Background

VBA’s disability compensation and pension claims processing is done in its  57 regional offices. Each state, except Wyoming, has at least 1 regional  office; California has 3, and New York, Pennsylvania, and Texas have 2  each. VBA also has regional offices in Washington, D.C.; San Juan, Puerto  Rico; and Manila, the Philippines. Also, VBA has 142 Benefits Delivery at  Discharge sites, where VBA staff process claims from newly separated  service members. In fiscal year 2004, VBA spent about $926 million to  administer its disability compensation and pension programs. This  included support for about 9,100 full-time equivalent (FTE) employees.
In fiscal year 2004, VBA received about 771,000 rating-related claims from  veterans and their families for disability benefits. This included about  195,000 original claims for compensation of service-connected disabilities  (injuries or diseases incurred or aggravated while on active military duty),  and about 438,000 reopened compensation claims. In addition, about  87,000 original and reopened claims were filed for pensions for wartime  veterans who have low incomes and are permanently and totally disabled  for reasons not service-connected, and their survivors. In addition, VBA  received about 29,000 original claims for dependency and indemnity  compensation from deceased veterans’ spouses, children, and parents and  to survivors of service members who died on active duty.
When a veteran or other claimant submits a claim for disability  compensation, pension, or dependency and indemnity compensation to a  VBA regional office, veterans service center staff process the claim in  accordance with VBA regulations, policies, procedures, and guidance. A  veterans service representative (VSR) in a predetermination team develops  the claim, that is, assists the claimant in obtaining sufficient evidence to  decide the claim. For rating-related claims, a decision is made in a rating  team by rating veterans service representatives (also known as rating  specialists). VSRs also perform a number of other duties, including  establishing claims files, authorizing payments to beneficiaries and  generating notification letters to claimants, conducting in-person and  telephone contacts with veterans and other claimants, and assisting in the  processing of appeals of claims decisions.
For a number of years, VBA’s regional offices have experienced problems  processing veterans’ disability compensation and pension claims. As we  reported in May 2000, VBA’s regional offices still experience problems  such as large backlogs of pending claims, lengthy processing times, and  questions about the consistency of its regional office decisions. VBA has  acknowledged the need to improve the timeliness and accuracy of claims  processing.

	VBA Has Used Limited Field Restructuring and Staff Redeployment to Improve Compensation and Pension Performance

Since 2001, VBA has made a number of changes to its field structure and  staff deployment in an effort to provide veterans with faster decisions and  reduce its rating-related claims inventory. In October 2001, VBA  established a Tiger Team, including experienced rating specialists, to  complete very old claims and claims from elderly veterans. Also, to  supplement regional offices’ claims processing capacity, VBA established  nine resource centers, where teams of rating specialists decided claims  developed at the regional offices of jurisdiction. Further, VBA has  consolidated specific types of work, including pension maintenance work  (such as annual means testing for VA pension beneficiaries) at three  regional offices, in an effort to free up staff at other offices to concentrate  on rating-related claims. VBA also consolidated in-service dependency and  indemnity compensation claims at its Philadelphia regional office; created  an Appeals Management Center in Washington, D.C., to process appeals  remanded from VA’s Board of Veterans Appeals; and is consolidating the  rating of Benefits Delivery at Discharge claims at the Salt Lake City and  Winston-Salem, North Carolina, regional offices. Further, VBA reduced the  jurisdictions of two regional offices with inadequate performance— Washington, D.C., and Newark—to reduce their claims workloads.
In fiscal year 2002, VBA established special units to supplement regional  offices’ claims processing capacity, as part of its effort to achieve rating- related decision timeliness improvement and reduce its pending claims  inventory. The Tiger Team at the Cleveland, Ohio, regional office was  tasked to process very old claims (pending 1 year or more), and claims by  elderly veterans (aged 70 and older). The Tiger Team was staffed with  experienced rating specialists and with veterans service representatives,  primarily from the Cleveland office’s staff, to perform whatever additional  development work was needed on the claims they receive and to make  rating decisions on these claims. To help expedite development work, VBA  obtained priority access for the Tiger Team to obtain evidence from VA  and other federal agencies. For example, VA and the National Archives  and Records Administration completed a memorandum of understanding  in October 2001 to expedite Tiger Team requests for service records at the  National Personnel Records Center (NPRC) in St. Louis, Missouri. Also,  VBA established procedures and time frames for expediting Tiger Team  requests for medical evidence and examinations from the Veterans Health  Administration. In fiscal year 2004, the Tiger Team completed over 14,000  decisions. Since its creation in fiscal year 2002, the average age of VBA’s  inventory of rating-related claims has declined from 182 days at the end of  September 2001 to about 118 days at the end of September 2004.
In addition, VBA supplemented regional offices’ capacity to make claims  decisions by establishing resource centers at nine regional offices. The  resource centers, staffed with rating specialists who were less experienced  than the Tiger Team’s, were to decide “ready to rate” claims. These are  claims where veterans service representatives at the regional offices of  jurisdiction had developed the evidence needed to support decisions on  the claims. In fiscal year 2004, the nine resource centers completed about  69,000 decisions. Since their creation, the inventory of rating-related  claims has declined from about 421,000 to about 321,000 claims at the end  of fiscal year 2004.
VBA has also consolidated some specific types of compensation and  pension work into specialized units. In January 2002, VBA consolidated  pension maintenance work at three regional offices—St. Paul, Minnesota;  Philadelphia; and Milwaukee, Wisconsin. This work involves, for VBA’s  means-tested pension programs, conducting periodic income and  eligibility verifications for beneficiaries. In fiscal year 2004, the Pension  Maintenance Centers completed over 200,000 pension maintenance  actions. In addition to consolidating pension maintenance, VBA plans to  consolidate all pension claims processing at the three Pension  Maintenance Centers.
VBA also consolidated in-service dependency and indemnity  compensation claims at the Philadelphia regional office. These claims are  filed by survivors of service members who die while in military service.  VBA consolidated these claims as part of its efforts to provide expedited  service to these survivors, including service members who died in  Operations Enduring Freedom and Iraqi Freedom.
VBA has also consolidated the processing of decisions remanded on  appeal by VA’s Board of Veterans Appeals. Effective February 2002, VA  issued a new regulation to streamline and expedite the appeals process.  The new regulation allowed the board to process remanded decisions  without having to send them back to VBA regional offices. To implement  this regulation, the board established a unit to process remanded appeals.  However, in May 2003, the U.S. Court of Appeals for the Federal Circuit  held that the board could not, except in certain statutorily authorized  exceptions, decide appeals in cases in which the board had developed  evidence. As a result, VBA regained responsibility for evidence  development and adjudication work on remands, and chose to establish a  centralized Appeals Management Center at its Washington regional office.  According to VBA officials, remand processing was consolidated because  a consolidated unit, focusing only on remands, could process them faster  and more consistently, and with better accountability, than the individual  regional offices. VBA’s Washington regional office was chosen because of  its proximity to the board’s headquarters. The Appeals Management  Center was established in July 2003, and was, according to VBA officials,  fully operational by February 2004. According to a VBA official, it was  staffed largely through transfers from regional offices and with staff from  the board’s former remand processing unit.
VBA continues to consolidate specific types of claims processing work.  VBA is in the process of consolidating decision making on Benefits  Delivery at Discharge claims, which are generally original claims for  disability compensation, at the Salt Lake City and Winston-Salem regional  offices. VBA established this program to expedite decisions on disability  compensation claims from newly separated service members. A service  member can file a BDD claim up to 180 days before separation; VBA staff  performs some development work on the claim before separation. VBA  actually decides the claim after the service member is separated, and the  official discharge form (DD Form 214) is received. Under the  consolidation, regional offices and BDD sites will accept and develop  claims, but will send the developed claims to Salt Lake City or Winston- Salem for decision. VBA expects this consolidation to help improve  decision efficiency and consistency. Consolidation began in December  2004 and is expected to be completed by March 2006. According to VBA  officials, claims processing performance was one reason for selecting  these two regional offices. In the case of Salt Lake City, the availability of  space and the ability to recruit new claims processing staff were also  factors. The Salt Lake City office is in a relatively new building on the  campus of the Salt Lake City VA Medical Center.
VBA has also made changes in the jurisdictions of some regional offices.  The Washington regional office has lost most of its jurisdiction. Claims  from veterans residing in Washington’s Maryland and Virginia suburbs  were transferred to the Baltimore, Maryland, and Roanoke, Virginia,  regional offices, respectively. The Washington regional office’s staff  declined by about 37 percent between fiscal year 2001 and 2004. Also,  jurisdiction over claims from veterans residing outside the United States  was transferred from Washington to the Pittsburgh, Pennsylvania, regional  office. Meanwhile, the Newark regional office lost jurisdiction over claims  from veterans in seven southern New Jersey counties to the Philadelphia  regional office. The Newark regional office lost about 16 percent of its  staff between fiscal year 2001 and 2004. These shifts in jurisdiction were,  according to VBA officials, in response to poor performance by the  Washington and Newark regional offices, such as inadequate timeliness  and accuracy.

	VBA Continues to Face Challenges as It Realigns Its Compensation and Pension Field Structure

While VBA has done limited field restructuring and claims processing staff  reallocation, it has not changed the basic field structure for processing  claims for disability compensation and pension benefits and still faces  challenges in improving performance. VBA continues to process claims at  57 regional offices, which experience large performance variations and  questions about the consistency of their decisions. In addition, we have  reported that in order to improve long-term performance in the face of  increased workloads and without significant staffing increases, VBA needs  to improve its productivity. Several studies by VA and outside groups have  suggested that VBA could improve claims processing efficiency and  consistency by consolidating claims processing into fewer offices as well  as other strategic changes. In taking on these broader changes, however,  VBA would need to consider an array of human capital and real property  challenges, such as optimizing its ability to recruit and retain staff and  minimizing the cost of office space.
VBA continues to struggle to improve nationwide performance, and  significant performance differences exist among its regional offices. For  example, in fiscal year 2004 the average time to complete rating-related  claims VBA-wide was 166 days, far from VBA’s strategic goal of 125 days.  Average completion times ranged from 99 days at the Salt Lake City  regional office to 237 days at the Honolulu, Hawaii, regional office. To help  struggling offices reduce their inventories of pending claims, VBA has  been brokering (that is, having a regional office send a claim to another  office to be decided) tens of thousands of rating-related claims. In fiscal  year 2004, regional offices brokered out about 92,000 claims—about 90  percent to the Tiger Team and resource centers. This action enabled some  individual offices reduce the size and age of their pending inventories. For  example, the Providence, Rhode Island regional office brokered out about  two-thirds of its rating-related decisions in fiscal year 2004. This helped  Providence to reduce its rating-related inventory by almost 30 percent,  while the nationwide inventory of pending claims grew by more than 25  percent. Also, Providence was able to reduce its inventory’s average age  by about 7 weeks, while the nationwide inventory’s average age increased  by about 1 week.
VBA also experiences problems ensuring the accuracy and consistency of  its rating decisions. As measured by VBA’s Systematic Technical Accuracy  Review (STAR) data for fiscal year 2004, the accuracy of regional office  decisions varied from a low of 76 percent at its Boston regional office to 96  percent at its Fort Harrison regional office. Moreover, as we recently  testified and reported, VA still needs to develop a plan for assessing  variations in disability claims decisions and whether they are within the  bounds of reasonableness. While some variation is inherent in the claims  decision-making process, we have reported in the past on wide variations  in the state-to-state average compensation payments per disabled veteran,  and more recently, VA’s inspector general has found that inconsistency  remains a problem.
In addition to the challenges VBA faces in improving claims processing  timeliness and consistency, VBA also faces productivity challenges. In  November 2004, we reported that to achieve its claims processing  performance goals in the face of increasing workloads and decreased  staffing levels, VBA would have to rely on productivity improvements.  VBA’s fiscal year 2006 budget justification provided information on actual  and planned productivity, in terms of rating-related claims decided per  direct full-time equivalent employee, and identified a number of initiatives  that could improve claims processing performance. These initiatives  included technology initiatives such as Virtual VA, involving the creation  of electronic claims folders; consolidation of the processing of Benefits  Delivery at Discharge claims at 2 regional offices; and collaboration with  the Department of Defense to improve VBA’s ability to obtain evidence,  such as evidence of in-service stressors for veterans claiming service- connected post-traumatic stress disorder. VBA’s fiscal year 2006 budget  justification assumed that it would increase the number of rating-related  claims completed per FTE from 94 in fiscal year 2004 to 109 in fiscal year  2005 and 2006, a 16 percent increase. For fiscal year 2005, this level of  productivity translates into VBA completing almost 826,000 rating-related  decisions. VBA completed about 763,000 decisions in fiscal year 2005. It is  not clear whether these measures will enable VBA to achieve its planned  improvements in productivity.
Organizations studying these challenges have suggested that they could be  addressed by more strategic, comprehensive restructuring than has been  done to date. For example, in a 1997 report, the National Academy of  Public Administration found that VA could achieve significant savings in  administrative overhead costs by closing a large number of regional  offices. Similarly, in its January 1999 report, the Congressional  Commission on Servicemembers and Veterans Transition Assistance  found that some regional offices are so small that their disproportionately  large supervisory overhead may unnecessarily consume personnel  resources. The commission highlighted a need to consolidate disability  claims processing into fewer locations. VBA has consolidated its  education assistance and housing loan guaranty programs into fewer than  10 locations, and the commission encouraged VBA to take similar action in  the disability programs.
In its own 1995 study of field restructuring, VBA enumerated several  potential benefits of consolidating processing into fewer than 57 regional  offices. These included allowing VBA to assign the most experienced and  productive adjudication officers and directors to the consolidated offices;  facilitating increased specialization and as-needed expert consultation in  deciding complex cases; improving the completeness of claims  development, the accuracy and consistency of rating decisions, and the  clarity of decision explanations; improving overall adjudicative quality by  increasing the pool of experience and expertise in critical technical areas;  and facilitating consistency in decision making through fewer  consolidated claims processing centers.
Consolidating compensation and pension claims processing into fewer  offices would not necessarily mean that regional offices would be closed.  As the VA Claims Processing Task Force suggested, regional offices that  lose claims processing functions could still provide public contact and  outreach services. Also, VBA officials suggested that these offices could  continue to provide vocational rehabilitation and employment services.
No matter which alternative VBA chooses to pursue in making further  changes to its field office structure, it will need to address an array of  human capital and real property issues. These include, for example, (1)  assessing what mix of incentives—such as buyouts, early retirements, or  retention bonuses—would be needed to accommodate downsizing at  some offices and workload increases at others, (2) what additional  training would be needed to ensure staff could take on new  responsibilities, and (3) how office space could be disposed of or acquired  as needed to accommodate workload shifts. At the same time, given  potential resistance to changes in field structure, VA would need to find  effective ways of communicating its plans while enhancing staff morale  and productivity.

	Conclusions

VBA has taken limited actions to realign its field structure and redeploy  staff resources as part of its effort to improve overall claims processing  performance. While targeted at specific types of work and specific  regional offices, these actions have not been in the context of a  comprehensive restructuring strategy. Rather, VBA has made piecemeal  changes, many in the context of short-term performance improvements,  particularly in claims processing efficiency. Unless more comprehensive  and strategic changes are made to its field structure, VBA is likely to  continue to miss opportunities to substantially improve productivity,  accuracy, and consistency in its disability claims processing, especially in  the face of future workload increases.

	Recommendation for Executive Action

To help ensure more timely, accurate, and consistent decisions in a cost- effective manner, we recommend that the Secretary of Veterans Affairs  direct the Under Secretary for Benefits to undertake a comprehensive  review of VBA’s field structure for processing disability compensation and  pension claims. This review would address staff deployment,  opportunities for consolidating disability compensation and pension  claims processing, and human capital and real property issues.

	Agency Comments and Our Response

In its written comments on a draft of this report (see app. II), VA agreed  with our conclusions and concurred fundamentally with our  recommendation that it undertake a comprehensive review of VBA’s field  structure for processing disability compensation and pension claims.  VA  stated that it will establish a task force to thoroughly explore potential  areas for further consolidation.  VA also noted that field restructuring is a  complex process that involves, among other things, obtaining input and  support from service organizations, members of Congress, and labor  partners.  We agree that field restructuring is a complex process but urge  VA to establish its task force expeditiously to ensure that VA can achieve  the potential benefits of field restructuring as soon as possible.  As VA  noted in its comments, these could include improved proficiency, greater  accuracy, and consistency in operations.
We will send copies of this report to the Secretary of Veterans Affairs,  appropriate congressional committees, and other interested parties. The  report will also be available at GAO’s Web site at http://www.gao.gov.
If you or your staff have any questions regarding this report, please call me  at (202) 512-7215. Carl Barden, Irene Chu, Martin Scire, Greg Whitney,  Vanessa Taylor, and Walter Vance also made key contributions to this  report.

Appendix I: Scope and Methodology

To develop the information for this report, we reviewed prior studies on  Veterans Benefits Administration (VBA) claims processing, including the  1995 report of VBA’s Field Restructuring Task Force, the National  Academy of Public Administration’s 1997 report on management of  compensation and pension benefits claim processes for veterans, the 1999  report of the Congressional Commission on Servicemembers and Veterans  Transition Assistance, and the 2001 Department of Veterans Affairs (VA)  Claims Processing Task Force report. We reviewed VBA’s model for  allocating staff to its regional offices and discussed the allocation model  with VBA officials. We also analyzed VBA staffing data from fiscal years  2001 through 2004 for VBA’s regional offices. To determine the range in  workload and performance of VBA’s regional offices, we reviewed VBA  workload, timeliness, and accuracy data.
To discuss VBA initiatives and the impacts of changes in staffing levels, we  visited the VBA regional offices in Washington, D.C.; Boston,  Massachusetts; Newark, New Jersey; Philadelphia, Pennsylvania; and Salt  Lake City, Utah. Also, while visiting the Salt Lake City regional office, we  interviewed by videoconference officials of the Anchorage, Alaska, and  Fort Harrison, Montana, regional offices—which are operated by the Salt  Lake City regional office. We selected the Philadelphia and Salt Lake City  offices because they have added, or are in the process of adding, workload  through consolidations. The Philadelphia regional office hosts one of the  three Pension Maintenance Centers; processes in-service dependency and  indemnity claims; and has taken jurisdiction for southern New Jersey from  the Newark regional office. The Salt Lake City regional office was in the  process of expanding its staffing as part of VBA’s plan to consolidate  Benefits Delivery at Discharge (BDD) claims decision making, and in fiscal  year 2004, it made almost 90 percent of the Anchorage regional office’s  rating-related decisions. The Boston, Newark, and Washington regional  offices were chosen because they had lost a large percentage of their staff  since fiscal year 2001. Also, the Newark and Washington offices had lost  jurisdiction to other regional offices in recent years. Finally, we visited the  Washington office because it is the site of VBA’s Appeals Management  Center.
We assessed the reliability of VBA’s timeliness and workload data and  found that the data were sufficiently reliable for the purposes of this  report. For data at the VBA-wide level we relied on the assessment we  performed for our November 2004 report on VBA’s fiscal year 2005 budget  request. For data on workload and timeliness at the regional office level,  we used data from VBA’s Distribution of Operational Resources (DOOR)  reports. We were unable to directly assess the reliability of the data  contained in these reports because VBA officials responsible for putting  together the DOOR reports do not receive claims-level data. For this  reason, to corroborate the data in the DOOR reports, we obtained claims- level data that had been archived by VBA’s Office of Performance Analysis  and Integrity (PA&I). We utilized PA&I’s methodology and calculated  workload and timeliness numbers for September 2004 with minimal  differences from those contained in the DOOR reports. This gave us  reasonable assurance that the DOOR numbers accurately reflect VBA’s  workload and timeliness.
We assessed the reliability of VBA’s claims brokering data and found the  data sufficiently reliable for the purposes of this report. We discussed  VBA’s brokering data with VBA officials and reviewed guidance on  reporting brokering data. According to VBA, regional offices work with  VBA’s area offices to ensure that brokered cases are properly counted. The  area offices, in turn, provide the data to VBA headquarters. These data are  updated monthly. According to VBA, the Office of Performance Analysis  and Integrity reviews and validates brokering data.
We also assessed the reliability of VBA’s fiscal year 2004 benefit  entitlement accuracy data and found that the data were sufficiently  reliable to show the range in accuracy between VBA’s most and least  accurate offices, but not to make further distinctions in accuracy among  regional offices. We interviewed officials responsible for VBA’s Systematic  Technical Accuracy Review (STAR) program and discussed their  procedures for requesting cases for review. We obtained data by regional  office on the number of cases requested and reviewed. We found that  VBA’s STAR unit had requested, but never received or reviewed, hundreds  of sampled cases from its regional offices. This could have affected  regional office accuracy scores for fiscal year 2004. For example, the  Washington regional office’s score was reported as 77 percent. However,  because a large number of cases were never received by the STAR unit,  Washington’s accuracy score could have been as high as 87 percent or as  low as 42 percent. According to VBA officials, VBA is now tracking cases  that it requests as part of its STAR accuracy review sample and charges  offices with errors if cases are not sent in for review.

Appendix II: Comments from the Department of Veterans Affairs

Summary:
Why GAO Did This Study

The Chairman, former Chairman, and Ranking Minority Member, Senate Committee on Veterans' Affairs asked GAO to review the Veterans Benefits Administration's (VBA) efforts to realign its compensation and pension claims processing field structure to improve performance. This report (1) identifies the actions VBA has taken to realign its compensation and pension claims processing field structure to improve performance, and (2) examines whether further changes to its field structure could improve performance.

What GAO Found

Since 2001, VBA has made a number of changes to its field structure and staff deployment in an effort to improve compensation and pension claims processing performance, in particular, to improve the timeliness of claims decisions and reduce inventories. VBA created a Tiger Team to complete very old claims, and claims from elderly veterans; created nine resource centers to decide claims developed at the regional offices of jurisdiction; consolidated pension maintenance work at three regional offices to free up staff at other offices to concentrate on other work; consolidated in-service dependency and indemnity compensation claims at one office; consolidated processing of appeals remanded from VA's Board of Veterans Appeals at one office; and is consolidating decision making on Benefits Delivery at Discharge (BDD) claims at two regional offices. While VBA has taken these steps to improve its claims processing performance through targeted realignments of its field structure and workload, VBA has not changed the basic field structure for processing claims for disability compensation and pension benefits, and it still faces performance challenges. VBA continues to process these claims at 57 regional offices, where large performance variations and questions about decision consistency persist. For example, in fiscal year 2004 the average time to decide a rating-related claim ranged from 99 days at one office to 237 days at another, and accuracy varied across regional offices. Furthermore, productivity improvements are necessary to maintain performance in the face of greater workloads and relatively constant staffing resources. VBA and others who have studied claims processing have suggested that consolidating claims processing into fewer regional offices could help improve claims processing efficiency, save overhead costs, and improve decision accuracy and consistency.