priced competitors. None will have to switch to another health care plan just because their employer told them they must.

With these strokes, we create a nationwide network of medical centers and clinics that replicates the best features of the VA, including its unique ability to deliver low-cost, highly coordinated, quality health care over a patient's lifetime.

As with the VA no one would be compelled by law to join this network. We'd simply make it the default option for people mandated to obtain health insurance. As with the VA, its very existence, let alone the exceptional value it would offer to costumers, would increase competition over quality throughout the health care system. Just as the existence of the Postal Service improves the quality of service provided by FedEx and UPS, and vice versa, so would the existence of a large network of publicly provided health care system based on the VA model.

If conservative think about it long enough, they will realize that "socialized medicine" is hardly the phase to describe this plan. Nor is single payer." The plan expands the role of government in health care, and achieves universal access by government fiat, to be sure. But at the same time it increases competition between providers and preserves the right of consumers chose their own doctor so long as they are willing to pay a market determined price.

After seeing what the VA can do, I believe the health care crisis is solvable. We need only open our hearts.