VA HEALTH CARE

Methodology for 

Estimating and 

Process for Tracking 

Savings Need 

Improvement

Report to Congressional Requesters

February 2012

GAO-12-305

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-305, a report to 

congressional requesters

February 2012

VA HEALTH CARE

Methodology for Estimating and Process for 

Tracking Savings Need Improvement

Why GAO Did This Study

The President’s budget request for the 

Department of Veterans Affairs (VA) 

for fiscal years 2012 and 2013 included 

a total of $2.5 billion dollars in savings 

from six VA-wide operational 

improvements. If VA’s estimated 

savings for fiscal years 2012 and 2013 

do not come to fruition and VA 

receives appropriations in the amount 

requested by the President, VA may 

have to make difficult trade-offs to 

provide health care services with the 

resources provided. 

GAO assessed (1) the basis for VA’s 

estimated savings from each 

improvement and (2) VA’s process for 

tracking its actual savings from each 

improvement. GAO obtained 

documentation that described the 

methodology VA used to develop its 

savings estimates and the process it 

used to track those savings. By 

analyzing the documentation and 

interviewing VA officials, GAO 

assessed whether VA’s savings 

estimates were reasonable and 

whether VA’s process for tracking 

savings would allow it to accurately 

determine actual savings.

What GAO Recommends

GAO recommends that VA develop 

(1) a sound methodology for estimating 

savings from new operational 

improvements and (2) a detailed 

process for tracking actual savings 

resulting from those improvements for 

which GAO identified concerns. VA 

concurred with GAO’s findings and 

recommendations on all but two 

initiatives within the real property 

improvement, stating that the savings 

from these initiatives were not 

overstated. GAO believes its findings 

and recommendations remain valid.

What GAO Found

GAO found that VA’s estimated savings from two of its six operational 

improvements lacked analytic support and estimated savings from another were 

flawed. Without a sound methodology for estimating these savings, VA runs the 

risk of not achieving them. Furthermore, due in part to flaws GAO identified with 

another operational improvement—reducing acquisition costs—VA decided to 

revise it. Because this effort was still in progress, GAO could not evaluate VA’s 

estimated savings and process for tracking actual savings from this operational 

improvement. In addition, GAO found that VA lacks a process for tracking actual 

savings for one operational improvement and its processes may overstate results 

for two others. Without an accurate process for tracking these savings, VA will be 

unable to determine whether it has realized the estimated savings reflected in the 

President’s budget request for fiscal years 2012 and 2013. See table 1 for GAO’s 

assessment of VA’s methodology for estimating savings and VA’s process for 

tracking actual savings, for five of six improvements.

Table 1: Summary of GAO’s Findings

Operational improvement

Assessment of VA’s savings 

estimation methodology

Assessment of VA’s process 

for tracking actual savings

Reducing costs for medical and 

administrative support activities

VA lacked analytic support for 

its savings estimate.

VA’s process for tracking actual 

savings may overstate such 

savings.

Realigning VA clinical staff and 

resources by using less costly 

health care providers

VA lacked analytic support for 

an assumption in its savings 

estimate. 

VA lacks a process for tracking 

actual savings at this time.

Reducing costs associated with 

operating and leasing VA real 

property

VA’s estimated savings for 

three of the six initiatives within 

this operational improvement 

may be overstated.

VA’s process for tracking actual 

savings from three of the six 

initiatives within this operational 

improvement may overstate 

such savings.

Reducing provider 

reimbursement rates for certain 

fee-based care services

VA’s methodology for 

estimating savings appeared to 

be reasonable.

VA’s process for tracking actual 

savings appears to be 

reasonable.

Additionally reducing fee-based 

care costs

While VA’s methodology for 

estimating savings appeared to 

be reasonable for six of the 

seven initiatives within this 

operational improvement, GAO 

was unable to assess VA’s 

ability to achieve its estimated 

savings from the remaining 

initiative.

VA’s process for tracking actual 

savings appears to be 

reasonable.

Source: GAO analysis of VA data.

View GAO-12-305. For more information, 

contact Randall B. Williamson at (202) 512-

7114 or williamsonr@gao.gov.
Page i GAO-12-305 Department of Veterans Affairs Operational Improvements

Letter 1 

Background 4

VA’s Estimated Savings from Two of Its Six Operational 

Improvements Lacked Analytic Support and Estimated Savings 

from Another Were Flawed 9

VA’s Process for Tracking Actual Savings from the Six Operational 

Improvements Is Lacking for One and Potentially Overstates 

Results for Two Others 13

Conclusions 15

Recommendations for Executive Action 16

Agency Comments and Our Evaluation 17

Appendix I VA’s Methodology for Estimating and Process for Tracking 

Savings from Its Six Operational Improvements 20

Appendix II Comments from the Department of Veterans Affairs 25

Appendix III GAO Contact and Staff Acknowledgments 30

Tables

Table 1: Description of VA’s Methodology for Estimating Savings 

from Each of VA’s Six Operational Improvements in the 

President’s Budget Request for Fiscal Years 2012 and 2013 20

Table 2: Description of VA’s Process for Tracking Actual Savings 

from Each of VA’s Six Operational Improvements in the 

President’s Budget Request for Fiscal Years 2012 and 2013 23

Contents
Page ii GAO-12-305 Department of Veterans Affairs Operational Improvements

Abbreviations

VA Department of Veterans Affairs

VAMC Veterans Affairs medical center

VHA Veterans Health Administration

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Page 1 GAO-12-305 Department of Veterans Affairs Operational Improvements

United States Government Accountability Office

Washington, DC 20548

February 27, 2012

The Honorable Patty Murray

Chairman

Committee on Veterans’ Affairs

United States Senate

The Honorable Jeff Miller

Chairman

Committee on Veterans’ Affairs

House of Representatives

The Honorable Michael H. Michaud

Ranking Member

Subcommittee on Health

Committee on Veterans’ Affairs

House of Representatives

The Department of Veterans Affairs (VA) operates one of the largest 

health care delivery systems in the nation. In fiscal year 2010, VA 

provided a range of health care services, including primary care, inpatient 

and outpatient surgery, and mental health services, to 6 million eligible 

veterans with $48.2 billion in federal funding. The amount of funding VA 

receives to provide its health care services is determined by Congress in 

the annual appropriations process. In preparation for this appropriations 

process, VA annually must develop a 2-year budget estimate of the 

resources needed to provide health care services, including the costs for 

the administration and operation of VA facilities. Developing a budget 

estimate is the first step in a complex, multistep budget formulation 

process, which culminates in the inclusion of a request for VA in the 

President’s annual budget submission to Congress.

In an effort to be more efficient and—according to VA—achieve savings 

without compromising the quality of and access to health care services,

the President’s budget request for fiscal years 2012 and 20131

 

1

The President’s budget request was submitted to Congress in February 2011. 

incorporated a total of $2.5 billion in savings from six VA-wide operational 

 
 

Page 2 GAO-12-305 Department of Veterans Affairs Operational Improvements

improvements.2 These six operational improvements cover a broad 

spectrum of potential cost-saving areas, such as reducing costs for 

medical and administrative support activities and reducing costs of 

operating and leasing VA real property. In addition to these six 

operational improvements, VA is in the process of implementing other 

savings initiatives—not outlined in the President’s budget request for 

fiscal years 2012 and 2013—that may result in some additional savings in 

these years.3

Based on experiences with past budget submissions where VA did not 

achieve anticipated savings associated with its proposed initiatives to 

promote efficiency, members of Congress have expressed renewed 

concern about VA’s estimated savings supporting the President’s budget 

request for fiscal years 2012 and 2013. In 2006, for example, we reported 

on planned management efficiency initiatives by VA and found, at that 

time, that the department lacked a methodology for determining its 

estimated savings and also lacked the ability to accurately track the 

savings resulting from these initiatives.4 In part because VA did not 

achieve its targeted savings from proposed management efficiency 

measures at that time, the President had to ask Congress for a 

supplemental appropriation to meet VA’s funding needs for that year. If 

the savings anticipated under VA operational improvements incorporated 

in the President’s budget request for fiscal years 2012 and 2013 do not 

materialize and VA receives appropriations in the amounts requested by 

the President, VA may have to make difficult trade-offs to provide health 

care services with the resources provided.5

 

2

VA estimated that it would realize savings from these operational improvements of more 

than $1.2 billion in fiscal year 2012 and approximately $1.3 billion in fiscal year 2013. GAO 

recently reported on VA’s plans to improve efficiencies through these operational 

improvements. See GAO, Veterans Health Care Budget Estimate: Changes Were Made in 

Developing the President’s Budget Request for Fiscal Years 2012 and 2013,

You asked us to evaluate 

GAO-11-622

(Washington, D.C.: June 14, 2011). 

3

GAO also recently reported on other departmentwide efforts that VA is implementing to 

improve efficiency. See GAO, Streamlining Government: Key Practices from Select 

Efficiency Initiatives Should be Shared Governmentwide, GAO-11-908 (Washington, D.C.: 

Sept. 30, 2011). 

4

See GAO, Veterans Affairs: Limited Support for Reported Health Care Management 

Efficiency Savings, GAO-06-359R (Washington, D.C.: Feb. 1, 2006). 

5

These concerns were included in a letter to VA Secretary Eric Shinseki from Senate 

Veterans’ Affairs Committee Chairman Patty Murray and Ranking Member Richard Burr 

on September 15, 2011.
 

Page 3 GAO-12-305 Department of Veterans Affairs Operational Improvements

VA’s operational improvements included in the President’s budget 

request for fiscal years 2012 and 2013. Specifically, in this report, we 

assess (1) the basis for VA’s estimated savings from each of the six 

operational improvements in the President’s budget request for fiscal 

years 2012 and 2013 and (2) VA’s process for tracking its actual savings 

from each of the six operational improvements.

To assess the basis of VA’s estimated savings from each of the six 

operational improvements in the President’s budget request for fiscal 

years 2012 and 2013, we examined documents—provided by VA 

headquarters officials—that describe VA’s savings estimates and 

interviewed VA headquarters officials about how they developed these 

estimates. Our assessment included examining the extent to which VA’s 

savings estimates were documented and the assumptions used to 

develop these estimates were supported and appeared to be reasonable. 

Developing savings estimates that are documented and include 

assumptions that are supported helps ensure that the estimation 

methodology is applied consistently over time, and that estimates can be 

reviewed for accuracy by agency officials and independent evaluators. 

Furthermore, we examined whether VA’s timeline for implementing the six 

operational improvements appeared to be achievable, based on our 

review of VA’s plans for implementing them. Although we asked VA 

headquarters officials about the extent to which some of VA’s operational 

improvements would impact the quality of, and access to, VA health care 

services, we did not assess their impact on quality and access because 

many of the operational improvements had not been fully implemented at 

the time of our review.

To assess VA’s process for tracking the actual savings it is achieving 

from each of the six operational improvements, we examined documents 

that describe VA’s processes for tracking these savings. We also 

interviewed VA headquarters officials and officials from three VA 

networks,6

 

6

Each of VA’s 21 regional networks is responsible for managing and overseeing several 

VA medical centers (VAMC). VA’s 152 VAMCs, located throughout the United States, 

offer a variety of outpatient, residential, and inpatient services.

who we judgmentally selected, because of diversity in the size 

of the veteran populations they serve, the size of their budgets, and their 
 

Page 4 GAO-12-305 Department of Veterans Affairs Operational Improvements

locations.7

We conducted this performance audit from July 2011 to February 2012 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

Our assessment included determining the extent to which VA 

has developed a written process for tracking actual savings from each 

operational improvement, and determining whether VA’s processes allow 

the department to accurately determine the savings from each operational 

improvement. We were unable to assess the accuracy of the actual 

savings reported by VA for each operational improvement because 

complete data on VA’s actual savings will not be available until the 

beginning of fiscal year 2013.

VA provides health care services to various veteran populations—

including an aging veteran population and a growing number of younger 

veterans returning from military operations in Afghanistan and Iraq. VA 

provides these services at 152 VA medical centers (VAMC) and other 

facilities that are organized into 21 regional VA networks. Each network is 

responsible for managing and overseeing the VAMCs within it.

Each year, Congress provides funding for VA health care through the 

appropriations process. Specifically, Congress provides appropriations for 

the coming fiscal year that begins October 1 of that year, as well as an 

advance appropriation for the following year. In preparation for this 

process, each year VA must develop a budget estimate for the next 

2 years to determine the resources needed for its health care services, 

including the cost for the administration and operation of VA medical 

facilities. In February 2011, the President submitted a budget request to 

 

7

The three networks we visited are the Sunshine Healthcare Network in St. Petersburg, 

Fla.; the Rocky Mountain Network in Glendale, Colo.; and the New York/New Jersey 

Veterans Healthcare Network in Bronx, N.Y.

Background 
 

Page 5 GAO-12-305 Department of Veterans Affairs Operational Improvements

Congress for fiscal years 2012 and 2013 that was informed by VA’s 

estimates.8

The President’s budget request for fiscal years 2012 and 2013 

incorporated six operational improvements that were intended to improve 

efficiency within the VA health care system. According to VA, these 

operational improvements were intended to achieve savings without 

compromising the quality of, and access to, VA health care services. VA 

estimated that it would realize savings from these operational 

improvements of more than $1.2 billion in fiscal year 2012 and 

approximately $1.3 billion in fiscal year 2013.9 In total, these savings were 

designed to pay for the majority of the $2.8 billion in expected costs for 

initiatives included in the fiscal year 2012 and 2013 budget requests 

associated with opening new health care facilities and programs for 

homeless veterans, among other initiatives.10

1. Reducing costs for medical and administrative support activities. VA 

intends to employ resources more efficiently in various medical and 

administrative support activities at each medical center and in other 

VA locations. VA estimated savings of $150 million a year in fiscal 

years 2012 and 2013 for this operational improvement.

More specifically, the six 

operational improvements are:

2. Realigning VA clinical staff and resources by using less costly health 

care providers. VA intends to use selected nonphysician providers, 

such as nurse practitioners, instead of certain types of physicians; use 

 

8

In 2009, the Veterans Health Care Budget Reform and Transparency Act was enacted 

and provided that VA’s annual appropriations for health care include advance 

appropriations that become available 1 fiscal year after the fiscal year for which the 

appropriations act was enacted. The act provided for advance appropriations for VA’s 

Medical Services, Medical Support and Compliance, and Medical Facilities appropriations 

accounts. Pub. L. No. 111-81, § 3, 123 Stat. 2137, 2137–38 (2009), codified at 38 U.S.C. 

§ 117.

9

VA officials told us that in addition to these six operational improvements, VA is in the 

process of implementing other measures—not specifically referenced in the President’s 

budget request for fiscal years 2012 and 2013—that involve using financial data to identify 

VAMCs that are higher or lower in terms of staffing costs and costs for certain services 

and taking steps to address those outliers. VA expects these measures to result in some 

additional savings over the course of fiscal years 2012 and 2013. 

10Department of Veterans Affairs, Volume II Medical Programs and Information 

Technology Programs Congressional Submission Fiscal Year 2012 Funding and Fiscal 

Year 2013 Advance Appropriations Request (Washington, D.C.).
 

Page 6 GAO-12-305 Department of Veterans Affairs Operational Improvements

selected licensed practical nurses instead of certain types of 

registered nurses; and according to VA, more appropriately align 

required clinical skills with patient care needs. VA estimated savings 

of $151 million a year in fiscal years 2012 and 2013 from clinical staff 

and resource realignment.

3. Reducing costs associated with operating and leasing VA real 

property. This operational improvement comprises six initiatives, 

which VA estimated will generate savings of about $66 million a year 

in fiscal years 2012 and 2013.11,12 These are:

• Repurposing vacant and underutilized buildings: VA intends to 

lease vacant and underutilized buildings that it owns to entities 

that provide housing to homeless veterans, among other things. 

VA estimated that this initiative will result in more than $5 million in 

savings per year in the form of decreased operating costs for 

buildings the department no longer uses and rent payments from 

entities that lease these buildings.

• Demolishing or abandoning vacant or underutilized VA buildings: 

VA estimated that this initiative will result in about $3 million in 

savings in fiscal year 2012. These savings result from decreased 

operating costs for buildings the department no longer uses.

• Decreasing energy costs: VA intends to decrease energy costs by 

renegotiating electricity and natural gas contracts at a lower rate, 

improving energy efficiency, and increasing the use of renewable 

energy at VAMCs. VA estimated that the reduction in energy costs 

will result in about $42 million in savings in fiscal year 2012.

• Improving nonrecurring maintenance contracting: VA is reducing 

its reliance on the Army Corps of Engineers for conducting 

nonrecurring maintenance, thereby reducing the amount of fees it 

pays to the Army Corps of Engineers. VA estimated that this will 

result in savings of over $8 million in fiscal year 2012.

 

11In June 2010, all federal agencies were directed by the President to find ways to reduce 

real property costs as part of the broader President’s Accountable Government Initiative, 

intended to reduce federal spending.

12At the time of our review, VA had not determined how it will generate the $66 million in 

savings for fiscal year 2013.
 

Page 7 GAO-12-305 Department of Veterans Affairs Operational Improvements

• Reducing leased space: VA is moving operations previously 

located or planned for leased spaced into space owned by VA. VA 

estimated that this will result in savings of about $6 million in fiscal 

year 2012.

• Additionally reducing leased space by increasing the number of 

employees who telework: In fiscal year 2012, VA expects to 

increase the number of employees who telework frequently—that 

is, greater than 60 percent of the time. As telework increases, VA 

plans to reduce the amount of office space it leases.13

4. Reducing acquisition costs. VA expects to make changes to its 

purchasing and contracting strategies for which VA estimated savings 

of $355 million a year in fiscal years 2012 and 2013. The budget 

estimate included the following seven initiatives for the reducing 

acquisition costs operational improvement: consolidating contracting 

at the national and network level; increasing competition of contracts; 

reassigning work currently contracted to the U.S. Army Corps of 

Engineers to work done internally by VA staff; reverse auctioning—

selling back—utilities, such as electricity or natural gas, to utility 

providers; converting contracted services to services within VA; 

reutilizing excess equipment to avoid costs of purchasing new 

equipment; and more efficiently managing inventory by using medical 

and surgical vendors rather than VA for inventory management.

5. Reducing provider reimbursement rates for certain fee-based care 

services.

14 VA proposed to reimburse fee-based care providers at 

lower-priced Medicare rates instead of using current higher-priced 

community rates for clinical laboratory services and other care. VA 

estimated savings of $315 million in fiscal year 2012 and $362 million 

in fiscal year 2013 as a result of this rate change.

 

13VA estimated that this initiative will result in almost $14 million in savings per year in 

fiscal years 2012 and 2013. However, VA officials told us that only a small portion of these 

estimated savings will be counted towards the $66 million annual target for the real 

property operational improvement, because this initiative primarily applies to the Veterans 

Benefit Administration.

14Fee-based care refers to care delivered by non-VA providers who will accept VA 

payment.
 

Page 8 GAO-12-305 Department of Veterans Affairs Operational Improvements

6. Additionally reducing fee-based care costs. This operational 

improvement comprises seven initiatives, which VA estimated will 

generate savings of about $200 million a year in fiscal years 2012 and 

2013.15 These are:

• Reducing bed days of care: This initiative is intended to reduce 

the number of days veterans spend in non-VA hospitals when 

space is available in VAMCs. VA estimated this will result in over 

$26 million in savings in fiscal year 2012.

• Reducing fraud, waste, and abuse: This initiative is intended to 

identify instances of fraud, waste, and abuse associated with feebased care claims and recouping associated spending. VA 

estimated this will result in $25 million in savings in fiscal year 

2012.

• Increasing revenue collection from veterans’ health insurance 

plans: VA is authorized to submit claims for fee-based care to 

veterans’ health insurance plans for non-service-connected 

conditions. By being more diligent in submitting claims to these 

insurance plans, VA estimated that it will achieve almost $9 million 

in savings in fiscal year 2012.

• Avoiding interest payments: This initiative is intended to reduce 

the amount of interest VA pays to fee-based care providers. VA 

estimated this will result in almost $30 thousand in savings in 

fiscal year 2012.

• Repricing fee-based care claims: This initiative is intended to 

obtain lower prices for fee-based care by taking advantage of 

lower reimbursement rates negotiated by a VA contractor. VA 

estimated this will result in about $70 million in savings in fiscal 

year 2012.16

 

15At the time of our review, VA had not determined the amount of savings it expects to 

achieve from each of these initiatives in fiscal year 2013. 

16VA’s contractor, Health Net, offers VA its negotiated provider reimbursement rates for 

certain fee-based care services. VA’s savings from this initiative represent the difference 

between VA’s provider reimbursement rates and Health Net’s rates minus Health Net’s fee 

for providing this service.
 

Page 9 GAO-12-305 Department of Veterans Affairs Operational Improvements

• Contracts for dialysis treatments: For fiscal year 2012, VA 

negotiated lower reimbursement rates for contracted providers 

that provide dialysis treatments. VA estimated this will result in 

over $60 million in savings in fiscal year 2012.

• Additional savings identified by VA networks: VA tasked its 

21 networks with developing their own initiatives to reduce feebased care costs. In total, VA estimated these network-developed 

initiatives will result in about $10 million in savings in fiscal year 

2012.

For two of VA’s six operational improvements—reducing costs of medical 

and administrative support activities and realigning clinical staff—we 

found that VA’s estimated savings lacked analytic support. For another—

reducing costs of real property—we found that VA’s estimated savings 

were flawed. Furthermore, due in part to flaws we identified with another 

operational improvement—reducing acquisition costs—VA decided to 

revise it. Because this effort is still in progress, we could not evaluate 

VA’s estimated savings from this operational improvement. While we did 

not identify concerns with VA’s savings estimate for six of the seven 

initiatives within one operational improvement—additionally reducing feebased care costs—we were unable to assess VA’s ability to achieve its 

estimated savings from one initiative because VA’s networks were in the 

process of developing plans to achieve such savings at the time of our 

review. We did not identify concerns with VA’s estimated savings from the 

remaining operational improvement—reducing provider reimbursement 

rates for certain fee-based care services. (See table 1 in app. I for a 

detailed description of VA’s methodology for estimating savings from all 

initiatives planned within each of its six operational improvements.)

Reducing costs for medical and administrative support activities. VA lacks 

analytic support for determining the estimated savings of $150 million per 

fiscal year for this operational improvement. Rather, VA headquarters 

officials told us these estimated savings were based on their belief that 

VAMCs could reduce medical and administrative support costs by 

$150 million per fiscal year, which represents more than 1 percent of all 

medical and administrative support costs based on fiscal year 2011 

VA’s Estimated 

Savings from Two of 

Its Six Operational 

Improvements Lacked 

Analytic Support and 

Estimated Savings 

from Another Were 

Flawed
 

Page 10 GAO-12-305 Department of Veterans Affairs Operational Improvements

data.17

Realigning VA clinical staff and resources by using less costly health care 

providers. VA lacks analytic support for one of two assumptions in the 

methodology it used to determine its estimated savings of $151 million for 

this operational improvement. VA headquarters officials said this estimate 

was based on their belief that 3 percent of physician positions and 

3.6 percent of registered nurse positions across the VA health care 

system could be filled by lower paid clinical staff, such as nurse 

practitioners replacing physicians and licensed practical nurses replacing 

registered nurses. However, VA lacked documentation to support how 

these percentages were determined; VA headquarters officials told us 

that these percentages were “determined judgmentally”. Furthermore, VA 

headquarters officials told us that VAMCs—rather than VA 

headquarters—are responsible for implementing this operational 

improvement in a way that does not negatively impact quality and 

veterans’ access to care.

VA headquarters officials could offer no analysis to support the 

$150 million in annual savings estimated in the budget submitted for fiscal 

years 2012 and 2013. Instead, VA headquarters officials told us they 

expect VAMCs to reduce medical and administrative support costs 

without compromising veterans’ quality of care and access to medical 

services. However, officials have not provided any guidance to VAMCs 

for how they are to reduce costs.

Reducing costs associated with operating and leasing VA real property. 

We did not identify concerns with VA’s estimated savings for three of the 

six initiatives within this operational improvement.18

 

17For this operational improvement, VA is focusing only on those medical and 

administrative support costs which can be controlled by VAMCs. In fiscal year 2011, these 

costs amounted to over $12 billion across all VAMCs. 

However, VA’s 

methodology for determining savings from the remaining three initiatives 

resulted in an overstatement of the savings VA is likely to achieve in fiscal 

year 2012. Specifically, VA’s estimated savings from the decreasing 

energy costs and improving nonrecurring maintenance contracting

initiatives include savings that VA realized prior to fiscal year 2012. 

Furthermore, VA’s estimated savings from the additionally reducing 

leased space through telework initiative are likely overstated because VA 

18Because this operational improvement comprises six different initiatives, VA developed 

a separate savings estimate for each initiative. 
 

Page 11 GAO-12-305 Department of Veterans Affairs Operational Improvements

neglected to account for the time necessary to implement this initiative—

that is, the time it would take the department to increase the number of 

employees who telework frequently, put in place office-sharing 

arrangements, and subsequently reduce the amount of leased space. VA 

assumed it would achieve savings of nearly $14 million through a 

reduction in leased space in fiscal year 2012 by increasing the number of 

employees who telework frequently. VA officials told us that as of January 

2012, VA has not yet reduced the amount of space it leases and does not 

expect to achieve space reductions necessary to achieve estimated 

savings in this area until the end of fiscal year 2012, which would result in 

lower savings than VA estimated.19

Reducing acquisition costs. We determined that VA’s methodology for 

determining estimated savings from this operational improvement—as 

presented in the President’s budget submission—overstated the savings 

that VA was likely to achieve. Specifically, we pointed out to VA officials 

that VA’s methodology for estimating savings from this improvement was 

flawed for two reasons.

• First, it included estimated savings from one initiative—consolidating 

contracting at the national and network level—that were already being 

counted towards another operational improvement, and thus were 

being double-counted.

• Second, it did not take into account the cost of implementing two 

initiatives—converting contracting workload from the U.S. Army Corps 

of Engineers to workload within VA and converting contracted 

services to services within VA. Both of these initiatives may require 

VA to hire or retain additional staff to perform services previously 

performed by a contractor, potentially resulting in added cost to VA 

that would detract from any savings realized.

Due in part to the concerns we identified for this operational improvement, 

VA is now developing new savings initiatives that VA officials say will 

meet the department’s target of $355 million in savings for fiscal years 

2012 and 2013. However, given that this effort is a work in progress, we 

 

19A VA headquarters official told us that only a small portion of the estimated savings from 

the reducing leased space through telework initiative will be counted towards the 

$66 million annual target for the real property operational improvement, because this 

initiative primarily applies to the Veterans Benefit Administration.
 

Page 12 GAO-12-305 Department of Veterans Affairs Operational Improvements

cannot say whether proposed savings in this area can be expected to 

materialize in fiscal years 2012 and 2013.20

Additionally reducing fee-based care costs. We did not identify concerns 

with VA’s estimated savings for six of the seven initiatives within this 

operational improvement.21 However, we could not yet assess VA’s 

estimated savings from the remaining initiative—additional savings 

identified by VA networks—which represents a savings target VA 

headquarters expects its 21 networks to achieve. Under this initiative, 

each network is required to develop and implement its own plans to 

achieve fee-based care savings, which VA headquarters would 

subsequently review and approve. Because this process was still ongoing 

at the time of our review, we were unable to assess the networks’ plans to 

achieve such savings.22

Overall, although VA headquarters officials admitted that estimated 

savings from some of the operational improvements lacked analytic 

support, they stated that they are not concerned if some of the estimated 

savings from the six operational improvements do not materialize. 

According to officials, VA is in the process of implementing other costcutting measures, not outlined in the President’s budget request for fiscal 

years 2012 and 2013, that also may generate savings for those years. 

For example, these measures involve using data to identify VAMCs that 

may be outliers in terms of having higher or lower staffing costs than 

other VAMCs, and identifying the reasons for these VAMCs being 

outliers. Because those measures have not been fully implemented at this 

time, we are unable to assess whether they will generate the savings VA 

expects to achieve.

 

20Recently, GAO reviewed acquisition-related savings and risk reduction initiatives of 24 

federal agencies, including VA, and in a number of instances identified problems with the 

reported savings data and missed opportunities to further reduce high-risk contracts. See 

GAO, Federal Contracting: OMB’s Acquisition Savings Initiative Had Results, but 

Improvements Needed, GAO-12-57 (Washington, D.C.: Nov. 15, 2011). 

21Because this operational improvement comprises seven different initiatives, VA 

developed a separate savings estimate for each initiative.

22GAO has ongoing work to evaluate selected networks’ plans to achieve fee-based care 

savings.
 

Page 13 GAO-12-305 Department of Veterans Affairs Operational Improvements

We found that VA’s process for tracking actual savings is lacking for one 

operational improvement and may overstate results for two others. 

Moreover, we were unable to assess VA’s process for tracking actual 

savings from the reducing acquisition costs operational improvement as 

VA is still developing it. We did not identify concerns with the processes 

for the remaining two operational improvements. (See table 2 in app. I for 

a detailed description of VA’s process for tracking actual savings from all 

initiatives planned within each of its six operational improvements.)

We found that VA lacks a process for tracking the actual savings it is 

achieving for its realigning VA clinical staff and resources operational 

improvement, and its processes for tracking savings for two other 

operational improvements—reducing costs for medical and administrative 

support activities and reducing costs associated with operating and 

leasing VA real property—may overstate such savings. More specifically, 

we identified the following concerns:

Realigning VA clinical staff and resources by using less costly health 

care providers. VA lacks a process for tracking actual savings it is 

achieving from this operational improvement. Although VA 

headquarters officials told us that they intend to develop a process to 

track these savings, they do not know when this process will be in 

place. VA officials stated that tracking savings from this operational 

improvement is challenging because VA’s data systems do not 

provide information on the extent to which VAMCs are filling vacated 

positions with lower paid clinical staff—for example, replacing 

physicians with nurse practitioners. In addition, officials from VA 

networks we visited stated that VAMCs have continually realigned 

clinical staff to better meet patient care needs, making it difficult to 

determine whether realignments—and associated savings, if any—

can be attributed to the operational improvement as cited in the 

budget request.

VA’s Process for 

Tracking Actual 

Savings from the Six 

Operational 

Improvements Is 

Lacking for One and 

Potentially Overstates 

Results for Two 

Others

Process for Tracking 

Actual Savings Is Lacking 

or Potentially Overstates 

Results for Three 

Operational Improvements
 

Page 14 GAO-12-305 Department of Veterans Affairs Operational Improvements

Reducing costs for medical and administrative support activities. VA’s 

process for tracking its actual savings from this operational 

improvement may overstate such savings for three reasons:

• First, VA is tracking actual savings by determining the change in 

the ratio of VA’s medical and administrative support costs to VA’s 

total health care costs between fiscal year 2010 and fiscal year 

2012 and then multiplying the difference in this ratio by its medical 

and administrative support costs in fiscal year 2012.23 This 

process does not, in fact, measure actual savings, partly because 

a decrease in the ratio of VA’s medical and administrative support 

costs to VA’s total health care costs may be attributed to other 

factors besides greater efficiency, such as increases in VA’s costs 

for providing health care services to veterans.

• Second, the ratio of VA’s medical and administrative support costs 

to VA’s total health care costs has generally decreased since 

fiscal year 2008, several years before the operational 

improvement was included in the President’s budget request, 

which suggests that this ratio may decrease even if the 

operational improvement had not been implemented.

• Third, according to officials from VA headquarters and the three 

networks we visited, the data VA is using to calculate its actual 

savings for this operational improvement may have limitations.

Specifically, according to officials from the three networks we 

visited, networks have recently taken steps to more accurately 

record the time clinicians spend conducting administrative 

activities (time that is counted towards support costs) versus 

clinical activities (time recorded separately as clinical time) in VA’s 

electronic system. A network official told us that this is because 

clinicians were overreporting the time they spent conducting 

administrative activities. This further calls into question VA’s ability 

to use these data to track its actual savings, as a decrease in the 

ratio of support costs to total costs may be partially the result of 

more accurate data reporting rather than actual savings.

 

23VA is using the same methodology to calculate savings for fiscal year 2013.
 

Page 15 GAO-12-305 Department of Veterans Affairs Operational Improvements

Reducing costs associated with operating and leasing VA real property. 

VA’s process for tracking its actual savings from three of the six initiatives 

within this operational improvement may overstate such savings. 

Specifically, for the decreasing energy costs initiative, VA is calculating 

the difference between energy contract prices—including electricity and 

natural gas—negotiated prior to and after the implementation of this 

operational improvement. However, for electricity contract prices, VA is 

tracking cumulative savings achieved between fiscal years 2010 and 

2012, rather than savings achieved solely in fiscal year 2012. This results 

in savings that may be overstated. Similarly, for the improving 

nonrecurring maintenance contracting initiative, VA is tracking cumulative 

savings achieved in fiscal years 2011 and 2012, rather than savings 

achieved solely in fiscal year 2012. Furthermore, to determine actual 

savings from the additionally reducing leased space through telework

initiative, VA is manually tracking the number of employees who telework 

frequently and multiplying this number by its assumed savings per 

frequent teleworker. However, because savings are not achieved until VA 

is able to reduce the amount of space it leases, the amount it is reporting 

through its process does not represent actual savings. VA officials told us 

that as of January 2012, VA has not yet reduced the amount of space it 

leases and does not expect to achieve space reductions necessary to 

achieve savings in this area until the end of fiscal year 2012, which would 

result in lower savings than VA estimated.

We did not identify concerns with VA’s process for tracking its actual 

savings from the remaining three initiatives that comprise this operational 

improvement.

Because VA was still in the process of developing its reducing acquisition 

costs operational improvement, we were unable to evaluate VA’s process 

for tracking actual savings resulting from it.

We did not identify concerns with VA’s process for tracking actual savings 

from the reducing provider reimbursement rates for certain fee-based 

care services and the additionally reducing fee-based care costs

operational improvements.

VA is seeking ways to be more efficient—achieving savings without 

compromising the quality of and access to VA health care services. One 

way VA plans to improve efficiency and, in turn, reduce its level of 

requested resources, is by relying on anticipated savings resulting from 

Process for Tracking 

Actual Savings from One 

Operational Improvement 

Cannot Be Assessed Yet 

and for Two Appears to be 

Adequate 

Conclusions 
 

Page 16 GAO-12-305 Department of Veterans Affairs Operational Improvements

six operational improvements included in the President’s budget request 

for fiscal years 2012 and 2013. We found that the savings estimates and 

processes for tracking actual savings were flawed in many cases. Without 

a sound methodology for estimating savings from these operational 

improvements, VA runs the risk of falling short of its estimates, which may 

ultimately require VA to have to make difficult trade-offs to provide health 

care services with the resources provided by Congress. We are unable to 

verify how close VA may come to its estimated savings and planned 

budgets. If VA decides to include new operational improvements in future 

budget requests, developing a sound methodology for its savings 

estimates would help the department ensure that it can achieve its 

proposed savings. Similarly, without a detailed process for tracking VA’s 

actual savings resulting from each operational improvement, VA is unable 

to determine whether, and to what extent, each operational improvement 

is generating the intended savings, which is key to helping VA manage its 

resources.

We recommend that the Secretary of Veterans Affairs take the following 

two actions:

In order to better inform future budget requests, develop a sound 

methodology for estimating savings from new operational improvements. 

This methodology should include:

• an explanation of how savings from each operational improvement will 

be achieved;

• an explanation for the basis of any assumptions included in the 

savings estimates; and

• an implementation plan that includes a realistic timeline for 

implementation, to help ensure that savings can be achieved within 

the targeted time frame.

In addition, develop a detailed process for tracking VA’s actual savings 

resulting from those operational improvements for which we identified 

concerns. This process should provide detailed written guidance for those 

responsible for tracking the savings, which outlines the methodology for 

calculating savings.

Recommendations for 

Executive Action
 

Page 17 GAO-12-305 Department of Veterans Affairs Operational Improvements

VA provided written comments on a draft of this report, which are 

reprinted in appendix II. In its comments, VA generally concurred with our 

findings—with one exception—and described the department’s planned 

actions to implement our recommendations. VA did not agree with our 

assessment that its projected savings from two of the initiatives within the 

reducing costs associated with operating and leasing VA real property

operational improvement were flawed or that VA’s process for tracking 

actual savings may overstate them.

VA concurred with our recommendation that the department develop a 

sound methodology for estimating savings from new operational 

improvements. VA also concurred with our recommendation that the 

department develop a detailed process for tracking its actual savings 

resulting from the realigning clinical staff and resources by using less 

costly health care providers and the reducing costs for medical and 

administrative support activities operational improvements. VA elaborated 

on what actions the department would take to implement these 

recommendations. In addition, VA agreed that estimated savings from the 

additionally reducing leased space by increasing the number of 

employees who telework initiative, which is included in the real property

operational improvement may not be achieved in fiscal year 2012. VA 

decided to remove this initiative from the fiscal year 2013 budget request.

VA did not agree with our assessment that projected savings from two of 

the initiatives within the real property operational improvement—

decreasing energy costs and improving non-recurring maintenance 

contracting—were flawed or that VA’s process for tracking actual savings 

from these initiatives may overstate the savings.

• Specifically, VA did not agree that its calculation of projected savings 

from these two initiatives in the real property operational improvement 

were flawed. According to VA, the initiatives within this operational 

improvement were developed in response to a June 2010 Presidential 

memorandum, which required agencies to achieve real property 

savings from June 2010 through September 2012. Because VA did 

not account for these savings in the fiscal year 2010 and 2011 budget 

requests, VA believes that it is appropriate to account for them in the 

fiscal year 2012 and 2013 budget requests instead.

• VA also noted in its comments that the department believes actual 

savings for this operational improvement are not overstated because 

they were not reflected in the baseline data VA used to develop the 

budget request for fiscal years 2012 and 2013. For example, VA’s 

Agency Comments 

and Our Evaluation
 

Page 18 GAO-12-305 Department of Veterans Affairs Operational Improvements

baseline data do not reflect lower electricity contract rates, which VA 

renegotiated between fiscal years 2010 and 2012.

VA is correct that these savings would not be reflected in the baseline 

data, but it does not change our position that VA should have included 

only those savings achieved in fiscal year 2012 in its fiscal year 2012 

budget request. For example, in order to determine the impact of 

those renegotiated lower electricity contract rates on the fiscal year 

2012 budget, we believe VA should have multiplied its estimated fiscal 

year 2012 electricity consumption by the difference between the 

electricity rates under the prior contracts (i.e., those in place prior to 

fiscal year 2010) and under the renegotiated contracts. Instead, VA 

relied on cumulative savings it achieved between fiscal years 2010 

and 2012, which may have resulted in an overstatement of the 

savings VA is likely to achieve in fiscal year 2012. We believe that the 

same argument applies to fiscal year 2013 as well.

In summary, we remain concerned that VA has included savings 

achieved in prior fiscal years—2010 and 2011—in the President’s budget 

request for fiscal years 2012 and 2013. VA has not provided evidence 

that the department can achieve $66 million in savings in fiscal years 

2012 and 2013 from the real property operational improvement. 

Therefore, we continue to believe that the reduction in costs for fiscal 

years 2012 and 2013, as shown in the President’s budget request, is 

overstated. If VA’s projected savings are overstated, the department may 

not be able to offset other costs in the fiscal year 2012 and 2013 budgets 

as it had originally intended. As a result, it may have to make difficult 

trade-offs to provide health care services with the resources provided by 

Congress.

We are sending copies of this report to appropriate congressional 

committees and the Secretary of Veterans Affairs. The report is also 

available at no charge on the GAO website at http://www.gao.gov. 
 

Page 19 GAO-12-305 Department of Veterans Affairs Operational Improvements

If you or your staff have any questions about this report, please contact 

me at (202) 512-7114 or williamsonr@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs are on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix III.

Randall B. Williamson

Director, Health Care
Appendix I: VA’s Methodology for Estimating 

and Process for Tracking Savings from Its Six 

Operational Improvements

Page 20 GAO-12-305 Department of Veterans Affairs Operational Improvements

Table 1 provides a detailed description of VA’s methodology for 

estimating savings from all initiatives planned within each of its six 

operational improvements, and table 2 provides a detailed description of 

VA’s process for tracking its actual savings from all initiatives within these 

operational improvements.

Table 1: Description of VA’s Methodology for Estimating Savings from Each of VA’s Six Operational Improvements in the 

President’s Budget Request for Fiscal Years 2012 and 2013

Operational improvement VA’s methodology for estimating savings

Reducing costs for medical and 

administrative support activities

N/A—VA lacked an analytic methodology for estimating savings.

Realigning VA clinical staff and 

resources by using less costly health 

care providers

VA estimated its savings by:

1. assuming that 3 percent of physician positions and 3.6 percent of registered nurse 

positions across the VA health care system could be filled by lower paid clinical 

staff (such as nurse practitioners replacing physicians and licensed practical 

nurses replacing registered nurses); and

2. multiplying 3 percent of the total number of physician positions by the difference in 

average physician and nurse practitioner salaries, and 3.6 percent of the total 

number of registered nurse positions by the difference in average registered 

nurse and licensed practical nurse salaries.

Reducing costs associated with 

operating and leasing VA real property

Repurposing vacant and underutilized buildings initiative: VA estimated its savings by 

(1) determining the number of buildings that would be repurposed as well as their square 

footage; (2) multiplying the total square footage by assumed operating cost per square 

foot; and (3) adding intended revenue from entities that will be leasing the repurposed 

buildings.

Demolishing or abandoning other vacant or underutilized VA buildings initiative: Similarly, 

VA determined the number of buildings that would be demolished or abandoned and their 

square footage and then multiplied the total square footage by assumed operating cost per 

square foot.

Decreasing energy costs initiative: VA carried out three separate estimates for this 

initiative:

1. VA estimated its savings from negotiated electricity and natural gas contracts by 

subtracting the new price per unit of electricity or natural gas from the former 

price and multiplying the result by the assumed amount each VAMC consumes.

2. The department estimated savings from its energy conservation efforts by 

multiplying VA’s total energy costs by nearly 1 percent—the amount by which VA 

expects to reduce energy consumption.

3. To estimate savings from its renewable energy efforts, VA multiplied its average 

price per unit of electricity by the amount of electricity it expects VA’s renewable 

energy projects to generate.

Appendix I: VA’s Methodology for Estimating 

and Process for Tracking Savings from Its Six 

Operational Improvements 
Appendix I: VA’s Methodology for Estimating 

and Process for Tracking Savings from Its Six 

Operational Improvements

Page 21 GAO-12-305 Department of Veterans Affairs Operational Improvements

Operational improvement VA’s methodology for estimating savings

Improving nonrecurring maintenance contracting initiative: VA estimated its savings by: 

(1) estimating its total spending reduction on nonrecurring maintenance contracts 

administered by the Army Corps of Engineers based on historical data and (2) multiplying 

this amount by 7 percent, which represents the fee charged by the Army Corps of 

Engineers for administering these contracts; the resulting amount is offset by VA’s 

estimated increase in staffing costs for administering these contracts.

Reducing leased space initiative: VA estimated these savings by calculating avoided 

payments for three canceled contracts.

Additionally reducing leased space by increasing telework initiative: VA estimated its 

savings by: (1) determining the number of employees who would be eligible to telework 

frequently—that is, greater than 60 percent of the time; (2) determining net savings per 

frequent teleworker, based on assumptions about the average amount of office space 

occupied by each employee, the average lease cost per square foot of office space, and 

additional technology costs resulting from teleworking; and (3) multiplying the net savings 

per frequent teleworker by the total number of estimated frequent teleworkers. 

Reducing acquisition costs N/A—VA is in the process of developing savings initiatives for this operational 

improvement.

Reducing provider reimbursement rates 

for certain fee-based care services

To develop the savings estimate, a VA contractor: (1) analyzed claims for certain feebased care services paid at VA’s previous reimbursement rates and calculated what VA’s 

payment would have been, had the reduced rates been implemented; the difference 

between the two amounts represents VA’s potential savings and (2) adjusted the estimated 

savings for each year based on estimated increases in the number of fee-based care 

claims and health care inflation.

Additionally reducing fee-based care 

costs

Reducing bed days of care: To develop the savings estimate, VA reviewed prior year data 

on the reduction in bed days of care and the associated savings and determined that the 

same amount of savings would be achievable in fiscal year 2012.

Reducing fraud, waste, and abuse: Because this initiative is new, VA based its savings 

estimate on a report from its Office of Inspector General, which stated that VA could save 

at least $114 million annually due to better fraud management. In fiscal year 2012, VA 

assumed that it could achieve savings of $25 million—roughly 25 percent of the savings 

estimated by the Office of Inspector General.

Increasing revenue collection from veterans’ health insurance plans: VA developed the 

estimate by (1) projecting total fiscal year 2012 third-party revenue collection based on 

factors including the expected workload and the average billed amount, (2) projecting total 

fiscal year 2012 first-party revenue collection based on the historical ratio of first-party to 

third-party revenue collection, and (3) determining the increase in projected first-party and 

third-party revenue collection for fiscal year 2012 relative to fiscal year 2011.

Avoiding interest payments: To develop the savings estimate, VA reviewed prior year data 

on interest payments and determined that a 5 percent reduction over fiscal year 2011 

interest payments would be achievable.

Repricing fee-based care claims: VA based its savings estimate on historical data, which it 

adjusted for factors that impact its ability to achieve savings from repricing fee-based care 

claims in fiscal year 2012.
Appendix I: VA’s Methodology for Estimating 

and Process for Tracking Savings from Its Six 

Operational Improvements

Page 22 GAO-12-305 Department of Veterans Affairs Operational Improvements

Operational improvement VA’s methodology for estimating savings

Contracts for dialysis treatments: To develop the savings estimate, VA multiplied the 

difference in reimbursement rates for contracted dialysis providers prior to and after the 

implementation of this initiative by the estimated number of dialysis services performed by 

contracted providers.

Additional savings identified by VA networks: VA’s savings estimate for this initiative 

represents the difference between the $200 million overall savings target VA set for the 

additionally reducing fee-based care costs operational improvement and the total amount 

of estimated savings from the other initiatives within this operational improvement. VA 

networks are responsible for developing plans to achieve these savings. 

Source: GAO analysis of VA data.
Appendix I: VA’s Methodology for Estimating 

and Process for Tracking Savings from Its Six 

Operational Improvements

Page 23 GAO-12-305 Department of Veterans Affairs Operational Improvements

Table 2: Description of VA’s Process for Tracking Actual Savings from Each of VA’s Six Operational Improvements in the 

President’s Budget Request for Fiscal Years 2012 and 2013

Operational improvement VA’s process for tracking actual savings

Reducing costs for medical and 

administrative support activities

VA is tracking savings by determining the change in the ratio of VA’s medical and 

administrative support costs to VA’s total health care costs between fiscal year 2010 and 

fiscal year 2012 and then multiplying the difference in this ratio by its medical and 

administrative support costs in fiscal year 2012. VA is using the same methodology to 

calculate savings for fiscal year 2013.

Realigning VA clinical staff and resources 

by using less costly health care providers

N/A—VA lacks a process for tracking savings at this time.

Reducing costs associated with operating 

and leasing VA real property

Repurposing vacant and underutilized buildings initiative: To track savings, VA is 

(1) recording information on the buildings being repurposed in a database and (2) 

multiplying the square footage of repurposed buildings by VA’s assumed operating cost 

per square foot. In addition, VA is tracking the revenue it receives from entities that lease 

these buildings.

Demolishing or abandoning other vacant or underutilized VA buildings initiative: VA is 

(1) recording information on the buildings being demolished and abandoned, and 

(2) multiplying the square footage of demolished or vacated buildings by VA’s assumed 

operating cost per square foot.

Decreasing energy costs initiative: VA is tracking three separate measures:

1. To track actual savings from negotiated electricity and natural gas contracts, VA 

is using a manual spreadsheet to calculate the difference between contract 

prices negotiated prior to and after the implementation of this operational 

improvement.

2. To track actual savings from its energy conservation efforts, VA is determining 

the percentage reduction in energy intensity and multiplying this percentage by

its total energy costs.

3. To track actual savings from its renewable energy efforts, VA is determining the 

amount of renewable energy VAMCs generate and multiplying this amount by 

the cost per unit of energy.

Improving nonrecurring maintenance contracting: VA is tracking savings by 

(1) determining its total spending reduction on nonrecurring maintenance contracts 

administered by the Army Corps of Engineers and (2) multiplying this amount by 

7 percent; VA is subsequently subtracting its estimated additional staffing costs.

Reducing leased space initiative: VA is determining whether each contract has been 

terminated and recording the amount of the terminated contract.

Additionally reducing leased space by increasing telework initiative: VA is manually 

tracking the number of employees who telework frequently and multiplying this number 

by its assumed savings per frequent teleworker. 
Appendix I: VA’s Methodology for Estimating 

and Process for Tracking Savings from Its Six 

Operational Improvements

Page 24 GAO-12-305 Department of Veterans Affairs Operational Improvements

Reducing acquisition costs N/A—VA is in the process of developing savings initiatives for this operational 

improvement.

Reducing provider reimbursement rates 

for certain fee-based care services

VA is tracking savings by comparing the amount it reimbursed providers for certain feebased care services before and after the implementation of the operational improvement. 

Specifically, VA is (1) calculating the percentage of the amount billed by providers that 

VA reimbursed prior to the implementation of the operational improvement; 

(2) multiplying this percentage by the amount billed by providers after the operational 

improvement was implemented to calculate the amount VA would be paying had it not 

implemented the operational improvement; and (3) comparing the amount it would have 

paid if the operational improvement had not been implemented to the amount it actually 

paid.

Additionally reducing fee-based care costs Reducing bed days of care: VA is tracking the savings by first calculating the savings per 

episode of care. This is done by (1) subtracting the number of bed days of care for each 

diagnostic code in fiscal year 2012 from the number of bed days of care for each 

corresponding diagnostic code in fiscal year 2011 and (2) multiplying the resulting 

number by the average disbursed amount for bed days of care for each diagnostic code 

in fiscal year 2012. Then VA is multiplying the savings per episode by the number of 

stays for each diagnostic code that occurred in fiscal year 2012.

Reducing fraud, waste, and abuse: VA is tracking the savings by recording the total 

amount of funds it deems to be collectible. VA plans to eventually track actual 

collections.

Increasing revenue collection from veterans’ health insurance plans: VA maintains a 

database to track the revenue it collects. VA is tracking savings by determining the 

increase in revenue since fiscal year 2011.

Avoiding interest payments: VA is tracking the savings by calculating the reduction in 

interest payments for fee-based care claims between fiscal years 2011 and 2012.

Repricing fee-based care claims: VA is tracking savings reported by its contractor and is 

subtracting fees charged by the contractor from these savings.

Contracts for dialysis treatments: VA is tracking savings by comparing the difference in 

costs per dialysis patient between fiscal year 2011 and fiscal year 2012.

Additional savings identified by VA networks: VA is tracking the savings by subtracting 

each network’s actual spending on fee-based care in fiscal year 2012 from the total 

amount of funds allocated to each network for fee-based care in fiscal year 2012; from 

this amount, VA is subtracting any savings each network achieved from any of the other 

initiatives within the operational improvement and savings from the reducing provider 

reimbursement rates for certain fee-based care services operational improvement. 

Source: GAO analysis of VA data.
Appendix II: Comments from the Department 

of Veterans Affairs

Page 25 GAO-12-305 Department of Veterans Affairs Operational Improvements

Appendix II: Comments from the Department 

of Veterans Affairs
Appendix II: Comments from the Department 

of Veterans Affairs

Page 26 GAO-12-305 Department of Veterans Affairs Operational Improvements
Appendix II: Comments from the Department 

of Veterans Affairs

Page 27 GAO-12-305 Department of Veterans Affairs Operational Improvements
Appendix II: Comments from the Department 

of Veterans Affairs

Page 28 GAO-12-305 Department of Veterans Affairs Operational Improvements
Appendix II: Comments from the Department 

of Veterans Affairs

Page 29 GAO-12-305 Department of Veterans Affairs Operational Improvements
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 30 GAO-12-305 Department of Veterans Affairs Operational Improvements

Randall B. Williamson, (202) 512-7114 or williamsonr@gao.gov

In addition to the contact named above, Mary Ann Curran, Assistant 

Director; Christina C. Serna; and Michael Zose made key contributions to 

this report. Jennie F. Apter assisted in the message and report 

development; Hal Brumm and Melissa A. Wolf provided methodological 

support; and Sandra George provided legal support.

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(290970)
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