DEFENSE HEALTH 

CARE

Applying Key 

Management Practices 

Should Help Achieve 

Efficiencies within the 

Military Health System

Report to Congressional Committees

April 2012

GAO-12-224

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-224, a report to 

congressional committees

April 2012

DEFENSE HEALTH CARE

Applying Key Management Practices Should Help 

Achieve Efficiencies within the Military Health 

System

Why GAO Did This Study

DOD’s health care costs have risen 

significantly, from $19 billion in fiscal 

year 2001 to $48.7 billion in its fiscal 

year 2013 budget request, and are 

projected to increase to $92 billion by 

2030. 

GAO reviewed DOD’s efforts to slow 

its rising health care costs by changing 

selected clinical, business, and 

management practices. Specifically, 

GAO determined the extent to which 

DOD has (1) identified initiatives to 

reduce health care costs and applied 

results-oriented management practices 

in developing plans for implementing 

and monitoring them and 

(2) implemented its seven medical 

governance initiatives approved in 

2006 and employed key management 

practices. For this review, GAO 

analyzed policies, memorandums, 

directives, and cost documentation, 

and interviewed officials from the 

Office of the Secretary of Defense, 

from the three services, and at each of 

the sites where the governance 

initiatives were under way.

What GAO Recommends

GAO recommends that DOD 

(1) complete and fully implement 

comprehensive results-oriented plans 

for each of its medical initiatives; 

(2) fully implement an overall 

monitoring process across the portfolio 

of initiatives and identify accountable 

officials and their roles and 

responsibilities; and (3) complete its 

governance initiatives and employ key 

management practices to show 

financial and nonfinancial outcomes 

and evaluate interim and long-term 

progress. In written comments on a 

draft of this report, DOD concurred with 

each of these three recommendations. 

What GAO Found

The Department of Defense (DOD) has identified 11 initiatives aimed at slowing 

its rising health care costs, but has not fully applied results-oriented management 

practices in developing plans to implement and monitor its initiatives. Resultsoriented management practices include developing plans that identify goals, 

activities, and performance measures; resources and investments; organization 

roles, responsibilities, and coordination; and key external factors that could affect 

goals, such as a decrease of funding to a program. At the conclusion of GAO’s 

review, DOD had completed and approved a detailed implementation plan, 

including a cost savings estimate, for just 1 of its 11 initiatives. Developing cost 

savings estimates is critical to successful management of the initiatives for 

achieving the 2010 Quadrennial Defense Review’s call for reduced growth in 

medical costs. DOD also has not completed the implementation of an overall 

process for monitoring progress across its portfolio of health care initiatives and 

has not completed the process of identifying accountable officials and their roles 

and responsibilities for all of its initiatives. Without comprehensive, resultsoriented plans, a monitoring process, and clear leadership accountability, DOD 

may be hindered in its ability to achieve a more cost-efficient Military Health 

System, address its medical readiness goals, improve its overall population 

health, and improve its patients’ experience of care.

Additionally, DOD has another set of initiatives, which were approved in 2006 to 

change aspects of its medical governance structure. GAO found that DOD had 

implemented some of the initiatives but had not consistently employed several 

key management practices that would have helped it achieve its stated goals and 

sustain its efforts. DOD approved the implementation of the seven governance 

initiatives with the goal of achieving economies of scale and operational 

efficiencies, sharing common support functions, and eliminating administrative 

redundancies. Specifically, DOD expected the initiatives to save at least 

$200 million annually once implemented; however, to date, only one initiative has 

projected any estimated financial savings. DOD officials stated that the other 

governance initiatives have resulted in efficiencies and have significant potential 

for cost savings. Further, the governance initiatives that are further developed 

were driven primarily by requirements of Base Realignment and Closure 

Commission recommendations and their associated statutory deadlines for 

completion. Additionally, GAO found that DOD had not consistently employed 

several key management practices, which likely hindered the full implementation 

of the initiatives. For example, the initiatives’ initial timeline was high-level and 

generally not adhered to, a communication strategy was not prepared, an overall 

implementation team was never established, and performance measures to 

monitor the implementation process and achievement of the goals were not 

established. With more emphasis on the key practices of a successful 

transformation, DOD will be better positioned in the future to realize efficiencies 

and achieve its goals as it continues to implement the initiatives.

View GAO-12-224. For more information, 

contact Brenda S. Farrell at (202) 512-3604 or 

farrellb@gao.gov.
Page i GAO-12-224 Defense Health Care

Letter 1 

Background 4

DOD Has Identified Initiatives Aimed at Slowing Medical Cost 

Growth but Has Not Fully Applied Results-Oriented 

Management Practices 11

Some Governance Initiatives Have Been Implemented, but DOD 

Has Not Fully Employed Key Management Practices 19

Conclusions 29

Recommendations for Executive Action 30

Agency Comments 30

Appendix I Scope and Methodology 33

Appendix II Comments from the Department of Defense 39

Appendix III GAO Contact and Staff Acknowledgments 42

Tables

Table 1: The Seven Approved Military Health System Governance 

Initiatives 10

Table 2: Progress Made in Developing a Dashboard and Detailed 

Implementation Plan for Each of DOD’s Strategic 

Initiatives as of January 13, 2012 14

Table 3: Extent to Which the Patient Centered Medical Home 

Implementation Plan Addressed the Six Desired 

Characteristics of Comprehensive, Results-Oriented 

Management Plans 16

Table 4: Status of the Seven Approved Military Health System 

Governance Initiatives 21

Figures

Figure 1: Actual and Projected Costs of DOD’s Plans for Its Military 

Health System 5

Figure 2: Current Governance Structure of the MHS 7

Contents
Page ii GAO-12-224 Defense Health Care

Abbreviations

BRAC Base Realignment and Closure 

DOD Department of Defense 

FYDP Future Years Defense Program 

J/UMC Joint/Unified Medical Command

MHS Military Health System 

MRMC Army Medical Research and Material Command 

VA Department of Veterans Affairs

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Page 1 GAO-12-224 Defense Health Care

United States Government Accountability Office

Washington, DC 20548

April 12, 2012

Congressional Committees

Over the past decade, health care costs in the United States have grown 

substantially, and the Department of Defense’s (DOD) medical costs for 

its Military Health System (MHS)1 have been no exception. DOD’s total 

medical costs have more than doubled from $19 billion in fiscal year 2001 

to its fiscal year 2013 budget request of $48.7 billion.2 The Secretary of 

Defense stated that the cost of the MHS continues to increase and there 

is a need to explore all possibilities to control the costs of military health 

care. DOD’s health care system serves about 9.6 million beneficiaries—

including active duty, reserve, and National Guard troops and their 

dependents as well as military retirees and their dependents. According 

to a 2011 Congressional Budget Office report, DOD’s health care costs 

are projected to reach $59 billion by 2016 and nearly $92 billion by 2030.3

Under the current structure, the responsibilities and authorities for the 

management of DOD’s MHS are distributed among several organizations, 

including the Assistant Secretary of Defense for Health Affairs,4 who 

serves as the principal advisor to the Secretary of Defense and the Under 

Secretary of Defense for Personnel and Readiness. Health Affairs is 

responsible for submitting the Unified Medical Budget5

 

1 The MHS refers to DOD’s health operations as a whole and consists of the Office of the 

Assistant Secretary of Defense for Health Affairs; the medical departments of the Army, 

Navy, Air Force, and Joint Chiefs of Staff; the Combatant Command surgeons; and the 

TRICARE network of health care providers.

a single combined 

2 DOD’s fiscal year 2013 budget request of $48.7 billion for its Unified Medical budget 

includes $32.5 billion for the Defense Health Program, $8.5 billion for military medical 

personnel, $1.0 billion for military construction, and $6.7 billion set aside for the MedicareEligible Retiree Health Care Fund. The total excludes overseas contingency operations 

funds and certain transfers.

3 Congressional Budget Office, Long-Term Implications of the 2012 Future Years Defense 

Program, Pub. No. 4281 (June 2011).

4 For purposes of this report, the Office of the Assistant Secretary of Defense for Health 

Affairs will be called Health Affairs.

5 One component of the Unified Medical Budget is the Defense Health Program, which is 

a single appropriation account typically consisting of operation and maintenance; 

research, development, test, and evaluation; and procurement funds for the MHS.

 
 

Page 2 GAO-12-224 Defense Health Care

medical budget for itself and the services’ health operations, and centrally 

manages Defense Health Program funds for the military services through 

the TRICARE Management Activity,6 while each of the military services 

manages its respective medical personnel and programs. In 2007, the 

Defense Health Board stated in its report, Task Force on the Future of 

Military Health Care,

7 that DOD’s MHS does not function as a fully 

integrated health care system and this lack of integration diffuses 

accountability for fiscal management, results in misalignment of 

incentives, and limits the potential for continuous improvement in the 

quality of care delivered to beneficiaries. Further, we previously identified 

DOD’s health care system as an example of a key challenge facing the 

U.S. government in the 21st century and an area in which DOD could 

improve delivery of services by combining, realigning, or otherwise 

changing selected support functions and could achieve economies of 

scale.8

Congressional leaders have also raised questions regarding rising military 

health costs and DOD’s MHS governance structure. For example, the 

House Committee on Armed Services’ Print accompanying the Ike 

Skelton National Defense Authorization Act for Fiscal Year 20119 noted 

that the department had not yet developed a comprehensive plan to 

enhance quality, efficiencies, and savings in DOD’s MHS, and it 

encouraged the Secretary of Defense to evaluate the potential 

operational, organizational, and financial benefits of a unified medical 

command. We previously identified in our March 2011 report10

 

6 DOD provides health care and mental health care through its TRICARE program, its 

regionally structured health care program. DOD’s TRICARE Management Activity, which 

oversees the program, uses contractors to develop networks of civilian providers and to 

perform other customer service functions, such as processing claims and assisting 

beneficiaries with finding providers.

7 Defense Health Board, Task Force on the Future of Military Health Care (December 

2007).

8 GAO, 21st Century Challenges: Reexamining the Base of the Federal Government, 

GAO-05-325SP (Washington, D.C.: February 2005).

9 The Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (Pub. L. No. 

111-383 (2010)) was not accompanied by a conference report. In lieu of a formal 

conference report and joint explanatory statement, House Armed Services Committee 

Print No. 5 (December 2010) was provided to show congressional intent and maintain 

legislative history.

10 GAO, Opportunities to Reduce Potential Duplication in Government Programs, Save 

Tax Dollars, and Enhance Revenue, GAO-11-318SP (Washington, D.C.: Mar. 1, 2011).
 

Page 3 GAO-12-224 Defense Health Care

opportunities to reduce potential duplication in government programs by 

realigning DOD’s military medical command structures and consolidating 

common functions that could increase efficiencies and reduce costs. We 

noted that DOD could potentially save from approximately $281 million to 

$460 million annually depending upon the governance option chosen. We 

also reported that DOD had actions under way for a concept approved in 

November 2006 that directed seven incremental reorganizational 

initiatives designed to minimize duplicative layers of command and 

control, among other things. For this review, we evaluated Health Affairs’ 

cost saving efforts and the status of its seven governance initiatives. 

Specifically, we determined the extent to which DOD has (1) identified 

initiatives to reduce health care costs and applied results-oriented 

management practices to develop plans for implementing and monitoring 

them and (2) implemented its seven medical governance initiatives 

approved in 2006 and employed key management practices.

To determine the extent to which DOD has identified initiatives to reduce 

health care costs, we reviewed documentation and interviewed officials 

from the Health Budgets and Financial Policy Office and from the Office 

of Strategy Management, within Health Affairs, as well as officials in the 

TRICARE Management Activity. Additionally, to determine the extent to 

which DOD applied results-oriented management practices to develop 

plans for implementing and monitoring its initiatives, we evaluated the one 

implementation plan for reducing health care costs that had been 

completed at the time of our review. The analyses included comparing the 

implementation plan for the completed initiative with results-oriented 

management practices on which we have previously reported11

 

11 GAO, Combating Terrorism: Evaluation of Selected Characteristics in National 

Strategies Related to Terrorism, 

and 

drawing conclusions from a consensus of the analyses. To determine the 

extent to which DOD has implemented its seven medical governance 

initiatives approved in 2006, we visited the locations where DOD’s MHS 

governance initiatives were being implemented to collect relevant 

documents, interview agency officials, and observe any physical changes 

to the locations. We also reviewed cost estimates, budget documents, 

business plans, and other instructions, policy statements, and documents 

related to progress made. Additionally, we interviewed officials within the 

Office of the Secretary of Defense and the military services concerning 

the initiatives’ implementation status. Further, to determine the extent to 

GAO-04-408T (Washington, D.C.: Feb. 3, 2004).
 

Page 4 GAO-12-224 Defense Health Care

which DOD employed key management practices in implementing its 

seven medical governance initiatives approved in 2006, we identified prior 

reports that documented key management practices of successful 

transformational efforts.12

We conducted this performance audit from March 2011 through 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. For details on our scope 

and methodology, see appendix I.

Using these practices as a guide, as well as 

documentation and discussions with MHS officials, we assessed DOD’s 

actions taken and processes employed while implementing its seven 

governance initiatives. Throughout this report, we used financial data for 

illustrative purposes to provide context on DOD’s efforts and to make 

broad estimates about potential costs savings. We determined that these 

data did not materially affect the nature of our findings and therefore did 

not assess its reliability.

According to the Defense Health Board’s Task Force on the Future of 

Military Health Care,

13 rising health care costs result from a multitude of 

factors that are affecting not only DOD but also health care in general. 

These factors include greater utilization of health care services, 

increasingly expensive technology and pharmaceuticals, growing 

numbers of users, and the aging of the retiree population. Additionally, in 

2009, the Defense Business Board reported14

 

12 GAO, Results-Oriented Cultures: Implementation Steps to Assist Mergers and 

Organizational Transformations, 

that defense health care 

costs are taking up more of the defense budget, and its health care 

programs may eventually compete with other critical defense acquisition 

and operational programs. Figure 1 illustrates the actual and projected 

GAO-03-669 (Washington, D.C.: July 2, 2003).

13 Defense Health Board, Task Force on the Future of Military Health Care. 

14 Defense Business Board, Focusing a Transition (January 2009).

Background 

Rising Health Care Costs
 

Page 5 GAO-12-224 Defense Health Care

future cost growth for DOD’s MHS according to the Congressional Budget 

Office.

Figure 1: Actual and Projected Costs of DOD’s Plans for Its Military Health System

Notes:

Definitions of cost categories: Military medical personnel includes funds for pay and benefits for 

uniformed personnel assigned to work in the MHS. Direct care and other includes funds for the 

operation of military medical facilities and other activities. It includes pay and benefits for civilian 

personnel assigned to work in those facilities but excludes the pay and benefits of military personnel. 

Purchased care and contracts covers medical care delivered to military beneficiaries by providers in 

the private sector, both inside and outside the network. Pharmaceuticals covers purchases of 

medicines dispensed at military medical facilities, at pharmacies inside and outside DOD’s network, 

and through DOD’s mail-order pharmacy program. TRICARE for Life accrual payments covers funds 

deducted from DOD’s appropriation and credited to the Medicare-Eligible Retiree Health Care Fund. 

Outlays from that fund are used to reimburse military treatment facilities for care provided to military 

retirees and their family members who are also eligible for Medicare and to cover most of the out-ofpocket costs those beneficiaries would otherwise incur when seeking care from private-sector 

providers.
 

Page 6 GAO-12-224 Defense Health Care

Supplemental and emergency funding for overseas contingency operations, such as those in 

Afghanistan and Iraq, is included for 2011 and earlier but not for later years. Before 2001, 

pharmaceutical costs were not separately identifiable but were embedded in the costs of two 

categories: purchased care and contracts and direct care and other. In 2001, and later years, most 

pharmaceutical costs were separately identifiable, but some of those costs may be embedded in the 

category TRICARE for Life accrual payments. The amounts shown for the Future Years Defense 

Program (FYDP) and the extension of the FYDP are the totals for all categories. The FYDP period is 

2012 to 2016, the years for which DOD’s plans are fully specified.

Each category shows the Congressional Budget Office projection of the base budget from 2012 to 

2030. That projection incorporates costs that are consistent with DOD’s recent experience. 

For the extension of the FYDP (2017 to 2030), the Congressional Budget Office projects the costs of 

DOD’s plans using the department’s estimates of costs to the extent they are available and costs that 

are consistent with the broader U.S. economy if such estimates are not available.

Research, development, test, and evaluation; procurement; and military construction funds are not 

included in this illustration.

DOD operates a large, complex health system that provides health care 

to 9.6 million beneficiaries. DOD employs almost 140,000 military, civilian, 

and contract personnel who work in medical facilities throughout the 

world. Beneficiaries fall into different categories: (1) active duty 

servicemembers and their dependents, (2) eligible National Guard and 

Reserve servicemembers and their dependents, and (3) retirees and their 

dependents or survivors. In fiscal year 2009, active duty servicemembers 

and their dependents represented 32 percent of the beneficiary 

population, eligible National Guard and Reserve servicemembers and 

their dependents represented 14 percent, and retirees and their 

dependents or survivors made up the remaining 54 percent.15

The management of DOD’s MHS crosses several organizational 

boundaries. Reporting to the Under Secretary of Defense for Personnel 

and Readiness, the Assistant Secretary of Defense for Health Affairs is 

the principal advisor for all DOD health policies, programs, and force 

health protection activities. Health Affairs issues policies, procedures, and 

standards that govern management of DOD medical programs and has 

the authority to issue DOD instructions, publications, and directive-type 

memorandums that implement policy approved by the Secretary of 

Defense or the Under Secretary of Defense for Personnel and Readiness. 

It integrates the services’ budget submissions into a unified medical 

budget that provides resources for DOD’s MHS operations. However, 

 

15 GAO, Defense Health Care: 2008 Access to Care Surveys Indicate Some Problems, 

but Beneficiary Satisfaction Is Similar to Other Health Plans, GAO-10-402 (Washington, 

D.C.: Mar. 31, 2010).

Current Structure of DOD’s 

Military Health System
 

Page 7 GAO-12-224 Defense Health Care

Health Affairs lacks direct command and control of the services’ military 

treatment facilities. See figure 2 for the current organizational structure of 

DOD’s MHS.

Figure 2: Current Governance Structure of the MHS

Operationally, DOD’s MHS has two missions: supporting wartime and 

other deployments, known as the readiness mission, and providing 

peacetime care, known as the benefits mission. The readiness mission 

provides medical services and support to the armed forces during military 

operations, including deploying medical personnel and equipment 

throughout the world, and ensures the medical readiness of troops prior 

to deployment. The benefits mission provides medical services and 

support to members of the armed forces, retirees, and their dependents. 

DOD’s dual health care mission is delivered by the military services at 59 

military treatment facilities capable of providing diagnostic, therapeutic, 

and inpatient care, as well as hundreds of clinics and private sector 

civilian providers. The military treatment facilities make up what is known 

as DOD’s direct care system for providing health care to eligible 
 

Page 8 GAO-12-224 Defense Health Care

beneficiaries. The Departments of the Army and the Navy each have a 

medical command, headed by a surgeon general, who manages each 

department’s respective military treatment facilities and other activities 

through a regional command structure. The Navy’s Bureau of Medicine 

and Surgery supports both the Navy and Marine Corps. The Air Force 

Surgeon General, through the role of medical advisor to the Air Force 

Chief of Staff, exercises similar authority to that of the other surgeons 

general. Each service also recruits, trains, and funds its own medical 

personnel to administer the medical programs and provide medical 

services to beneficiaries. For the management of military treatment 

facilities within the National Capital Region and the execution of related 

Base Realignment and Closure (BRAC) actions16 in that area, an 

additional medical organizational structure and reporting chain was 

established in 2007. This structure is known as the Joint Task Force 

National Capital Region Medical, whose Commander reports to the 

Deputy Secretary of Defense, and the two inpatient medical facilities in 

the area are considered joint commands assigned to the task force. DOD 

also operates a purchased care system throughout the country that 

consists of a network of private sector civilian primary and specialty care 

providers. The TRICARE Management Activity, under the authority, 

direction, and control of Health Affairs, is responsible for awarding, 

administering, and managing these contracts.

For many years, GAO and other organizations have highlighted a range 

of long-standing issues surrounding DOD’s MHS and its efforts to 

reorganize its governance structure. For example, in 1995, we reported 

that interservice rivalries and conflicting responsibilities hindered 

improvement efforts. We further noted that the services have historically 

resisted efforts to change the way military medicine is organized, 

including consolidating the services’ medical departments, in favor of 

maintaining their own health care systems, primarily on the grounds that 

each service has unique medical activities and requirements. Since the 

1940s, there have been over 20 studies that have addressed military 

health care organization.

 

16 The 2005 BRAC Commission recommended that certain patient care activities at Walter 

Reed Army Medical Center in Washington, D.C., be relocated to the National Naval 

Medical Center in Bethesda, Maryland, and to a new community hospital at Fort Belvoir, 

Virginia.

Studies of Governance 

Options for DOD’s Military 

Health System
 

Page 9 GAO-12-224 Defense Health Care

In October 2007,17 we reported that DOD evaluated several options for 

widespread reorganization and integration of its medical governance 

structure, but it did not evaluate the option resulting in the seven 

governance initiatives that it is currently implementing.18 As part of its 

evaluation, DOD commissioned CNA’s Center for Naval Analyses to 

conduct a study to determine the cost savings associated with various 

organizational options. In its report,19 CNA’s officials estimated potential 

savings from $281 million to $460 million annually,20 and noted that any 

merger or transformation needs to be well planned and executed to 

realize potential benefits and efficiencies.21 However, because the 

services could not reach a consensus concerning which of the proposed 

governance options to implement, in November 2006, the Deputy 

Secretary of Defense approved the implementation of an alternative 

option that consisted of seven targeted governance initiatives.22 (See 

table 1.)

 

17 GAO, Defense Health Care: DOD Needs to Address the Expected Benefits, Costs, and 

Risks for Its Newly Approved Medical Command Structure, GAO-08-122 (Washington, 

D.C.: Oct. 12, 2007). 

18 Governance is defined as an entity’s ability to serve its constituents through the rules, 

processes, and behaviors by which interests are articulated, resources are managed, and 

power is exercised.

19 CNA’s Center for Naval Analyses, Cost Implications of a Unified Medical Command

(Alexandria, Va.: May 2006).

20 CNA’s Center for Naval Analyses developed the savings estimates, and GAO adjusted 

the estimates from 2005 to 2010 dollars.

21 CNA’s Center for Naval Analyses categorized the potential savings into the following 10 

areas: health care operations, comptroller operations, information management and 

information technologies, education and training, research and development, logistics, 

strategic planning, human capital management, force health protection and environmental 

health, and general headquarters.

22 Action Memorandum for the Deputy Secretary of Defense, Joint/Unified Medical 

Command (J/UMC) Way Ahead (Nov. 27, 2006).For purposes of this report, this memo 

will be referred to as the November 2006 DOD memo.
 

Page 10 GAO-12-224 Defense Health Care

Table 1: The Seven Approved Military Health System Governance Initiatives

1. Create governance structures in the National Capital Area and in the San Antonio, Texas, area to command, control, and manage 

the combined operations of the components’ respective Military Treatment Facilitiesa

2. Create a governance structure to command, control, and manage the Joint Medical Education and Training Campus in San 

Antonio, Texasa

3. Colocate the MHS’s and services’ medical headquarters staffb

4. Consolidate all medical research and development under the Army Medical Research and Material Command

5. Realign the TRICARE Management Activity and establish a Joint Military Health Service Directorate to consolidate shared services 

and common functions

6. Realign the TRICARE Management Activity and establish a TRICARE Health Plan Agency to focus on health insurance plan 

management

7. Create governance structures that consolidate command and control in multiservice medical markets (other than the National

Capital Region and San Antonio)c

Source: DOD.

a

This initiative is related to a recommendation(s) from the 2005 BRAC Commission.

b

This initiative is a recommendation of the 2005 BRAC Commission.

c

Multiservice medical markets are areas in which more than one DOD component provides military 

health care services.

Our analysis of the decision to implement this alternative concluded that 

DOD did not complete a comprehensive analysis to support its decision. 

Accordingly, we recommended in our October 2007 report that DOD 

should assess the expected benefits, costs, and risks for implementing 

these seven governance initiatives and develop performance measures to 

monitor the progress of its plan. DOD concurred with our 

recommendations and responded that it would form a team to conduct 

comprehensive planning to include an assessment of implications for 

doctrine, organization, training, material, leadership, personnel, and 

facilities. In a follow-on March 2011 report on duplication, overlap, and 

fragmentation in the federal government,23

Further, DOD officials implemented two separate efforts during 2011 to 

address, among other things, rising military health costs. First, in March 

we stated that these analyses 

had not been conducted, and Health Affairs had not provided guidance on 

how and when to complete the governance initiatives. Additionally, we 

emphasized that DOD needed to take action to reduce duplication in its 

command structure and eliminate redundant processes by further 

assessing alternatives for restructuring MHS governance.

 

23 GAO-11-318SP. 
 

Page 11 GAO-12-224 Defense Health Care

2011, the Under Secretary of Defense for Personnel and Readiness 

initiated a comprehensive review and evaluation of military health care to 

develop a series of proposals aimed at increasing the performance and 

efficiency of DOD’s MHS in a number of key areas. Additionally, in June 

2011, the Deputy Secretary of Defense established a 90-day task force to 

review various options for changes to the overall governance structure of 

the MHS and of its multiservice medical markets. Subsequent to the 

establishment of this task force, the National Defense Authorization Act 

for Fiscal Year 2012 required DOD to submit a report to the congressional 

defense committees to include (among other things) options considered 

by the task force, the goals to be achieved by governance reorganization, 

costs of each option considered, and an analysis of the strengths and 

weaknesses of each option.24 The Comptroller General is required to 

review DOD’s report and report back to the congressional committees 

within 180 days from DOD’s issuance. The act also prohibits the 

Secretary of Defense from restructuring or reorganizing the MHS until 120 

days after GAO submits its report.

DOD has identified 11 initiatives aimed at slowing medical cost growth, 

but it has not fully applied results-oriented management practices to its 

efforts. Specifically, it has developed an implementation plan and related 

estimates of potential cost savings for only 1 of the 11 initiatives. As a 

result, DOD has limited its effectiveness in implementing and monitoring 

these initiatives and achieving related cost savings and other 

performance goals.

 

24 National Defense Authorization Act for Fiscal Year 2012, Pub. L. No. 112-81, § 716

(2011). 

DOD Has Identified 

Initiatives Aimed at 

Slowing Medical Cost 

Growth but Has Not 

Fully Applied ResultsOriented Management 

Practices 
 

Page 12 GAO-12-224 Defense Health Care

The Senior Military Medical Advisory Council—a committee that functions 

as an executive-level discussion and advisory group,25 has approved 11 

initiatives that it believes will help reduce rising health care costs. (See 

table 2 for a list of these initiatives.) These 11 initiatives consist of 

changes to MHS clinical and business practices in areas ranging from 

primary care to psychological health care to purchased care 

reimbursement practices. DOD’s initiatives generally reflect broader 

concepts that were discussed by health care experts, business leaders, 

and public officials at two separate forums convened by GAO in 2004 and 

2007 on ideas for responding to cost and other challenges in the health 

care system.26 For example, in the 2004 forum, 55 percent of participants 

strongly agreed that the U.S. health care system is characterized by both 

underuse of wellness and preventive care and overuse of high-tech 

procedures. In addition, the plenary speakers at the 2004 forum observed 

that unwarranted variation in medical practices nationwide points to 

quality and efficiency problems. Similarly, DOD developed initiatives that 

seek to increase the productivity of and to ease access to primary care 

and encourage wellness, preventive, and evidence-based27

 

25 This group is chaired by the Assistant Secretary of Defense for Health Affairs and 

includes the surgeons general from the Army, the Navy, and the Air Force; the Joint Staff 

Surgeon; and four deputy assistant secretaries of defense.

health care. 

Further, in the 2007 forum, 77 percent of participants strongly agreed that 

the federal government should revise its payment systems and leverage 

its purchasing authority to foster value-based purchasing for health care 

products and services. Similarly, MHS officials discussed potential 

changes that led to the fourth and fifth initiatives as listed in table 2. Both 

initiatives involve changes to payment for medical care to reward quality 

of care and health outcomes instead of volume of services rendered. 

Another of the 11 initiatives aims to reduce costs by keeping patients as 

healthy as possible during treatment and recovery. With this initiative, 

MHS officials hope to reach the goal of reducing hospital readmissions by 

20 percent and hospital acquired infections by 40 percent by 2013 from 

the baseline year of 2010.

26 GAO, Comptroller General’s Forum: Health Care: Unsustainable Trends Necessitate 

Comprehensive and Fundamental Reforms to Control Spending and Improve Value, 

GAO-04-793SP (Washington, D.C.: May 2004), and Highlights of a Forum: Health Care 

20 Years from Now: Taking Steps Today to Meet Tomorrow’s Challenges, 

GAO-07-1155SP (Washington, D.C.: September 2007).

27 Evidence-based medicine is the integration of the best research evidence with clinical 

expertise and patient values.

DOD Has Identified 

Initiatives Aimed at 

Slowing Medical Cost 

Growth 
 

Page 13 GAO-12-224 Defense Health Care

DOD has not fully developed results-oriented management plans for 

implementing its health care initiatives, which could help ensure the 

achievement of these initiatives’ cost savings goals. Specifically, we 

found that as a start to managing the implementation of its initiatives, 

DOD has developed a dashboard management tool that will include 

elements such as an explanation of the initiative’s purpose, key 

performance measures, and funding requirements for implementation. In 

December 2011, the Senior Military Medical Advisory Council approved 

six dashboards that were significantly, but not entirely completed. A 

Health Affairs official stated that DOD currently lacks net cost savings 

estimates for all but one of the initiatives. Cost savings estimates are 

critical to successful management of the initiatives so that DOD can 

achieve its goal of reducing growth in medical costs as stated in the 2010 

Quadrennial Defense Review. Further, DOD developed an 

implementation plan to support the dashboards. The implementation plan 

has a set format to include such information as general timelines and 

milestones, key risks, and estimated cost savings.

DOD currently has one completed implementation plan, which also 

contains the one available cost savings estimate among all the initiatives. 

See table 2 for the progress made for each of these initiatives.

DOD Has Not Fully 

Developed ResultsOriented Management 

Plans for Implementing Its 

Health Care Initiatives
 

Page 14 GAO-12-224 Defense Health Care

Table 2: Progress Made in Developing a Dashboard and Detailed Implementation Plan for Each of DOD’s Strategic Initiatives 

as of January 13, 2012

Dollars in millions

Strategic initiative

Dashboard 

approved?

Implementation

plan approved?

Estimated net 

savingsa

1. Implement Patient Centered Medical Home model of care to 

increase satisfaction, improve care, and reduce costs

  $39.3

2. Integrate psychological health programs to improve outcomes 

and enhance value



3. Implement incentives to encourage adherence to medical 

standards based on evidence to increase patient satisfaction, 

improve care, and reduce costs 



4. Implement alternative payment mechanisms to reward value in 

health care services



5. Revise DOD’s future purchased care contracts to offer more 

and varied options for care delivery from private sector health 

care providers



6. Improve the measurement and management of DOD’s 

population health by moving away from focusing on illness and 

disease to an emphasis on prevention, intervention, and 

wellness by health care providers



7. Optimize pharmacy practices to improve quality and reduce 

costs

8. Implement policies, procedures, and partnerships to meet 

individual servicemembers’ medical readiness goals

9. Implement DOD and Department of Veterans Affairs joint 

strategic plan for mental health to improve coordination

10. Implement modernized electronic health record to improve 

outcomes and enhance interoperability

11. Improve governance to achieve better performance in 

multiservice medical markets 

Source: GAO analysis of DOD information.

a

The net savings represents GAO’s analysis based on DOD data. GAO did not independently assess 

the reliability of DOD data. DOD estimates that its investment in the Patient Centered Medical Home 

initiative will be $571.4 million in total from fiscal years 2010 through 2016.

As table 2 shows, DOD had completed a dashboard, an implementation 

plan, and a cost savings estimate for only 1 of its 11 initiatives as of 

January 13, 2012. As DOD completes its dashboards, implementation 

plans, and cost savings estimates, it could benefit from the application of 

the six characteristics of a comprehensive, results-oriented management 
 

Page 15 GAO-12-224 Defense Health Care

framework, on which GAO has previously reported,28 including a thorough 

description of the initiatives’ mission statement; problem definition, scope, 

and methodology; goals, objectives, activities, milestones, and 

performance measures; resources and investments; organizational roles, 

responsibilities, and coordination; and key external factors that could 

affect the achievement of goals. DOD has completed an implementation 

plan for 1 of its 11 initiatives—the Patient Centered Medical Home29

initiative, which seeks to increase access to DOD’s primary care network. 

Based on DOD data, we estimate that this initiative will have a net cost 

savings of $39.3 million through fiscal year 2016.30 Using the desirable 

characteristics of a results-oriented management plan, we assessed the 

one approved implementation plan, and our analysis of this plan showed 

that DOD addressed four of the characteristics and partially addressed 

two other characteristics. For an overview of the six desirable 

characteristics of comprehensive, results-oriented management plans 

and our assessment of the extent to which DOD’s Patient Centered 

Medical Home implementation plan incorporates these desired 

characteristics, see table 3.

 

28 GAO-04-408T. 

29 For the Patient Centered Medical Home program, which seeks to increase access to 

DOD’s primary care network, DOD has developed five measures to track progress in 

terms of positively affecting emergency room utilization, patient satisfaction with health 

care and appointment availability, primary care staff satisfaction, and the percentage of 

the times patients receive care from their primary care managers.

30 We did not assess the reliability of DOD data.
 

Page 16 GAO-12-224 Defense Health Care

Table 3: Extent to Which the Patient Centered Medical Home Implementation Plan Addressed the Six Desired Characteristics 

of Comprehensive, Results-Oriented Management Plans

Six desired characteristics of a comprehensive, results-oriented management plan 

Our assessment of the Patient Centered 

Medical Home implementation plan

(1) Mission statement—A comprehensive statement that summarizes the main purposes 

of the plan. ●

(2) Problem definition, scope, and methodology—Presents the issues to be addressed by 

the plan, the scope of its coverage, the process by which it was developed, and key 

considerations and assumptions used in the development of the plan. 

●

(3) Goals, objectives, activities, milestones, and performance measures—The 

identification of goals and objectives to be achieved by the plan, activities or actions to 

achieve those results, as well as milestones and performance measures. 

●

(4) Resources and investments—The identification of costs to execute the plan and the 

sources and types of resources and investments, including skills and technology and the 

human, capital, information, and other resources required to meet the goals and 

objectives. 

◐

(5) Organizational roles, responsibilities, and coordination—The development of roles 

and responsibilities in managing and overseeing the implementation of the plan and the 

establishment of mechanisms for multiple stakeholders to coordinate their efforts 

throughout implementation and make necessary adjustments to the plan based on 

performance. 

●

(6) Key external factors that could affect the achievement of goals—The identification of 

key factors external to the organization and beyond its control that could significantly 

affect the achievement of the long-term goals contained in the plan. These external 

factors can include economic, demographic, social, technological, or environmental 

factors, as well as conditions that would affect the ability of the agency to achieve the 

results desired. 

◐

Legend: ◐ = Partially addressed; ● = Addressed; ○ = Not addressed.

Source: GAO analysis of DOD data.

Our review of the Patient Centered Medical Home implementation plan 

found that DOD partially addressed the desired characteristic regarding 

resources and investments. While DOD acknowledged that some staff will 

be committed full-time to working on this initiative, it did not show in the 

plan, as prescribed, the number of personnel needed in total to implement 

the initiative. A DOD official noted that the section in the plan that asks for 

the number of personnel needed was intended for officials to show if 

additional personnel and funding beyond the current level were needed. 

However, the absence of information concerning DOD’s use of current 

staff renders the size of the initiative’s impact on utilization of personnel 

unclear. In addition, the Patient Centered Medical Home implementation 

plan’s annual cost savings estimate did not reflect net losses when they 

occur in a given fiscal year. For example, in fiscal years 2012 and 2013, 

DOD’s investment in the Patient Centered Medical Home initiative is 

larger than savings, but the implementation plan does not show the net 
 

Page 17 GAO-12-224 Defense Health Care

losses for those early years.31

Additionally, our review of this implementation plan found that DOD 

partially addressed the desired characteristic of discussing the key 

external factors that could have an impact on the achievement of goals. 

While it provided an extensive overview of internal and external 

challenges, DOD did not outline a specific process for monitoring such 

developments. Further, the implementation plan does not fully explore the 

effect of such challenges on the program’s goals or explain how it takes 

such challenges into account, such as by outlining a mitigation strategy to 

overcome them.

Instead, it shows zero cost savings for 

those years. A DOD official responded by noting that DOD interpreted 

estimated savings to only include actual savings in any given year and 

not net losses. However, without accounting for both cost savings and 

investments, decision makers lack a comprehensive understanding of a 

program’s true costs.

As DOD further develops its dashboards and implementation plans and 

incorporates the desired characteristics, it will be in a stronger position to 

better manage its reforms and ultimately achieve cost savings. For 

example, DOD was experiencing a 5.5 percent annual increase in per 

capita costs for its enrolled population according to data available as of 

December 2011, but DOD had set its target ceiling for per capita health 

care cost increases for fiscal year 2011 at a lower rate of 3.1 percent.

According to DOD calculations using 2011 enrollee and cost data, if DOD 

had met its target ceiling of 3.1 percent increase as opposed to a 5.5 

percent increase, the 2.4 percent reduction would have resulted in 

approximately $300 million in savings. As DOD’s initiatives evolve and 

each of these management tools is completed for each of the initiatives, 

they may provide DOD with a road map to improve its efforts to 

implement, monitor progress toward, and achieve both short-term and 

longer-term financial and other performance goals.

 

31 GAO’s calculation of the cost savings for the Patient Centered Medical Home initiative 

as shown in table 2 takes both net savings and total net losses into account.
 

Page 18 GAO-12-224 Defense Health Care

DOD also has not completed the implementation of an overall process for 

monitoring progress across its portfolio of health care initiatives and has 

not completed the process of identifying accountable officials and their 

roles and responsibilities for all of its reform efforts. Our work on resultsoriented management has found that a process for monitoring progress is 

key to success.32 We have also reported that clearly defining areas of 

responsibility is a key process that provides management with a 

framework for planning, directing, and controlling operations to achieve 

goals.33 In addition, as MHS leaders develop and implement their plans to 

control rising health care costs, they will need to work across multiple 

authorities and areas of responsibility. As the 2007 Task Force on the 

Future of Military Health Care noted, the current MHS does not function 

as a fully integrated health care system.34 As we reported in October 

2005,35 agreement on roles and responsibilities is a key step to 

successful collaboration when working across organizational boundaries, 

such as the military services. Committed leadership by those involved in 

the collaborative effort, from all levels of the organization, is also needed 

to overcome the many barriers to working across organizational 

boundaries. For example, Health Affairs centrally manages Defense 

Health Program funds for the military services, but it lacks direct 

command and control of the military treatment facilities. Additionally, we 

reported in September 200536

 

32 GAO, Results-Oriented Government: GPRA Has Established a Solid Foundation for 

Achieving Greater Results, 

that the commitment of agency managers 

to results-oriented management is an important practice to help increase 

the use of performance information for policy and program decisions. 

DOD’s one approved implementation plan for the Patient Centered 

Medical Home initiative provides further information on how DOD has 

applied a monitoring structure, defined accountable officials, and 

assigned roles and responsibilities in the case of this initiative. Senior 

officials stated that they plan to monitor performance, specifically cost 

GAO-04-38 (Washington, D.C.: Mar. 10, 2004).

33 GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).

34 Defense Health Board, Task Force on the Future of Military Health Care. 

35 GAO, Results-Oriented Government: Practices That Can Help Enhance and Sustain 

Collaboration among Federal Agencies, GAO-06-15 (Washington, D.C.: Oct. 21, 2005).

36 GAO, Managing for Results: Enhancing Agency Use of Performance Information for 

Management Decision Making, GAO-05-927 (Washington, D.C.: Sept. 9, 2005).

DOD Is in the Initial Stages 

of Developing a Monitoring 

Process for Measuring the 

Progress of Its Health Care 

Initiatives
 

Page 19 GAO-12-224 Defense Health Care

savings, and said that if projected cost savings were not realized, senior 

leadership would reconsider further investment in the program. We 

reported that in some instances, up-front investments are needed to yield 

longer-term savings and that it is essential for officials to monitor and 

evaluate whether the initiative is meeting its goals.37 However, DOD has 

not completed this process for the remainder of its initiatives. Without 

sustained top civilian and military leadership which is consistently 

involved throughout the implementation of its various initiatives and until 

DOD fully implements for all of its initiatives a mechanism to monitor 

performance and identify accountable officials, including their roles and 

responsibilities, DOD may be hindered in its ability to achieve a more 

cost-efficient MHS and at the same time address its medical readiness 

goals, improve its overall population health, and improve its patients’ 

experience of care.

Beyond the medical initiatives designed to slow medical cost growth, 

DOD has taken steps to implement several other initiatives designed to 

improve MHS governance. However, DOD officials have not fully 

employed several key management practices to help ensure that these 

medical governance initiatives will achieve their stated goals.

DOD has to varying degrees taken steps to implement some of the seven 

governance initiatives approved by the Deputy Secretary of Defense in 

2006 with the goal of achieving economies of scale, operational 

efficiencies, and financial savings as well as consolidating common 

support functions and eliminating administrative redundancies. In 2007, 

after the initiatives were approved, we recommended that DOD 

demonstrate a sound business case for proceeding with these initiatives 

to include providing detailed qualitative and quantitative analyses of 

benefits, costs, and associated risks. Initially, DOD expected that the 

 

37 GAO, Streamlining Government: Key Practices from Select Efficiency Initiatives Should 

Be Shared Governmentwide, GAO-11-908 (Washington, D.C.: Sept. 30, 2011).

Some Governance 

Initiatives Have Been 

Implemented, but 

DOD Has Not Fully 

Employed Key 

Management 

Practices 

DOD Has Taken Steps to 

Implement Its Seven 

Governance Initiatives
 

Page 20 GAO-12-224 Defense Health Care

seven initiatives would save at least $200 million annually once 

implemented. However, more than 5 years later, DOD officials have 

projected estimated financial savings for only one of the seven initiatives 

concerning the governance and management of the MHS—an initiative to 

consolidate the command and control structure of its health services 

within the National Capital Region.38 Similarly, as part of a separate 

initiative aimed at increasing efficiency and conserving funds, DOD 

consolidated its operations at the Naval Health Clinic Great Lakes with 

the Department of Veterans Affairs’ (VA) North Chicago Veterans Affairs 

Medical Center, but has not measured its progress in achieving financial 

savings.39 Officials said that many of the governance initiatives have 

significant potential for cost savings, and some of these governance 

initiatives have already achieved various efficiencies. However, financial 

savings have not been demonstrated for the majority of the initiatives 

because most have not been fully implemented. For those that have been 

implemented, such as the Joint Medical Education and Training Campus 

in San Antonio, Texas, officials stated that they were unable to develop 

baseline training costs against which to measure future costs and 

potential savings. However, the governance structure to command, 

control, and manage operations at the campus has resulted in the 

consolidation of 39 of 64 courses. According to officials, this has resulted 

in efficiencies such as the standardization of pharmacy clinical policy 

across the services. Table 4 lists the steps DOD has taken to implement 

the seven governance initiatives, the results of those actions, and 

potential opportunities to achieve additional cost savings and efficiencies.

 

38 In addition to the one documented estimate of financial savings, there may be 

additional cost savings or costs incurred as a result of the BRAC actions related to these 

initiatives.

39 In 2011, we reported on the progress that the joint venture had made toward achieving 

the integration areas identified in the executive agreement between DOD and VA. GAO, 

VA and DOD Health Care: First Federal Health Care Center Established, but 

Implementation Concerns Need to Be Addressed, GAO-11-570 (Washington, D.C.: 

July 19, 2011).
 

Page 21 GAO-12-224 Defense Health Care

Table 4: Status of the Seven Approved Military Health System Governance Initiatives 

Steps taken Outcomes achieved Potential additional opportunities

Create governance structures to command and control the combined operations at the military treatment facilities in the 

National Capital Area and in the San Antonio, Texas area

In 2007, the Deputy Secretary of 

Defense established the standing 

Joint Task Force National Capital 

Region Medicala to deliver military 

health care within the National Capital 

Region using all available military 

health care resources and to manage 

the BRAC-directed consolidation of 

medical service in the National 

Capital Region.

Financial savingsb achieved for Joint Task Force 

National Capital Region Medical:

• Joint Task Force officials reported that they had a 

onetime savings of about $109 million for fiscal year 

2009 through the use of one consolidated contract to 

cover the equipment and relocation costs for the 

hospitals being built or renovated under this 

recommendation and to employ bulk buying power 

to save money. 

• Joint Task Force officials stated that the new unified 

human resources center resulted in a reduction of 

nine full-time positions and a new joint referral and 

appointment office achieved $0.2 million in recurring 

annual savings from staffing efficiencies.

Estimates from the fiscal year 2011 BRAC budget 

request project an annual recurring savings of 

$172 million for the 13 separate actions associated with 

the BRAC recommendation related to this initiative (2 of 

which are closely related to the establishment of the Joint 

Task Force National Capital Region Medical).c However, 

our analysis has shown that the up-front costs for the 

actions under this recommendation are so great that they 

more than offset the annual recurring savings that might 

accrue. Therefore, this BRAC action very likely will not 

provide any savings over the 20-year projected payback 

period.d

Joint Task Force National Capital 

Region Medical officials expect 

consolidation to eventually reduce 

contractor and civilian personnel, 

which they estimate will decrease 

costs by $60 million per year by 

fiscal year 2016.

In September 2010, the Army and Air 

Force Chiefs of Staff signed a 

memorandum of agreement 

establishing a collaborative 

organization known as the San 

Antonio Military Health System that 

will provide oversight for clinical, 

educational, and business operations 

for the San Antonio area.

Financial savingsb achieved for the San Antonio 

Military Health System: The staffing for this office was 

accomplished through the reallocation of existing 

personnel. While agency officials report no documented 

savings associated with this initiative, they believe that 

establishing the San Antonio Military Health System 

governance structure will save money. However, they 

state that it is too early to quantify the savings. Estimates 

from the fiscal year 2011 BRAC budget request for a 

related BRAC recommendation projected an annual 

savings of $6.8 million.c However, our analysis has 

shown that the up-front costs for the actions under this 

recommendation are so great that they more than offset 

the annual recurring savings that might accrue. 

Therefore, this BRAC action very likely will not provide 

any savings over the 20-year projected payback period.d

San Antonio Military Health System 

officials expect that the collaborative 

governance structure will assist 

commanders with optimizing 

available medical resources and 

reallocating resources to prevent or 

eliminate redundant operations 

within the San Antonio area. 

Additionally, officials anticipate that 

efficiencies and associated cost 

savings will result from the area’s 

shared beneficiary population, 

facilities, and mission.
 

Page 22 GAO-12-224 Defense Health Care

Steps taken Outcomes achieved Potential additional opportunities

Create a governance structure to command, control, and manage the Joint Medical Education and Training Campus in 

San Antonio, Texas

The Army, Navy, and Air Force 

signed a memorandum of agreement 

that outlines the command and 

control structure for the BRACdirected establishment of the joint 

Medical Education Training Campus 

in San Antonio, which reduced the 

number of enlisted medical training 

locations from five to one.

Financial savingsb: While agency officials report no 

documented savings associated with this initiative, they 

believe that by reducing the number of overall training 

locations money has been saved and other efficiencies 

have been achieved. However, estimates from the fiscal 

year 2011 BRAC budget request project an annual 

savings of $97.1 million.c This estimate includes savings 

from changes in the cost of military personnel, civilian 

personnel, operations and maintenance, overhead, and 

other expenses. 

Other nonfinancial outcomes achieved: According to 

senior officials, 39 of the 64 named programs of 

instruction have been consolidated and are achieving 

nonfinancial efficiencies. For example, senior officials 

stated that colocating

• the pharmacy training provided the opportunity for 

differences in clinical policy across services to be 

identified and standardized and

• courses for X-ray and dental technicians provided 

the opportunity to standardize and raise the quality 

of instruction across the services.

Officials stated that they will 

continue to investigate ways to 

consolidate the remaining 25 

programs of instruction, which could 

lead to further financial and 

nonfinancial benefits in the future.

Officials stated that they are in the 

process of developing an 

accounting system that will be able 

to track the cost per course, per 

class, per service, and per student. 

Colocate the MHS’s and services’ medical headquarters staff

DOD leased a building for the BRACdirected colocation of Health Affairs, 

the TRICARE Management Activity, 

and the military services’ medical 

headquarters staff, and renovations to 

that building are under way. However, 

the staff are not scheduled to move 

into the building until the summer of 

2012.

Financial savingsb: Agency officials report no realized 

savings associated with this initiative, and estimates from 

the fiscal year 2011 BRAC budget request project this 

initiative to increase costs annually by $0.9 million.c

According to officials, projected increases are the result 

of the decision to lease a building, as opposed to the 

original plan to renovate an existing building or build a 

new facility. 

Officials believe the colocation will 

provide more opportunities for the 

different services to collaborate and 

consolidate functions or share 

services thus possibly producing 

efficiencies and cost savings in the 

future. However, according to 

diagrams provided by Health Affairs 

officials, MHS and each of the 

services’ personnel are segregated 

in different wings of the building, 

which could hinder opportunities for 

collaboration and further 

consolidation of functions.
 

Page 23 GAO-12-224 Defense Health Care

Steps taken Outcomes achieved Potential additional opportunities

Consolidate all medical research and development under the Army Medical Research and Material Command (MRMC)

Officials stated that Health Affairs and 

MRMC agreed to a management 

arrangement that resulted in the Army 

managing two-thirds to three-fourths 

of DOD’s medical research and 

development funding, mostly from the 

Army and the Defense Health 

Program. 

Financial savings: Agency officials report no 

documented savings associated with this initiative. 

However, officials stated that Health Affairs avoided 

establishing a duplicative structure for the management 

of its increased research and development funding by 

using the existing Army research and development 

management structure already in place at MRMC. Health 

Affairs reimburses the Army for costs related to this 

effort.

Approximately one-fourth to onethird of medical research and 

development is not centrally 

managed, but according to officials, 

DOD has no plans to consolidate 

that funding. A 2008 DOD 

assessment concluded that a single 

consolidated medical research and 

development budget structure with 

centralized planning, programming, 

and budgeting authority along with 

centralized management would 

provide the most efficient and 

effective process and governance 

for the investment.e Further, GAO 

recently reported that multiple 

entities play roles in psychological 

health and traumatic brain injury 

health care activities, but none 

serves as a coordinating authority.f

Realign TRICARE Management Activity and establish a Joint Military Health Service Directorate to consolidate shared 

services and common functions

Realign TRICARE Management Activity and establish a TRICARE Health Plan Agency to focus on health insurance plan 

management

In March 2011, Secretary Gates 

approved an Assistant Secretary of 

Defense for Health Affairs 

recommendation to reorganize the 

TRICARE Management Activity and 

establish the Military Health System 

Support Activity consisting of four 

divisions: (1) Uniformed Services 

University of the Health Sciences, 

(2) TRICARE health plan, (3) Health 

Management Support, and (4) Shared 

Services division.

Financial savingsb: Agency officials report no realized 

savings associated with this initiative; however, Health 

Affairs reduced the fiscal year 2012 Defense Health 

Program budget request by $51 million and reduced 

estimates for future year requests by the same amount 

anticipating the establishment of the Military Health 

System Support Activity. 

If additional consolidation of shared 

support activities occurs not only 

within the TRICARE Management 

Activity but among the services also, 

officials indicated that additional 

cost savings may be possible. For 

example, the services could reduce 

overhead costs by consolidating 

corporate-level functions, such as 

human capital management, 

finance, support, and logistics. 

Create governance structures that consolidate command and control of the military treatment facilities in multiservice 

markets (other than the National Capital Region and San Antonio)

In June 2011, the Deputy Secretary of 

Defense established a team to study 

the governance in these multiservice 

markets and to recommend any 

necessary changes to their structure. 

The task force completed its work in 

September 2011, but DOD has made 

no changes to the governance 

structures of current multiservice 

markets throughout MHS.

Financial savings: Agency officials report no realized 

savings associated with this initiative. 

DOD documentation supporting the 

development of the November 2006 

memo approved by the Deputy 

Secretary of Defense stated that the 

services agreed that there is a 

significant opportunity to improve 

health services delivery at the 

market or regional levels, especially 

where two or more services operate, 

by empowering a single commander 

with clear authority over programs, 

budget, and personnel. 
 

Page 24 GAO-12-224 Defense Health Care

Source: GAO analysis of DOD information.

a

A joint task force is a jointly manned and operated force that is designated by the Secretary of 

Defense (among others) that may be established on a geographical area or functional basis when the 

mission has a specific limited objective and does not require overall centralized control of logistics, 

such as the Joint Task Force National Capital Region Medical, which covers both geographical and 

functional bases.

b

GAO did not independently assess the reliability of this cost savings estimate.

c

The estimates were obtained from the electronic version of the fiscal year 2011 BRAC budget 

request and not the published document. We and the BRAC Commission believe that DOD’s net 

annual recurring savings estimates are overstated because DOD includes savings from eliminating 

military personnel positions without corresponding decreases in end strength. DOD disagrees with 

our position. See GAO, Military Base Realignments and Closures: Estimated Costs Have Increased 

While Savings Estimates Have Decreased Since Fiscal Year 2009, GAO-10-98R (Washington, D.C.: 

Nov. 13, 2009).

d

We used net present value analysis to determine whether future annual savings achieved by BRAC 

action would exceed their up-front costs. Net present value is a financial calculation that accounts for 

the time value of money by determining the present value of future savings minus up-front investment 

costs over a specific period of time. Determining net present value is important because it illustrates 

both the up-front investment costs and long-term savings in a single amount. In the context of BRAC 

implementation, net present value is calculated for a 20-year period from 2006 through 2025.

e

See Dr. Robert E. Foster, Captain C. Douglas Forcino, MSC, USN, and Dr. Frederick Pearce, 

“Guidance for the Development of the Force FY2010–2015, Program and Budget Assessment A4.16, 

Medical Research and Development Investments,” prepared for the Under Secretary of Defense for 

Acquisitions, Technology and Logistics (June 2008).

f

GAO, Defense Health: Coordinating Authority Needed for Psychological Health and Traumatic Brain 

Injury Activities, GAO-12-154 (Washington, D.C.: Jan. 25, 2012).

Although DOD has achieved varying levels of implementation of its MHS 

governance initiatives, it did not consistently employ several key 

management practices found at the center of successful mergers, 

acquisitions, and transformations. Further, BRAC implementation 

requirements drove implementation progress for a number of initiatives. 

At a GAO forum in September 2002, leaders with experience managing 

large-scale organizational mergers, acquisitions, and transformations 

identified at least nine key practices and lessons learned from major 

private and public sector organizational mergers, acquisitions, and 

transformations.40

 

40

During the course of our work examining DOD’s health 

care initiatives, we determined that six of the key practices identified at 

our 2002 forum were especially important to ensure that DOD has the 

framework needed to implement its governance initiatives: (1) a focus on 

a key set of principles and priorities that are embedded in the 

organization to reinforce the new changes, (2) coherent mission and 

integrated strategic goals to guide the transformation, (3) implementation 

GAO-03-669. 

DOD Did Not Fully 

Employ Key Management 

Practices
 

Page 25 GAO-12-224 Defense Health Care

goals and a timeline to build momentum and show progress from day 

one, (4) a communication strategy to create shared expectations and 

report related progress, (5) a dedicated implementation team with the 

responsibility and authority to drive the department’s governance 

initiatives, and (6) committed and sustained leadership.41

To its credit, DOD developed a set of guiding principles to facilitate its 

transformation of DOD’s medical command structure. A clear set of 

principles and priorities can serve as a framework to help the agency 

create a new culture and drive employee behavior. For example, a set of 

core values can become embedded in every aspect of the organization 

and can serve as an anchor that remains valid and enduring while 

organizations, personnel, programs, and processes change. Senior DOD 

officials developed a set of guiding principles to direct efforts throughout 

the governance transformation. These principles and goals were included 

in the November 2006 memorandum: (1) provide a healthy, fit and 

protected force; (2) create a trained, ready, and highly capable medical 

force that delivers superior medical support; and (3) ensure efficient 

delivery of a comprehensive health benefit to eligible beneficiaries.

Although DOD provided initial guidance and strategic goals in its 

November 2006 memorandum, it did not follow leading results-oriented 

strategic planning guidance by establishing performance measures. As 

we have previously reported, effective implementation includes adopting 

leading practices for results-oriented strategic planning and reporting,

such as establishing specific and measurable performance measures for 

the transformed organization.42 In addition, intermediate measures can be 

used to provide information on interim results and show progress toward 

intended results.43

 

41 We determined that DOD’s use of each of these six of the practices was relevant 

because DOD either employed a practice to some degree or the practice was appropriate 

given DOD’s position in the transformational process and therefore it should have 

employed the practice. However, this exception on our part does not suggest that DOD 

should not employ the other three practices in the future. As DOD progresses through the 

change process, DOD should consider employing all of the key practices to help ensure a 

successful transformation. For a more detailed discussion concerning our methodology for 

assessing DOD’s application of these key practices, see app. I of this report. 

DOD provided initial guidance, which includes strategic 

42 GAO-03-669. 

43 GAO, DOD’s High-Risk Areas: Challenges Remain to Achieving and Demonstrating 

Progress in Supply Chain Management, GAO-06-983T (Washington, D.C.: July 25, 2006).

Focus on a Key Set of 

Principles and Priorities at the 

Outset of the Transformation

Establish a Coherent Mission 

and Integrated Strategic Goals 

to Guide the Transformation
 

Page 26 GAO-12-224 Defense Health Care

goals to assist in the implementation of the governance transformation. 

For example, the memo provided that lessons learned from the 

consolidation and realignment of health care delivery within the National 

Capital Region and San Antonio be used as the basis for establishment of 

similar structures in other multiservice medical markets. However, MHS 

officials stated that Health Affairs did not fully monitor and evaluate the 

progress of its governance initiatives using performance measures. 

Specifically, DOD leaders stated that specific measures to evaluate the 

outcomes of the different governance approaches taken in these two 

locations had not been established. Therefore, DOD lacked information 

that would be useful in deciding if governance changes are needed in 

other multiservice medical markets. Such measurable outcomes provide 

the information DOD needs to determine if it is meeting its goals, make 

informed decisions, and track the progress of the governance 

transformation activities.

The November 2006 memorandum provided a brief, initial 3-year 

timetable for the implementation of the governance transformation 

initiatives; however, this timetable is high level and did not contain interim 

dates indicating progress. Besides meeting the approval date of the 

memorandum, MHS officials did not meet any of the other major dates 

that were set in the timetable. We have reported that establishing 

implementation goals and a timeline is critical to ensuring success, as 

well as pinpointing performance shortfalls and gaps and suggesting 

midcourse corrections.44 A transformation, such as changing DOD’s MHS 

governance, is a substantial commitment that could take years before it is 

completed and therefore must be carefully managed and monitored to 

achieve success. At a minimum, successful mergers and transformations 

should have careful and thorough interim plans in place well before the 

effective implementation date.45

 

44

However, the timetable lacked any 

interim goals. While DOD has made progress in implementing the three 

initiatives that were related to BRAC recommendations, this is most likely 

because DOD was required by law to complete most implementation of 

BRAC recommendations by September 15, 2011, and to have a 

monitoring process in place to support these efforts. These three 

GAO-03-669. 

45 GAO, Highlights of a GAO Forum: Mergers and Transformation: Lessons Learned for a 

Department of Homeland Security and Other Federal Agencies, GAO-03-293SP

(Washington, D.C.: Nov. 14, 2002).

Set Implementation Goals and 

a Timeline to Build Momentum 

and Show Progress from Day 

One
 

Page 27 GAO-12-224 Defense Health Care

initiatives are (1) create governance structures to command, control, and 

manage the combined operations at the military treatment facilities in the 

National Capital Area and in the San Antonio, Texas, area; (2) create a 

governance structure to command, control, and manage the Joint Medical 

Education and Training Campus in San Antonio, Texas; and (3) colocate 

Health Affairs, TMA, and the services’ medical headquarters staff. 

However, the latest completion date for the colocation of the Health 

Affairs, TMA, and the services’ medical headquarters staff is the summer 

of 2012. DOD’s governance initiatives may have been better implemented 

if MHS officials had maintained a long-term focus on the transformation 

by setting both short- and long-term goals to show progress and 

developing a more complete and specific timetable to guide the efforts.

DOD has not established an effective and ongoing communication 

strategy to allow MHS officials to distribute information about its 

governance changes early and often. Key practices suggest that a 

transforming organization develop a comprehensive communication 

strategy that reaches out to employees, customers, and stakeholders and 

seeks to genuinely engage them in the transformation process. This 

includes communicating early and often to build trust, ensuring 

consistency of message, encouraging two-way communication, and 

providing information to meet specific needs of employees. While MHS 

officials communicated their transformation initiatives in the 2007 

TRICARE Stakeholders’ Report, subsequent reports did not contain any 

references to the governance initiatives. In addition, the 2008 Military 

Health System Strategic Plan46

 

46 DOD, The Military Health System Strategic Plan: A Roadmap for Medical 

Transformation (Summer 2008).

references a goal to “improve governance 

by aligning authority and accountability” as a strategic priority; however, 

the plan does not elaborate on how this goal will be met, and it has not 

been reissued since. Furthermore, the lack of a communication strategy 

is evident based on the fact that officials in San Antonio responsible for 

the initiatives related to establishing the Joint Medical Education and 

Training Campus and San Antonio Military Health System told us they 

were unaware of the approved governance initiatives. DOD has not 

developed an approach to communicate its governance transformation 

initiatives with stakeholders to ensure that they have a basic 

understanding of their role and involvement. Without a comprehensive 

communication strategy, MHS officials will remain limited in their ability to 

Establish a Communication 

Strategy to Create Shared 

Expectations and Report 

Related Progress 
 

Page 28 GAO-12-224 Defense Health Care

gain support for the governance transformation. Further, this lack of 

communication can create confusion or a lack of awareness among 

stakeholders, which can place the success of DOD’s initiatives at risk.

DOD did not form an overarching implementation team for all seven of its 

initiatives to direct their progress. Our prior work has shown that a 

dedicated team vested with necessary authority and resources to help set 

priorities, make timely decisions, and move quickly to implement 

decisions is critical for a successful transformation.47

DOD leadership did not provide the sustained direction needed to help 

ensure progress of its MHS governance transformation. We previously 

reported that leadership sets the direction, pace, and tone for the 

transformation and provides sustained attention over the long term. In 

addition, top leaders who are clearly and personally involved in mergers 

or transformations can help to provide stability during such tumultuous 

times.

As we have 

previously reported, a strong and stable implementation team responsible 

for day-to-day management is important to ensuring that a transformation 

effort receives the focused, full-time attention needed to be sustained and 

successful. The Deputy Secretary of Defense’s November 2006 

memorandum directed DOD to build such a team by 2007. Instead, 

according to a DOD official, it initiated independent transition teams to 

guide the implementation of some of its initiatives, such as the Joint Task 

Force National Capital Region Medical and the colocation of the MHS’s 

and the services’ medical headquarters staff. The lack of an overarching 

implementation team likely hampered progress and contributed to uneven 

progress in the implementation of the initiatives.

48

 

47

Since the approval of the governance initiatives in 2006, DOD 

leadership has not provided such direction. While progress was made in 

implementing three of the initiatives, BRAC statutory requirements 

provided an additional impetus for this progress. As noted above, 

leadership’s failure to establish performance measures, set interim 

implementation dates, establish a communication strategy, and establish 

an implementation team may have hampered the initiatives’ progress. For 

example, DOD made no progress in the realignment of the TRICARE 

Management Activity to create separate units focused on shared services 

and health insurance plan management until the 2010 Secretary of 

GAO-03-669. 

48 GAO-03-669. 

Dedicate a Transition Team to 

Implement MHS Governance 

Transformation

Ensure That Top Leadership 

Drives the Transformation 
 

Page 29 GAO-12-224 Defense Health Care

Defense internal efficiencies review. Further, officials told us that the lack 

of Senate-confirmed, presidentially appointed leadership also presented 

challenges in moving forward with governance changes. For example, the 

position of the Under Secretary of Defense for Personnel and Readiness 

was vacant from January 2009 to February 2010, and the position of 

Assistant Secretary of Defense for Health Affairs was vacant from April 

2009 to January 2011. According to officials, these vacancies hindered 

progress toward greater unification, as someone temporarily filling the 

position may be reluctant to make major decisions to change the strategic 

direction of the MHS. Without involved and sustained military and civilian 

leadership being held accountable to guide and sustain progress of its 

initiatives, it may be difficult for the department to fully and successfully 

achieve its governance transformation.

Overall, DOD did not consistently employ key management practices to 

help improve the implementation of its MHS governance initiatives or to 

evaluate the extent to which it accomplished the initiatives’ costs savings 

and other performance goals. As a result, the gaps we identified may 

have created risks that undermined DOD’s efforts as it began to 

implement its plans. Specifically, without key management practices in 

place, DOD lacks both a day-to-day and long-term focus on achieving its 

goals and accountability to guide and sustain progress of its initiatives.

If military health care costs continue to rise at their current rate, they will 

consume an increasingly large portion of the defense budget and 

potentially divert funding away from other critical DOD priorities. MHS 

medical-related and governance-related initiatives represent potential 

opportunities to implement more efficient ways of doing business, reduce 

overhead, and slow the rate of cost growth while continuing to meet the 

needs of military personnel, retirees, and their dependents. While DOD 

has developed a number of medical initiatives aimed at slowing health 

care cost increases, successful implementation will depend upon 

incorporating characteristics of results-oriented management practices, 

sustaining top military and civilian leadership that holds officials 

accountable for achieving agency goals, and establishing clear cost 

savings targets where applicable. By fully employing the characteristics of 

results-oriented management with greater attention to its investments and 

resources and key external factors that could affect the achievement of its 

goals, DOD will gain more assurance that it is effectively managing its 

health care initiatives and saving money. Additionally, opportunities exist 

for an improved governance structure that can result in direct cost 

savings but also help to drive clinical savings. As DOD moves forward 

Conclusions 
 

Page 30 GAO-12-224 Defense Health Care

with its governance, clinical, and other initiatives, significant financial 

savings as well as other efficiencies may be possible with the appropriate 

level of management attention to ensure success. With sound decision 

making and analysis and by consistently employing key management 

practices throughout their implementation, DOD officials will be in a 

position to make informed decisions, to better measure DOD’s progress 

toward its cost and performance goals, and to be more assured that their 

efforts yield necessary improvements and achieve efficiencies within the 

MHS.

In order to enhance DOD’s efforts to manage rising health care costs and 

demonstrate sustained leadership commitment for achieving the 

performance goals of the MHS’s strategic initiatives, we recommend that 

the Under Secretary of Defense for Personnel and Readiness direct the 

Assistant Secretary of Defense for Health Affairs, in conjunction with the 

service surgeons general, to take the following three actions:

• Complete and fully implement, within an established time frame, the 

dashboards and detailed implementation plans for each of the 

approved health care initiatives in a manner that incorporates the 

desired characteristics of results-oriented management practices, 

such as the inclusion of performance metrics, investment costs, and 

cost savings estimates.

• Complete the implementation of an overall monitoring process across 

DOD’s portfolio of initiatives for overseeing the initiatives’ progress 

and identifying accountable officials and their roles and 

responsibilities for all of its initiatives.

• Complete the implementation of the governance initiatives that are 

already under way by employing key management practices in order 

to show financial and nonfinancial outcomes and to evaluate both 

interim and long-term progress of the initiatives.

In written comments provided in response to a draft of this report, DOD 

concurred with our findings and recommendations. Regarding our first 

recommendation to complete and fully implement, within an established 

time frame, the dashboards and detailed implementation plans for each of 

the approved health care initiatives in a manner that incorporates the 

desired characteristics of results-oriented management practices, DOD 

concurred and noted that it anticipates that these dashboards and 

detailed implementation plans will be fully implemented within a year.

Recommendations for 

Executive Action

Agency Comments 
 

Page 31 GAO-12-224 Defense Health Care

Regarding our second recommendation to complete the implementation 

of an overall monitoring process across DOD’s portfolio of initiatives for 

overseeing the initiatives’ progress and identifying accountable officials 

and their roles and responsibilities, DOD concurred and noted that such a 

system is being implemented and it anticipates that the overall monitoring 

process will also be fully implemented within a year. Regarding our third 

recommendation to complete the implementation of the governance 

initiatives that are already under way by employing key management 

practices in order to show financial and nonfinancial outcomes, DOD 

concurred and noted that the department will take further action once the 

legislative requirements concerning its submitted task force report on 

MHS governance have been fulfilled. DOD noted that it will employ key 

management practices in order to identify financial and nonfinancial 

outcomes. DOD’s comments are reprinted in their entirety in appendix II.

We are sending copies of this report to the Secretary of Defense, the 

Deputy Secretary of Defense, the Under Secretary of Defense for 

Personnel and Readiness, the Assistant Secretary of Defense (Health

Affairs), the Surgeon General of the Air Force, the Surgeon General of 

the Army, the Surgeon General of the Navy, the Commander, Joint Task 

Force, National Capital Region Medical, and interested congressional 

committees. In addition, the report is available at no charge on the GAO 

website at http://www.gao.gov. 

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

contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made key contributions to this 

report are listed in appendix III.

Brenda S. Farrell

Director

Defense Capabilities and Management
 

Page 32 GAO-12-224 Defense Health Care

List of Committees

The Honorable Carl Levin

Chairman

The Honorable John McCain

Ranking Member

Committee on Armed Services

United States Senate

The Honorable Daniel K. Inouye

Chairman

The Honorable Thad Cochran

Ranking Member

Subcommittee on Defense 

Committee on Appropriations

United States Senate

The Honorable Howard P. “Buck” McKeon

Chairman

The Honorable Adam Smith

Ranking Member

Committee on Armed Services

House of Representatives

The Honorable C.W. Bill Young

Chairman

The Honorable Norman D. Dicks

Ranking Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives
Appendix I: Scope and Methodology

Page 33 GAO-12-224 Defense Health Care

To obtain general background information, we obtained and reviewed 

various directives, instructions, and policies that defined the organization, 

structure, and roles and responsibilities of the Military Health System’s 

(MHS) key leaders.

To determine the extent to which the Department of Defense (DOD) has 

identified initiatives to reduce health care costs and applied resultsoriented management practices in developing plans to implement and 

monitor them, we interviewed DOD officials concerning their approach to 

this challenge and examined documentation of related plans and policies. 

Specifically, we interviewed DOD officials in the Health Budgets and 

Financial Policy Office and in the Office of Strategy Management, within 

the Office of the Assistant Secretary of Defense for Health Affairs (Health 

Affairs), as well as officials in the TRICARE Management Activity 

concerning their 11 health care initiatives and obtained and reviewed 

documentation concerning their efforts. We compared DOD’s efforts to 

our prior work on the desirable characteristics of comprehensive, resultsoriented management and noted any differences.

We compared DOD’s one available implementation plan, concerning the 

Patient Centered Medical Home initiative, to key practices that guide 

federal agencies’ approaches to strategic planning efforts by examining 

the extent to which the implementation plan contained the desirable 

characteristics of a comprehensive, results-oriented management 

framework. To perform this comparison, we developed a data collection 

instrument that contained desirable characteristics and elements that help 

establish comprehensive strategies using information from prior GAO 

work examining national strategies and logistics issues. The data 

collection instrument included the following six desirable characteristics:

1. Mission statement: A comprehensive statement that summarizes the 

main purposes of the plan.

2. Problem definition, scope, and methodology: Presents the issues to 

be addressed by the plan, the scope of its coverage, the process by 

which it was developed, and key considerations and assumptions 

used in the development of the plan.

3. Goals, objectives, activities, milestones, and performance measures: 

The identification of goals and objectives to be achieved by the plan, 

activities or actions to achieve those results, as well as milestones 

and performance measures.

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 34 GAO-12-224 Defense Health Care

4. Resources and investments: The identification of costs to execute the 

plan and the sources and types of resources and investments, 

including skills and technology and the human, capital, information, 

and other resources required to meet the goals and objectives.

5. Organizational roles, responsibilities, and coordination: The 

development of roles and responsibilities in managing and overseeing 

the implementation of the plan and the establishment of mechanisms 

for multiple stakeholders to coordinate their efforts throughout 

implementation and make necessary adjustments to the plan based 

on performance.

6. Key external factors that could affect the achievement of goals: The 

identification of key factors external to the organization and beyond its 

control that could significantly affect the achievement of the long-term 

goals contained in the plan. These external factors can include 

economic, demographic, social, technological, or environmental 

factors, as well as conditions that would affect the ability of the agency 

to achieve the results desired. 

We used the data collection instrument to determine whether each 

characteristic was addressed, partially addressed, or not addressed. Two 

GAO analysts independently assessed whether each element was 

addressed, partially addressed, or not addressed, and recorded their 

assessment and the basis for the assessment on the data collection 

instrument. The final assessment reflected the analysts’ consensus and 

was reviewed by a supervisor.

We also obtained available documentation and interviewed DOD officials 

to determine DOD’s approach for monitoring the initiatives’ progress, 

identifying accountable officials, and defining their roles and 

responsibilities. We compared DOD’s efforts to our prior work on resultsoriented management and noted any differences.

We did not assess the reliability of any financial data associated with this 

objective since we used such data for illustrative purposes to provide 

context of DOD’s efforts and to make broad estimates about potential 

costs savings from these efforts. We determined that these data did not 

materially affect the nature of our findings.

To determine the extent to which DOD implemented its seven medical 

governance initiatives approved in 2006, we first identified the 

governance initiatives approved by the Deputy Secretary of Defense, and 
Appendix I: Scope and Methodology

Page 35 GAO-12-224 Defense Health Care

then we visited locations where the initiatives were being implemented to 

review available documentation related to the status of the efforts and 

interviewed officials concerning any progress made. Specifically:

• To determine the extent to which command and control structures in 

the National Capital Region and San Antonio areas had been 

established, we met with officials from the Joint Task Force National 

Capital Region Medical and officials from the 59th Medical Wing, 

Brook Army Medical Center, and the Army Medical Command in San 

Antonio, Texas. We obtained and reviewed the charter establishing 

the Joint Task Force and the memorandum of agreement establishing 

the San Antonio Military Health System. Based on the interviews and 

the reviews of the charter, memorandum of agreement, and other 

documents provided by officials, we determined each organization’s 

staffing, management structure, responsibilities and authorities, and 

financing. We compared the resulting organization with the guidance 

contained in the approved governance initiative to determine if the 

organization complied with the intent of the approved governance 

initiative. Furthermore, we interviewed officials and obtained any 

information available to document and determine if any financial 

savings had been generated from the change in governance 

structure. 

• To determine the extent to which a command and control structure for 

the Joint Medical Education and Training Campus had been 

established, we met with officials from the Medical Education and 

Training Campus. We obtained and reviewed the memorandum of 

agreement establishing the Medical Education and Training Campus. 

Based on this interview and the reviews of the memorandum of 

agreement and other documents provided by officials, we determined 

the organization’s staffing, management structure, responsibilities and 

authorities, and financing. We compared the resulting organization 

with the guidance contained in the approved governance initiative to 

determine if the organization complied with the intent of the approved 

governance initiative. Furthermore, we interviewed officials and 

obtained any information available to document and determine if any 

financial savings had been generated from the change in governance 

structure.

• To determine the extent to which the MHS’s and services’ medical 

headquarters staff had been colocated, we interviewed officials from 

Health Affairs, and we obtained briefings on the status of the 

colocation as well as the latest Base Realignment and Closure 

(BRAC) business plan developed for the colocation. Furthermore, we 
Appendix I: Scope and Methodology

Page 36 GAO-12-224 Defense Health Care

obtained and examined the recommendation from the 2005 BRAC 

Commission that mandated the colocation. 

• To determine the extent to which DOD consolidated all medical 

research and development under the Army Medical Research and 

Material Command, we interviewed Health Affairs officials responsible 

for medical research and development funded by the Defense Health 

Program appropriation to learn the extent to which these funds had 

been consolidated under the Army Medical Research and Material 

Command. We reviewed the interservice support agreement that 

documents how Health Affairs and the Army Medical Research and 

Material Command agreed to interact to manage the research funded 

by the Defense Health Program appropriation. We reviewed DOD’s 

2008 assessment of medical research and development investments 

conducted for the Guidance for Development of the Force (fiscal 

years 2010–2015)1 for background on how DOD handled medical 

research and development funds in the past and to document the 

need for additional research and development funds.

• To determine the extent to which DOD realigned the TRICARE 

Management Activity to establish a Joint Military Health Services 

Directorate and establish an agency to focus on health insurance plan 

management, we interviewed Health Affairs officials to determine 

what efforts had been made to accomplish these two initiatives and 

examined the proposed Military Heath System Support Activity 

organization put forth in the Defense Health Program’s fiscal year 

2012 budget request.

• To assess the extent to which DOD created governance structures 

that consolidate command and control of the military treatment 

facilities in locations with more than one DOD component providing 

health care services, we interviewed officials at Health Affairs to 

determine what efforts had been made and what future plans they 

may have in this area.

To determine the extent to which DOD employed key management 

practices while implementing the medical governance initiatives, we 

 

1 Dr. Robert E. Foster, Captain C. Douglas Forcino, MSC, USN, and Dr. Frederick Pearce, 

“Guidance for the Development of the Force FY2010–2015, Program and Budget 

Assessment A4.16, Medical Research and Development Investments,” prepared for the 

Under Secretary of Defense for Acquisitions, Technology and Logistics (June 2008).
Appendix I: Scope and Methodology

Page 37 GAO-12-224 Defense Health Care

compared DOD’s approach to implementing the approved governance 

initiatives with key management practices that GAO has found to be at 

the center of successful mergers, acquisitions, and transformations.2

• ensure top leadership drives the transformation,

Although the GAO report on key practices for transformation listed nine 

practices, we found that six of the nine had the most relevance to our 

review. The six key practices we used in our analysis were

• establish a coherent mission and integrated strategic goals to guide 

the transformation,

• focus on a key set of principles and priorities at the outset of the 

transformation,

• set implementation goals and a timeline to build momentum and show 

progress from day one,

• dedicate an implementation team to manage the transformation 

process, and

• establish a communication strategy to create shared expectations and 

report related progress.

We decided to exclude the following three practices: (1) the use of the 

performance management system to define responsibility and assure 

accountability for change, (2) the involvement of employees to obtain their 

ideas and ownership for the transformation, and (3) the adaptation of 

leading practices to build a world-class organization. Rather, we 

assessed DOD’s use of each of the six of the practices because DOD 

either employed a practice to some degree or the practice was 

appropriate given DOD’s position in the transformational process. 

However, this exception on our part does not suggest that DOD should 

not employ these three practices in the future. As DOD progresses 

through the change process, DOD should consider employing all of the 

key practices to help ensure a successful transformation.

We determined the extent to which DOD employed the above key 

management practices in implementing the medical governance initiatives 

by comparing them to the actions taken by MHS officials. Specifically, we 

reviewed the November 2006 action memorandum signed by the Deputy 

Secretary of Defense that laid out the way ahead, provided some initial 

guidance, and identified the seven next steps. We examined the 2008 

Military Health System Strategic Plan, the Under Secretary of Defense for 

 

2 GAO-03-669. 
Appendix I: Scope and Methodology

Page 38 GAO-12-224 Defense Health Care

Personnel and Readiness Fiscal Year 2012-2016 Strategic Plan, MHS 

stakeholders’ reports, the MHS Strategic Imperatives Scorecard, Defense 

Health Program budget estimates, memorandums of agreement, an 

interservice support agreement, charters, BRAC business plans, and 

memorandums providing the status of implementations efforts. To 

complete our understanding of DOD’s approach in implementing the 

seven approved governance initiatives, we interviewed officials from the 

Office of the Under Secretary of Defense for Personnel and Readiness, 

Health Affairs, the TRICARE Management Activity, the Joint Task Force 

National Capital Region Medical, the Medical Education and Training 

Campus, Brook Army Medical Center, Army Medical Command, and Air 

Force 59th Medical Wing. We compared this information to key 

management practices for successful mergers, acquisitions, and 

transformations and examined any differences.

Finally, we also interviewed officials who participated in the Office of the 

Under Secretary of Defense for Personnel and Readiness’ review of 

military health care and its impacts on the health of the force and the 

Deputy Secretary of Defense’s review of MHS governance options. We 

also obtained the final report from the Task Force on MHS Governance, 

analyzed its methodology and findings, and discussed the results and its 

recommendations with DOD officials.

We conducted this performance audit from March 2011 through 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. 
Appendix II: Comments from the Department 

of Defense

Page 39 GAO-12-224 Defense Health Care

Appendix II: Comments from the Department 

of Defense 
Appendix II: Comments from the Department 

of Defense

Page 40 GAO-12-224 Defense Health Care
Appendix II: Comments from the Department 

of Defense

Page 41 GAO-12-224 Defense Health Care
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 42 GAO-12-224 Defense Health Care

Brenda S. Farrell, (202) 512-3604 or farrellb@gao.gov

In addition to the contact named above, Lori Atkinson, Assistant Director; 

Rebecca Beale; Stacy Bennett; Grace Coleman; Elizabeth Curda; Kevin 

Keith; Charles Perdue; Adam Smith; Amie Steele; and Michael Willems 

made key contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(351588)
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