VA/DOD FEDERAL 

HEALTH CARE 

CENTER

Costly Information 

Technology Delays 

Continue and 

Evaluation Plan 

Lacking

Report to Congressional Committees

June 2012

GAO-12-669

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United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-669, a report to 

congressional committees

June 2012

VA/DOD FEDERAL HEALTH CARE CENTER

Costly Information Technology Delays Continue and 

Evaluation Plan Lacking

Why GAO Did This Study

The NDAA for Fiscal Year 2010 

authorized VA and DOD to establish a 

5-year demonstration to integrate VA 

and DOD medical care into a first-ofits-kind FHCC in North Chicago, 

Illinois. Expectations for the FHCC are 

outlined in the Executive Agreement 

signed by VA and DOD in April 2010. 

The NDAA for Fiscal Year 2010, as 

amended by the NDAA for Fiscal Year 

2012, directed GAO to report on the 

FHCC demonstration in 2011, 2012, 

and 2015. This is the second of the 

three reports and examines (1) to what 

extent VA and DOD have continued to 

implement the Executive Agreement to 

establish and operate the FHCC and 

(2) what plan, if any, VA and DOD 

have to assess the provision of care 

and operations of the FHCC. 

To conduct its work, GAO reviewed 

FHCC documents; interviewed VA, 

DOD, and FHCC officials; and 

reviewed related GAO work.

What GAO Recommends

GAO recommends that VA and DOD 

(1) determine the costs associated with 

the workarounds required because of 

delays in implementing IT capabilities 

laid out in the FHCC Executive 

Agreement; (2) develop plans with 

clear definitions, specifications, 

deliverables, and time frames for IT 

capabilities required by the Executive 

Agreement but not yet defined; 

(3) develop and agree to an evaluation 

plan, to include all performance 

measures and standards to be used in 

evaluating the FHCC demonstration; 

and (4) establish measures related to 

the cost-effectiveness of the FHCC as 

part of their evaluation. VA and DOD 

generally concurred and noted steps to 

address GAO’s recommendations. 

What GAO Found

Officials at the Department of Veterans Affairs (VA) and Department of Defense 

(DOD) Captain James A. Lovell Federal Health Care Center (FHCC) have 

continued to make progress implementing provisions of the Executive 

Agreement’s 12 integration areas, but delays in the information technology (IT) 

area have proven costly. Specifically, for 6 integration areas, all provisions have 

been implemented. Some of these areas were implemented at the time of GAO’s 

2011 report, including establishing the facility’s governance structure and patient 

priority system, while 2 areas—quality assurance and contingency planning—

were more recently implemented. In addition, 5 integration areas, such as 

property and fiscal authority, remain in progress. However, as previously 

reported by GAO, there have been delays implementing 1 of the integration 

areas—IT—which have resulted in additional costs for the FHCC, although the 

FHCC has been unable to quantify the total costs resulting from these delays. 

Despite an investment of more than $122 million for IT capabilities at the FHCC, 

VA and DOD have not completed work on all components required by the 

Executive Agreement, which were to have been in place in time for the FHCC’s 

opening in October 2010. These delays have resulted in additional costs and 

administrative burden for the FHCC because of the need for workarounds to 

address them. There also are other IT capabilities required by the Executive 

Agreement that are ill-defined and for which plans have not been established. 

Although they are required by the National Defense Authorization Act (NDAA) for 

Fiscal Year 2010 to assess the FHCC at the end of the 5-year demonstration, VA 

and DOD officials said the departments have not yet established an evaluation 

plan. Officials told GAO that in addition to the performance data already being 

collected from 15 integration benchmarks established by the Executive 

Agreement, the departments also expect to consider other factors; however, 

these factors, which may include performance measures, have not yet been 

established. VA and DOD officials also have not yet established the standards, 

such as target scores for the benchmarks, the departments will use to evaluate 

FHCC performance. GAO has previously found that well-defined measures and 

standards are essential to a sound evaluation plan. Furthermore, without VA and 

DOD agreement on the measures and standards, FHCC leadership is unable to 

track progress and make any midcourse adjustments to improve performance in 

areas VA and DOD have determined are necessary for the FHCC’s success. 

Although including measures of FHCC costs in the evaluation would be 

consistent with the FHCC’s purpose, VA and DOD departmental priorities, and 

federal financial accounting standards, no such cost measures have been 

established for evaluating the FHCC.

View GAO-12-669. For more information, 

contact Debra A. Draper at (202) 512-7114 or 

draperd@gao.gov.
Page i GAO-12-669 VA and DOD Federal Health Care Center Update

Letter 1 

Background 4

Further Progress Has Been Made Implementing the Executive 

Agreement, but Costly IT Delays and Lack of MTF Designation 

Continue to Pose Challenges 9

VA and DOD Have Not Yet Established a Plan for Evaluating the 

FHCC Demonstration 19

Conclusions 22

Recommendations for Executive Action 23

Agency Comments and Our Evaluation 24

Appendix I Federal Health Care Center Integration Benchmarks, by Number 

of Reported Measures 28

Appendix II Comments from the Department of Defense 29

Appendix III Comments from the Department of Veterans Affairs 36

Appendix IV GAO Contact and Staff Acknowledgments 44

Tables

Table 1: Key Provisions of Federal Health Care Center (FHCC) 

Executive Agreement Integration Areas 6

Table 2: Federal Health Care Center (FHCC) Executive 

Agreement—Status of Key Provisions of Currently 

Implemented Integration Areas 12

Table 3: Federal Health Care Center (FHCC) Executive 

Agreement—Status of Key Provisions of Currently In 

Progress Integration Areas 14

Contents
Page ii GAO-12-669 VA and DOD Federal Health Care Center Update

Figures

Figure 1: Federal Health Care Center (FHCC) Oversight Structure 8

Figure 2: Status of Federal Health Care Center (FHCC) 

Implementation of Provisions for the 12 Executive 

Agreement Integration Areas, as of May 2012 10

Abbreviations

DOD Department of Defense

FHCC Federal Health Care Center

HEC Health Executive Council

IT information technology

JEC Joint Executive Council

MTF military treatment facility

NCVAMC North Chicago Veterans Affairs Medical Center

NDAA National Defense Authorization Act 

NHCGL Naval Health Clinic Great Lakes

VA Department of Veterans Affairs

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Page 1 GAO-12-669 VA and DOD Federal Health Care Center Update

United States Government Accountability Office

Washington, DC 20548

June 26, 2012

Congressional Committees

The Departments of Veterans Affairs (VA) and Defense (DOD) expanded 

their efforts to share health care resources in 2010 following 

congressional authorization of a 5-year demonstration to more fully 

integrate VA and DOD facilities located in proximity to one another in the 

North Chicago, Illinois, area. As authorized by the National Defense 

Authorization Act (NDAA) for Fiscal Year 2010 (NDAA 2010), VA and 

DOD facilities in and around North Chicago were integrated into a first-ofits-kind system known as the Captain James A. Lovell Federal Health 

Care Center (FHCC). Although DOD and VA have shared resources at 

some level since the 1980s,1 the FHCC is unique in that it is the first fully 

integrated federal health care center for use by both VA and DOD 

beneficiaries,2 with an integrated workforce, a joint funding source, and a 

single line of governance. In addition to delivering integrated health care 

services to both VA and DOD beneficiaries, this unprecedented 

partnership is expected to offer lessons for decision makers about 

whether this is a model of care that might be effective if replicated at other 

VA and DOD locations. Among other things, the NDAA 2010 requires the 

Secretaries of VA and Defense to submit a report to the House and 

Senate Committees on Armed Services and Veterans’ Affairs by October 

2015, the year in which the demonstration ends, to include an 

assessment of the demonstration and a recommendation as to whether 

the FHCC should continue.3

VA and DOD signed an Executive Agreement in April 2010 that outlined 

the FHCC’s structure. Beginning October 1, 2010, the new structure 

integrated services previously provided by the former North Chicago VA 

 

1

The Veterans’ Administration and Department of Defense Health Resources Sharing and 

Emergency Operations Act was enacted in 1982. See 38 U.S.C. § 8111. The Department 

of Veterans Affairs was previously known as the Veterans Administration.

2

VA beneficiaries include veterans of military service and certain dependents and 

survivors; DOD beneficiaries include active duty servicemembers and their dependents, 

medically eligible National Guard and Reserve servicemembers and their dependents, 

and military retirees and their dependents and survivors. Active duty personnel include 

Reserve component members on active duty for at least 30 days.

3

See Pub. L. No. 111-84, § 1701(d), 123 Stat. 2190, 2568 (2009). 

 
 

Page 2 GAO-12-669 VA and DOD Federal Health Care Center Update

Medical Center (NCVAMC) and its community-based outpatient clinics 

and the Naval Health Clinic Great Lakes (NHCGL) and its associated 

clinics, as well as services provided by a new ambulatory care center 

constructed by DOD.4 The FHCC reported providing care to more than 

86,000 patients in its first year of operation (October 2010 through 

September 2011), including about 25,000 veterans and 59,000 DOD 

beneficiaries, including Navy recruits.5

NDAA 2010, as amended by the NDAA for Fiscal Year 2012 (NDAA 

2012), requires that we review and assess the progress made in 

implementing the Executive Agreement and the effects of the agreement 

on the provision of care and operation of the facility, and issue reports 

based on those assessments in 2011, 2012, and 2015.6 We first reported 

in July 20117 on the status of the FHCC’s integration efforts and found 

that for the 12 integration areas defined in the Executive Agreement,8

 

4

The NHCGL includes a main clinic and three branch clinics that provide health care 

services to Navy recruits, as well as active duty personnel and their families.

 

4 had been implemented, 7 were in progress, and 1—information 

technology (IT) integration—was delayed. We also found weaknesses in 

the tool created to collect and report performance results and 

recommended that the FHCC reexamine its process for assessing and 

reporting performance to ensure accurate and meaningful information. In 

addition, we recommended that DOD seek a legislative change to 

designate the FHCC as a military treatment facility (MTF) to eliminate the 

need for burdensome workarounds to address several administrative 

5

In addition to veterans and DOD beneficiaries, the FHCC reported providing care to 

approximately 2,000 other patients, including FHCC employees.

6

NDAA 2010—Pub. L. No. 111-84, § 1701(e), 123 Stat. 2190, 2568 (2009)—required 

GAO to report annually beginning in 2011; NDAA 2012—Pub. L. No. 112-81, § 1098, 

125 Stat. 1298, 1609 (2011)—amended that reporting requirement to include reports in 

2011, 2012, and 2015.

7

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).

8

The 12 integration areas are (1) governance structure, (2) access to health care at the 

FHCC, (3) research, (4) contracting, (5) quality assurance, (6) integration benchmarks, 

(7) property (i.e., construction and physical plant management), (8) reporting

requirements, (9) workforce management and personnel, (10) contingency planning, 

(11) fiscal authority, and (12) information technology.
 

Page 3 GAO-12-669 VA and DOD Federal Health Care Center Update

challenges that arose because the FHCC lacked such a designation.9

In this second required report, we address the following questions:

Specifically, we reported that the FHCC encountered challenges in the 

areas of managing beneficiary co-payments, contracting to meet 

temporary staffing needs, using drug pricing arrangements, and clarifying 

providers’ authority to sign medical readiness forms for active duty Navy 

servicemembers.

1. To what extent have VA and DOD continued to implement the 

Executive Agreement to establish and operate the FHCC?

2. What plan, if any, do VA and DOD have to assess the provision of 

care and operations of the FHCC?

To determine the extent to which VA and DOD have continued to make 

progress in establishing and operating the FHCC, we examined the 12 

integration areas (and the provisions within each area) outlined in the 

Executive Agreement and assessed the FHCC’s progress in meeting 

them. Specifically, we reviewed VA and DOD policies pertaining to FHCC 

operations; meeting minutes documenting discussions of FHCC, VA, and 

DOD officials about patient care and operations; and financial planning 

documents, such as the operating plan and budget.10 For the areas we 

noted in our prior report as having been implemented, we reexamined 

these for any changes that might affect their current status. We also 

reviewed our earlier work, including our first report on implementation 

progress, and a separate 2011 report specifically examining IT 

capabilities and planning for the FHCC integration.11

 

9

According to DOD policy, an MTF is a medical facility, owned and operated by DOD, 

established for the purpose of furnishing medical care, dental care, or both to eligible 

individuals. 

In addition, we 

interviewed officials at VA, DOD, and the FHCC about continued progress 

in establishing and operating the FHCC.

10In the area of financial systems, we did not perform a financial audit of the FHCC, but 

rather assessed its progress in establishing and operating a model for joint funding.

11See GAO-11-570, and GAO, Electronic Health Records: DOD and VA Should Remove 

Barriers and Improve Efforts to Meet Their Common System Needs, GAO-11-265

(Washington, D.C.: Feb. 2, 2011).
 

Page 4 GAO-12-669 VA and DOD Federal Health Care Center Update

To determine what plan, if any, VA and DOD have to assess the provision 

of care and operations of the FHCC, we interviewed officials at the FHCC,

VA, and DOD regarding the provision of care and operations, standards 

used to measure and assess performance, and plans to evaluate and 

report results. We also reviewed relevant documents that describe the 

plans for measuring the FHCC’s performance in delivering care to 

patients and for assessing the operations in support of care delivery. In 

addition, we examined best practices for program evaluation, mainly 

within federal agencies, including some specific to demonstrations.12

We conducted this performance audit from November 2011 to June 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.

VA and DOD have a long-standing history of sharing health care 

resources to provide services to their beneficiaries. However, the FHCC 

is unique among VA and DOD collaborations to deliver health care 

services in several ways, notably its level of integration, the way it is 

funded, and its governance structure. The Executive Agreement, signed 

by the Secretaries of both departments, contains provisions to be met in 

12 integration areas regarding specific aspects of FHCC operations, 

including establishing a governance structure and combining VA and 

DOD staff into a single, joint workforce. The FHCC’s leadership remains 

directly accountable to VA and DOD individually, through formal reporting 

relationships, and jointly, through oversight and advisory entities 

comprising VA and DOD officials.

 

12GAO, Limitations in DOD’s Evaluation Plan for EEO Complaint Pilot Program Hinder 

Determination of Pilot Results, GAO-08-387R (Washington, D.C.: Feb. 22, 2008), and Tax 

Administration: IRS Needs to Strengthen Its Approach for Evaluating the SRFMI DataSharing Pilot Program, GAO-09-45 (Washington, D.C.: Nov. 7, 2008). 

Background 
 

Page 5 GAO-12-669 VA and DOD Federal Health Care Center Update

VA and DOD have been authorized since the 1980s to enter into sharing 

agreements with each other to improve access to, and the quality and 

cost-effectiveness of, health care provided by the two departments. Since 

that time, VA and DOD have entered into a number of sharing 

agreements to provide services—such as emergency, specialty, inpatient, 

and outpatient care—to VA and DOD beneficiaries and to reimburse one 

another for the cost of such services. Starting in the 1990s, VA and DOD 

expanded their sharing efforts to include “joint ventures”—locations where 

sharing agreements are in place that encompass multiple health care 

services for VA and DOD beneficiaries. The FHCC is one of 10 joint 

venture locations across the country.13

The October 2010 launch of the FHCC demonstration established a new 

level of sharing and integration for VA and DOD. Specifically, the FHCC is 

unique among other VA and DOD joint ventures in three key ways:

1. The FHCC’s integration of the provision of care and operations 

represents the highest level of collaboration among the 10 VA and 

DOD joint ventures. For example, the FHCC has a more integrated 

staffing structure than any other joint venture site.

2. The FHCC has a joint funding source, to which VA and DOD 

contribute, unlike the other joint venture sites, which each have 

separate VA and DOD funding sources. NDAA 2010 established the 

Joint DOD-VA Medical Facility Demonstration Fund (Joint Fund) as 

the funding mechanism for the FHCC, with VA and DOD both making 

transfers to the Joint Fund from their respective appropriations.14

3. The FHCC operates under a single line of governance to manage 

medical and dental care, and has an integrated workforce of 

approximately 3,100 civilian and active duty military employees from 

 

13The other nine joint venture locations are Anchorage, Alaska; Fairfield, California; Key 

West, Florida; Honolulu, Hawaii; Las Vegas, Nevada; Albuquerque, New Mexico; Biloxi, 

Mississippi; Charleston, South Carolina; and El Paso, Texas. Charleston became the 

newest joint venture when it was added in 2011.

14The Consolidated Appropriations Act, 2012 provided funds for VA and DOD to transfer 

to the Joint Fund for fiscal year 2012. Pub. L. No. 112-74, div. A, § 8104, div. H, §§ 224, 

225, 125 Stat. 786, 830-31, 1158 (2011). Prior to the enactment of the Department of 

Defense and Full-Year Continuing Appropriations Act, 2011, the FHCC received funding 

from VA and DOD through an alternative funding mechanism outlined in the Executive 

Agreement.

FHCC Established a New 

Level of Sharing for VA and 

DOD
 

Page 6 GAO-12-669 VA and DOD Federal Health Care Center Update

both VA and DOD.15 None of the other joint venture sites have 

integrated governance structures; rather, they maintain separate VA 

and DOD lines of authority.

In April 2010, the Secretaries of VA and Defense signed the Executive 

Agreement that established the FHCC and defined the relationship 

between VA and DOD for operating the new, integrated facility, in 

accordance with NDAA 2010. The Executive Agreement contained 

provisions in 12 integration areas regarding specific aspects of FHCC 

operations (see table 1).

Table 1: Key Provisions of Federal Health Care Center (FHCC) Executive Agreement Integration Areas

Integration area Key provisions

Governance structure FHCC leadership structure and advisory bodies

Access to health care at the FHCC Patient priority system and eligibility of members of the uniformed services for care

Research Institutional Review Board approval and policy for the protection of human subjects

Contracting Departments of Veterans Affairs (VA) and Defense (DOD) responsibility for contracting 

support

Quality assurance Accreditation and oversight from external entities and credentialing and privileging of health 

care providers

Contingency planning Emergency and disaster management and security

Integration benchmarks Completion of 15 integration benchmarks may occur before 2015

Property Construction, transfer of property, and physical plant management

Reporting requirements VA and DOD reports to congressional committees and Comptroller General reviews

Workforce management and personnel Staffing, training, and the transfer of DOD civilian personnel to VA

Fiscal authority Budgeting, joint funding authority, and reconciliation

Information technology (IT) Administrative and clinical IT, including efforts to achieve interoperability between VA and 

DOD systems

Source: GAO.

Each of the 12 integration areas contains a number of specific provisions 

describing how the FHCC should be jointly operated by VA and DOD. 

Some provisions have designated deadlines, while others do not. For 

example, within the IT integration area, the Executive Agreement included 

provisions identifying three specific IT capabilities that VA and DOD were 

 

15This 3,100-employee figure is an FHCC estimate including civilian employees, active 

duty servicemembers, and contractors.

Executive Agreement
 

Page 7 GAO-12-669 VA and DOD Federal Health Care Center Update

to have in place by opening day of the FHCC, October 1, 2010 (for 

example, medical single sign-on, which would allow staff to use one 

screen to access both the VA and DOD electronic health record systems) 

while other provisions (such as those for financial management and 

outpatient appointment enhancement solutions) had no scheduled due 

dates.

As established in the Executive Agreement, the FHCC’s leadership and 

workforce remain directly accountable to both VA and DOD (see fig. 1). 

The FHCC Director, a VA executive, is accountable to VA for the 

fulfillment of the FHCC mission, while the Deputy Director and 

Commanding Officer, a Navy Captain, is accountable to DOD. In addition, 

the Joint Executive Council (JEC) and the Health Executive Council 

(HEC) provide oversight for all of the joint ventures, including the FHCC.

The JEC is made up of senior VA and DOD officials and provides broad 

strategic direction for collaboration and resource sharing between the two 

departments. The HEC, a sub-council of the JEC, provides oversight for 

the specific cooperative efforts of each department’s health care 

organizations—VA’s Veterans Health Administration and DOD’s Military 

Health System. The HEC has organized itself into a number of work 

groups to carry out its work and focus on specific high-priority areas of 

national interest.

FHCC Oversight
 

Page 8 GAO-12-669 VA and DOD Federal Health Care Center Update

Figure 1: Federal Health Care Center (FHCC) Oversight Structure

Notes: Since our 2011 report, the FHCC Advisory Board has become a working group of the Health 

Executive Council, formalizing its reporting relationship. Some oversight of the FHCC within VA is 

conducted by Veterans Integrated Service Network 12 and within DOD by the U.S. Navy Bureau of 

Medicine and Surgery.

The FHCC Advisory Board, a HEC workgroup co-chaired by and 

comprising senior officials from VA and DOD, was created specifically to 

provide guidance and support to FHCC leaders and to resolve issues that 

arise at the FHCC. The Advisory Board provides guidance for the 

integration and operations of the facility, including monitoring the FHCC’s 

performance and advising on issues related to strategic direction, 

mission, vision, and policy. It also serves as a communication link 

between the FHCC and VA and DOD executive leadership by reporting 

on FHCC activities to the HEC. FHCC issues that are not able to be 
 

Page 9 GAO-12-669 VA and DOD Federal Health Care Center Update

resolved by the Advisory Board are elevated to the HEC for final 

resolution. The Stakeholders Advisory Council also provides feedback on 

how well the FHCC is meeting customers’ needs and VA and DOD 

missions. The Stakeholders Advisory Council is made up of members 

from various regional and local organizations representing FHCC 

interests, including representation from local government, TRICARE, and 

two nearby VA medical facilities.

Eleven of 12 integration areas are now either “implemented” or “in 

progress.” The remaining integration area, IT, remains “delayed,” as it 

was at our last review, resulting in costly and time-consuming 

workarounds. DOD’s decision not to seek an MTF designation for the 

FHCC, as we had recommended in our July 2011 report, has resulted in 

continued implementation challenges.16

FHCC officials have implemented or made progress implementing 11 of 

the 12 Executive Agreement integration areas. Specifically, FHCC 

officials have implemented 6 integration areas, meaning all associated 

provisions in the Executive Agreement have been met. Five of the 

integration areas are in progress, meaning some, but not all, associated 

provisions have been met, with FHCC officials maintaining or making 

additional progress meeting the provisions in each integration area. The 

1 integration area not implemented or in progress is IT, which is delayed, 

meaning at least one provision had a deadline provided in the Executive 

Agreement that was not met. This integration area is discussed in more 

detail later in this report. (See fig. 2.)

 

16See GAO-11-570. 

Further Progress Has 

Been Made 

Implementing the 

Executive Agreement, 

but Costly IT Delays 

and Lack of MTF 

Designation Continue 

to Pose Challenges

All but 1 of the 12 

Executive Agreement 

Integration Areas Are 

Implemented or In 

Progress
 

Page 10 GAO-12-669 VA and DOD Federal Health Care Center Update

Figure 2: Status of Federal Health Care Center (FHCC) Implementation of Provisions for the 12 Executive Agreement 

Integration Areas, as of May 2012

Note: Integration areas that are categorized as “implemented” are areas in which all the identified 

provisions in the Executive Agreement have been completed, those categorized as “in progress” are 

areas in which at least one provision has not been completed, and those categorized as “delayed” are 

areas in which at least one provision had not met a deadline provided in the Executive Agreement.

a

In our prior review conducted in 2011, the status of this integration area was “in progress.” 

FHCC officials have implemented all provisions in 6 of the 12 Executive 

Agreement integration areas. Of these 6, 4 were integration areas we 

previously reported as implemented: (1) governance structure, (2) access 

to health care at the FHCC, (3) research, and (4) contracting. The two 

other implemented integration areas, quality assurance and contingency 

planning, moved from in progress at the time of our last review to 

implemented in this review. Integration areas we previously reported as 

implemented have remained in that status by maintaining activities or 

policies that meet the associated provisions in the Executive Agreement. 

Six Integration Areas Are 

Implemented
 

Page 11 GAO-12-669 VA and DOD Federal Health Care Center Update

For example, in the area of governance structure, the Stakeholders 

Advisory Council meets quarterly as required by the Executive Agreement 

and in another integration area, research, existing policies remain in 

place. Since our 2011 report, the FHCC met two additional required 

provisions for the quality assurance integration area: (1) officials obtained 

accreditation for the integrated facility by relevant external accrediting 

bodies—the Commission on Accreditation of Rehabilitation Facilities, and 

The Joint Commission17—and (2) FHCC officials reviewed the FHCC’s 

policy on professional practices.18 In addition, FHCC officials have 

established a formal agreement to outline the jurisdiction of VA and DOD 

related to the security program for the FHCC campus, as the Executive 

Agreement requires. (See table 2.)

 

17The Commission on Accreditation of Rehabilitation Facilities and The Joint Commission 

are independent organizations that accredit health care organizations and programs.

18The FHCC is required by the Executive Agreement to review its policy on professional 

practices, which deals with staff certification and training, 1 year after the FHCC became 

operational to determine if it meets the Navy and FHCC mission requirements.
 

Page 12 GAO-12-669 VA and DOD Federal Health Care Center Update

Table 2: Federal Health Care Center (FHCC) Executive Agreement—Status of Key Provisions of Currently Implemented 

Integration Areas 

Integration area Status of key provisions as of July 2011a Status of key provisions as of May 2012

Governance structureb FHCC leadership structure and advisory bodies were 

in place.

Maintained establishment of leadership 

structure; continued to meet provision for the 

Stakeholders Advisory Council to meet at least 

quarterly.

Access to health care at the 

FHCCb Patient priority system to ensure access was in place 

and FHCC maintained its “pipeline to the fleet” 

readiness goal by monitoring the medical readiness 

of enlisted Navy recruits.

Continued to meet provisions related to patient 

priority system and the “pipeline to the fleet” 

readiness goal.

Researchb Institutional Review Board approval and policy for the 

protection of human subjects were in place.

Continued the existing policies related to the 

Institutional Review Board.

Contractingb Department of Veterans Affairs (VA) responsibility for 

contracting support established.

Maintained implementation of contracting 

provisions, with VA continuing to oversee 

contracting support. The Department of Defense 

(DOD) is responsible for personal services 

contracts.

Quality assurancec Accreditation and oversight from external entities 

were ongoing and policies on credentialing and 

privileging of health care providers were in place. 

Met final two provisions:

(1) accreditation as a joint facility by relevant 

external accrediting bodies—the Commission on 

Accreditation of Rehabilitation Facilities and The 

Joint Commission—and (2) review of the 

FHCC’s policy on professional practices.d

Contingency planningc Emergency management personnel, training 

standards, and programs were in place. Officials 

were working on a formal agreement outlining the 

jurisdiction of VA and DOD related to FHCC campus 

security.

Met final provision: formal agreement outlining 

the jurisdiction of VA and DOD related to FHCC 

campus security established.

Source: GAO. 

a

See 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).

b

We reported this integration area as implemented in July 2011 (see GAO-11-570).

c

We reported this integration area as in progress in July 2011 (see GAO-11-570).

d

The Commission on Accreditation of Rehabilitation Facilities and The Joint Commission are 

independent organizations that accredit health care organizations and programs.

Five other integration areas in the Executive Agreement remain in 

progress: (1) integration benchmarks, (2) property, (3) reporting 

requirements, (4) workforce management and personnel, and (5) fiscal 

authority. Each of these integration areas was also in progress at the time 

of our first report in July of 2011. FHCC officials have actively maintained 

past progress while continuing to work toward implementation of the 

provisions in the Executive Agreement associated with these integration 

areas.

Five Integration Areas Remain 

In Progress 
 

Page 13 GAO-12-669 VA and DOD Federal Health Care Center Update

Some integration areas cannot be met until a certain point in the 

integration or depend on other conditions being met. For example, for the 

integration benchmarks area and the property area, the Executive 

Agreement specifies that in accordance with NDAA 2010, property 

transfer may occur upon the earlier of (1) completion of the 15 integration 

benchmarks or (2) 5 years from the date the Executive Agreement was 

executed. Thus, the FHCC may address the property integration area 

prior to the end of the demonstration, in 2015, but it is not required to do 

so.

FHCC officials also are in the process of addressing other integration 

areas with provisions that do not have specific deadlines associated with 

them. For example, for the fiscal authority integration area, FHCC officials 

continue to make progress implementing the provisions, although they 

have experienced some challenges. Since our last review, the Joint Fund, 

into which both VA and DOD contribute, has become operational.19

However, the provision of the Executive Agreement in the fiscal authority 

integration area that requires the FHCC to develop an operating plan by 

month that includes workload data has not yet been met. Specifically, the 

FHCC’s operating plan does not include workload data, which officials 

reported is because the current VA and DOD IT systems calculate 

workload data differently. (See table 3.)

 

19The FHCC was not able to operate the Joint Fund until funds had been authorized and 

appropriated for VA and DOD to transfer into the Joint Fund, which occurred in April 2011. 

Pub. L. No. 112-10, div. A, § 8107, div. B, §§ 2017, 2018, 125 Stat. 38 (2011).
 

Page 14 GAO-12-669 VA and DOD Federal Health Care Center Update

Table 3: Federal Health Care Center (FHCC) Executive Agreement—Status of Key Provisions of Currently In Progress 

Integration Areas 

Integration areaa Status of key provisions as of July 2011b Status of key provisions as of May 2012

Integration benchmarks Collection of data and assessment of performance on 

the 15 benchmarks had begun. Benchmarks may be 

addressed prior to the conclusion of demonstration in 

2015.

Past progress maintained by continued 

collection and assessment of data on the 

15 benchmarks to be addressed prior to 2015.

Property Construction of the facility was completed. Transfer of 

property to the Department of Veterans Affairs (VA) 

may occur by completion of demonstration in 2015.

Property transfer provision may be met by 

completion of demonstration by 2015.

Reporting requirements VA and the Department of Defense (DOD) required to 

report to congressional committees following 

completion of demonstration. This final report is due 

October 2015.

Provision to report to congressional committees 

to be met following completion of 

demonstration in October 2015.

Workforce management and 

personnel

Provisions related to staffing, training, and the transfer 

of DOD civilian personnel were met. VA is required to 

evaluate the extension of collective bargaining rights 

for the transferred employees by October 2012.

Past progress in staffing, training, and transfer 

of employees maintained. Provision to evaluate 

the extension of the collective bargaining rights 

to be met by October 2012.

Fiscal authority Developed an integrated budgeting and financial 

reconciliation process. Developed the Joint DOD-VA 

Medical Facility Demonstration Fund (Joint Fund) 

process, but had not implemented it. An automated 

reconciliation report is to be generated by 

December 31, 2013, and additional provisions are to 

be met at a future date.

Joint Fund has been implemented, and past 

progress of implemented provisions 

maintained. An automated reconciliation report 

to be generated by December 31, 2013. An 

operating plan by month including workload 

data to be developed.

Source: GAO.

a

We reported these integration areas as in progress in July 2011; see 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). Two additional integration areas—quality 

assurance and contingency planning—were in progress at the time of the last report and are now 

implemented (see table 2).

b

See GAO-11-570. 
 

Page 15 GAO-12-669 VA and DOD Federal Health Care Center Update

Despite some progress, the FHCC continues to face costly delays in the 

IT integration area. The Executive Agreement specified three key IT 

capabilities that VA and DOD were required to have in place on opening 

day, in October 2010, to facilitate interoperability of VA and DOD 

electronic health record systems.20

Specifically, in our 2011 report, we noted that none of the following three 

IT capabilities required by the Executive Agreement to be in operation by 

October 2010 were implemented by that time: (1) medical single sign-on, 

which would allow staff to use one screen to access both the VA and 

DOD electronic health record systems; (2) single patient registration, 

which would allow staff to register patients in both systems 

simultaneously; and (3) orders portability, which would allow VA and DOD 

clinicians to place, manage, and update clinical orders from either VA or 

DOD electronic health records systems for radiology, laboratory, consults 

(specialty referrals), and pharmacy services. 

In our 2011 report, we found that all 

three of these IT components were delayed; some of them continue to 

remain so. As a result of these delays, the FHCC has had to implement 

costly workarounds to address the needs these capabilities were intended 

to serve. In addition to delays in developing these specific IT capabilities, 

other IT capabilities required by the Executive Agreement have not been 

well defined and implementation plans for them have not been 

established.

Although none of these capabilities were in place at the time of the 

FHCC’s opening, FHCC officials reported that subsequently, in December 

2010, medical single sign-on and single patient registration became 

operational, as we noted in our 2011 report. Two orders portability 

components—pharmacy and consults—remain delayed as of May 2012. 

While orders portability for pharmacy remains delayed, VA and DOD 

officials have estimated completion of the consults component by March 

2013. Since our last review, orders portability for radiology became 

operational in June 2011 and for laboratory in March 2012. Officials report 

that as of March 2012, VA and DOD have spent more than $122 million 

on IT capabilities at the FHCC.

 

20VA and DOD rely on separate electronic health record systems to create, maintain, and 

manage patient health information.

Continued Delays in the 

Remaining Executive 

Agreement Integration 

Area—IT 

Implementation—Have 

Resulted in Additional 

Costs for the FHCC
 

Page 16 GAO-12-669 VA and DOD Federal Health Care Center Update

VA and DOD officials reported several reasons for the delays in each of 

the orders portability components and described the workarounds 

implemented as a result of these delays.

• Pharmacy component: Officials have said that they no longer plan to 

develop a FHCC-specific capability that will allow VA’s and DOD’s 

electronic health record systems to exchange information for 

pharmacy orders, as required by the Executive Agreement, until a 

more long-term effort to merge the departments’ electronic health 

record systems into a single system is complete. In March 2011, the 

Secretaries of VA and Defense announced that the two departments 

had committed to this broader effort, but the departments have not 

determined when this single electronic health record system will be 

completed. Officials reported that they have assigned a project team 

to address this requirement and estimate that they will award a 

contract for the pharmacy solution by November 2012. Meanwhile, the 

FHCC continues to maintain the interim orders portability workaround 

that we previously reported on, which includes five dedicated, full-time 

pharmacists to conduct manual checks of patient records to reconcile 

allergy information and identify possible interactions between drugs 

prescribed in VA and DOD systems. Additionally, FHCC officials 

reported that they have also hired a full-time pharmacy technician to 

assist in this process. FHCC officials reported that as of March 2012, 
 

Page 17 GAO-12-669 VA and DOD Federal Health Care Center Update

they have spent close to $1 million to institute this workaround and 

that they anticipate spending an additional $750,000 to fund this 

process from April 2012 through April 2013.

• Consults component: VA and DOD officials reported that this 

component, which will allow VA’s and DOD’s electronic health record 

systems to exchange information for consult orders, remains delayed 

because of changes to the requirements for this component in 

response to lessons learned since the FHCC opened. Officials 

reported that they completed the process of documenting changes to 

the requirements in February 2012 and will use that information to 

develop the consults component. Until this IT component is 

implemented, the FHCC staff in the specialty care clinics manage the 

consult orders manually by reviewing daily all consult requests to 

determine if care could be provided at the FHCC, in which case the 

order is manually entered into the appropriate system.

• Radiology component: Officials told us that this area was delayed in 

part because they underestimated the amount of work required to 

allow VA’s and DOD’s electronic health record systems to exchange 

information for radiology orders, and they needed additional time to 

resolve software defects related to the work.

• Laboratory component: Officials reported that there were delays in 

delivering a capability that would allow the VA and DOD systems to 

exchange information for laboratory orders because they needed to 

address software differences between the VA and DOD systems, 

such as how the systems detect and combine duplicate orders. In 

addition, they acknowledged that they underestimated the time and 

effort required to address such differences. Before the laboratory 

component was implemented, the FHCC instituted a workaround that 

required health care providers to review both VA and DOD systems 

for notifications of laboratory results.

Although they were unable to quantify the total cost for all the 

workarounds resulting from delayed IT capabilities, FHCC officials 

reported that staff time equivalent to 23 full-time employees is being used 

to manage the workarounds as a result of delays in IT capabilities to 

support pharmacy, consults, radiology, and laboratory as well as delays 

to the other IT components not delivered on time.

In addition to the three delayed IT capabilities that were to be in operation 

by opening day, implementation of three other IT capabilities required, but 

not defined, by the Executive Agreement—documentation of patient care 
 

Page 18 GAO-12-669 VA and DOD Federal Health Care Center Update

to support medical and dental operational readiness, financial 

management solutions, and outpatient appointment enhancements—also 

have not been implemented, and in some cases work on them has not 

begun. The Executive Agreement does not provide clear and specific 

definitions of these three capabilities, nor does it outline deadlines or 

specific deliverables. Officials reported that as of May 2012, they had not 

begun to address the requirements for two of the three capabilities—

documentation of patient care to support medical and dental operational 

readiness and outpatient appointment enhancements—nor had they 

developed plans or time frames for doing so. VA and DOD officials 

reported that they have determined the requirements for and have begun 

the technical development of the financial management solutions, such as 

automated financial reconciliation and billing processes, and they 

estimate that testing of the initial capability for the financial reconciliation 

requirement will occur in July 2012.

FHCC officials continue to experience implementation challenges related 

to the FHCC’s lack of an MTF designation. In our July 2011 report, we 

noted several challenges associated with the lack of an MTF designation 

at the FHCC, including limits on its ability to access DOD’s drug pricing 

arrangements for DOD beneficiaries and to use personal services 

contracts to meet staffing needs, as had been done by DOD prior to the 

integration.21

 

21See 

As a result, we recommended that DOD seek a legislative 

change to designate the FHCC as an MTF to facilitate sharing of all DOD 

authorities and privileges for the facility. Although DOD concurred with 

our assessment of challenges based on the lack of an MTF designation, 

the department has opted not to pursue our recommendation. DOD 

stated that it anticipates that as the FHCC stabilizes and matures, the 

confusion caused by the lack of an MTF designation will dissipate and 

that the challenges we noted in the last report have been addressed by 

workarounds. However, we have found that some of the integration 

implementation challenges that could be solved with such a designation 

remain. In particular, officials told us the FHCC has been denied access 

to DOD’s drug pricing arrangements for its DOD beneficiaries, which has 

resulted in the FHCC paying higher prices for certain drugs for DOD 

beneficiaries than would be the case if it were an MTF, although FHCC 

officials were unable to quantify the added expense. DOD officials told us 

GAO-11-570. 

Lack of an MTF 

Designation for the FHCC 

Continues to Pose 

Implementation 

Challenges
 

Page 19 GAO-12-669 VA and DOD Federal Health Care Center Update

that the department continues to explore ways to access DOD’s drug 

pricing arrangements, despite the lack of an MTF designation, but that so 

far these efforts have not been successful. In addition, FHCC officials 

have instituted a workaround to enable them to fulfill staffing needs using 

personal services contracts—a preferred method for accommodating 

fluctuations in medical and dental workloads resulting from increases in 

the number of Navy recruits on-site at any given time.22 If the FHCC was 

designated as an MTF, it would have the authority to use personal 

services contracts, making such a workaround unnecessary. We continue 

to believe that an MTF designation is important to address the challenges 

the FHCC faces based on the lack of such a designation, and because it 

would set a precedent for future VA and DOD integrations to help make 

the integration process smoother.

Although they are required by NDAA 2010 to conduct a comprehensive 

evaluation of the FHCC at the end of the 5-year demonstration and 

submit a report on this evaluation to the House and Senate Committees 

on Armed Services and Veterans’ Affairs, VA and DOD officials said the 

departments have not yet established an evaluation plan. We have 

previously found that developing a sound evaluation plan before a 

demonstration program is implemented can increase confidence in results 

and facilitate decision making about broader applications of the 

demonstration.23 Without such a plan in place during the demonstration—

including well-defined measures and standards, such as target scores, for 

determining performance on each measure—FHCC leadership cannot 

track progress and make adjustments to improve performance in areas 

that VA and DOD determine are necessary for the FHCC’s success.24

 

22The FHCC processes nearly 40,000 Navy recruits each year, ensuring that each recruit 

is medically ready for service.

In 

addition, we have previously found that joint agreement on commonly 

desired outcomes, such as those established as performance measures 

and standards in an evaluation plan, is important for collaborating 

agencies, such as VA and DOD, to successfully overcome differences in 

23GAO-08-387R and GAO-09-45. 

24GAO-09-45. 

VA and DOD Have 

Not Yet Established a 

Plan for Evaluating 

the FHCC 

Demonstration 
 

Page 20 GAO-12-669 VA and DOD Federal Health Care Center Update

their agency missions, cultures, and established ways of doing 

business.25

VA and DOD officials told us that at the end of the demonstration, they 

expect the FHCC Advisory Board, along with the HEC and JEC—the 

governing bodies that provide executive oversight for VA and DOD 

collaborations—to assess the demonstration and provide 

recommendations to the departments about whether the FHCC should 

continue. These assessments will inform the Secretaries of VA and 

Defense, who will ultimately issue a report and recommendation to 

congressional committees regarding the FHCC. Officials confirmed that 

they will use the 15 integration benchmarks established in the Executive 

Agreement as part of the assessment (see app. I),26 which as we 

previously reported, are monitored and reported by FHCC officials using a 

FHCC-developed tool.27

• an Institute of Medicine study commissioned by DOD to determine 

whether the quality of, and access to, services provided by the 

In addition to these benchmarks, VA and DOD 

officials also have said they expect to consider additional factors, which 

may include performance measures, in evaluating the FHCC’s 

performance at the end of the demonstration. Officials explained that the 

15 integration benchmarks do not address all factors relevant to 

determining the FHCC’s utility as an integrated model for delivering health 

care. Among the additional factors DOD and VA officials say they are 

considering are the following:

 

25GAO, Results-Oriented Government: Practices That Can Help Enhance and Sustain 

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

26The 15 integration benchmarks comprise 38 individual performance measures. For 

example, the patient satisfaction benchmark is measured using 2 performance 

measures—a VA measure and a DOD measure based on separate surveys that assess 

beneficiaries’ experience with care at the FHCC.

27In response to a recommendation we made in our July 2011 report, FHCC officials have 

made changes to this tool. Specifically, we raised concerns regarding the accuracy and 

transparency of the information generated by this reporting tool and also about the ability 

of FHCC’s use of a single monthly summary score to provide a meaningful gauge of 

success. We were particularly concerned about the use of this summary score given that 

VA and DOD had not established specific targets to define success. In response to our 

concerns, officials have (1) corrected a calculation error to make the summary score more 

accurate and (2) altered their methodology to ensure that the summary score better 

reflects performance rather than fluctuations caused by varied data collection time frames, 

as had occurred previously. See GAO-11-570. 
 

Page 21 GAO-12-669 VA and DOD Federal Health Care Center Update

integrated FHCC meet or exceed those of NCVAMC and NHCGL as 

separate facilities prior to the integration;28

• an evaluation of whether the services available at the FHCC are 

appropriate for the needs of its beneficiary population (for example, 

whether the pediatrics workload is sufficient to maintain a pediatrics 

department at the FHCC or whether it would be more cost-effective to 

contract for pediatrics care in the local community);

• personnel-related factors, such as whether corpsmen are able to be 

used at their full capacity at the FHCC and develop the medical skills 

needed for deployment;29 and

• FHCC costs.

Furthermore, VA and DOD have not set specific target scores for 

determining successful performance for the existing 15 integration 

benchmarks. Officials told us they do not expect to establish these scores 

until the end of the 5-year FHCC demonstration.

Although federal financial accounting standards, VA and DOD 

departmental priorities, and the Executive Agreement—which lays out the 

purpose of the FHCC—indicate that reliable cost information is important 

for evaluating the FHCC, VA and DOD officials have not determined what 

cost measures, if any, will be used in the FHCC’s evaluation. In particular, 

federal financial accounting standards state that Congress and federal 

executives need reliable cost information to compare alternative courses 

of action and evaluate program performance.30

 

28The Institute of Medicine expects to publish the results of this study in the fall of 2012.

In addition, both the 

Veterans Health Administration’s vision statement and the Military Health 

System’s core values statement highlight the importance of cost or value 

of health care to VA and DOD. Furthermore, VA and DOD jointly agreed 

through the Executive Agreement that the FHCC itself was designed to 

29Officials explained that corpsmen—enlisted personnel who receive advanced training to 

provide treatment and administer medications—must be able to fully develop skills at the 

FHCC that they will need to be ready for service in the field when deployed, such as 

medical skills needed in combat areas.

30Federal Accounting Standards Advisory Board, Statement of Federal Financial 

Accounting Standards 4: Managerial Cost Accounting Standards and Concepts

(Washington, D.C.: July 1995). 
 

Page 22 GAO-12-669 VA and DOD Federal Health Care Center Update

improve cost-effectiveness of health care delivery, along with access and 

quality, for the beneficiaries of NHCGL and NCVAMC. Prior to the 

integration, FHCC officials reported that cost savings, mainly one-time 

construction savings, were one of the original considerations in deciding 

to integrate the two facilities, but FHCC officials told us that they are 

unable to determine whether these savings were actually realized.31 We 

have previously reported that cost-effectiveness information is important 

for ensuring that a program produces sufficient benefits in relation to its 

costs.32 Although the existing FHCC integration benchmarks include 

measures related to access and quality, they do not include any 

measures related to cost-effectiveness, and while VA and DOD officials 

said they are considering incorporating cost into the evaluation, they still 

have not determined whether to do so or what cost measures will be 

used.

The FHCC is a 5-year demonstration that has the potential to be a model 

for future VA and DOD collaborations to deliver high-quality and costeffective integrated health care services. However, the demonstration has 

notable problems. The lack of an MTF designation; costly delays in IT 

implementation and the lack of clear definitions, deliverables, and time 

frames for certain IT capabilities; and the lack of an overall evaluation 

plan for the demonstration pose challenges to VA, DOD, and FHCC 

officials.

Because the FHCC does not have an MTF designation, FHCC officials 

continue to experience additional costs and administrative burden. The 

FHCC is unable to use DOD drug pricing arrangements for DOD 

beneficiaries, which has resulted in additional costs for the FHCC, and 

also cannot use personal services contracts without the need for a 

workaround. Because of these ongoing problems, we continue to believe 

 

31In a 2009 report, FHCC officials projected that the integration would result in one-time 

cost savings of $67 million by avoiding the need to build a new naval hospital and 

recurring annual cost savings of $22.3 million by reducing operating costs and staff size 

when compared to the projected costs for NCVAMC and NHCGL separately. They have 

contracted with the Center for Naval Analyses to conduct an assessment of the costs 

associated with the FHCC’s integration, including past and current costs through the early 

stages of the demonstration. This assessment is also intended to document any cost 

savings associated with FHCC patient care.

32GAO-09-45. 

Conclusions 
 

Page 23 GAO-12-669 VA and DOD Federal Health Care Center Update

that the Secretary of Defense should seek a legislative change to 

designate the FHCC as an MTF, even if only for the period of the 5-year 

demonstration.

Delays in the implementation of key IT components required by the 

Executive Agreement to be in place by October 2010 have resulted in the 

FHCC establishing workarounds in an effort to maintain patient care and 

safety. In some cases, these workarounds have been costly and 

inefficient, necessitating the hiring of additional staff or using additional 

staff time to do manually what the IT systems are intended to automate. 

After spending more than $122 million on IT capabilities needed for the 

FHCC, key deliverables remain delayed, resulting in additional costs to 

the FHCC. For example, officials have spent more than $1 million as of 

May 2012 on workarounds for the pharmacy component alone, with an 

additional $750,000 of spending expected through April 2013. Having a 

clear understanding of the costs associated with workarounds needed 

when IT systems are not in place is essential in planning any future VA 

and DOD integration efforts. In addition, the lack of clarity for time frames 

and deliverables for two other IT requirements included in the Executive 

Agreement may pose challenges for implementing them during the 

demonstration.

Despite the fact that the demonstration is in its second of 5 years, DOD 

and VA have yet to develop and implement an overall evaluation plan. 

Without such a plan, decision makers at all levels lack the information 

needed to evaluate the FHCC in a transparent way that ensures 

confidence in the results. Establishing an evaluation plan, including 

relevant measures and standards, such as target scores for the 

benchmarks, as early as possible during the demonstration also provides 

FHCC officials the opportunity to make informed midcourse changes to 

better ensure the delivery of high-quality and cost-effective care. It also 

will better facilitate decision making about whether replicating the model 

in other locations is prudent. Finally, without assessing the costeffectiveness of the FHCC, VA and DOD decision makers, as well as 

Congress, will be unable to adequately assess whether the integrated 

health care delivery model of the FHCC produces sufficient benefits in 

relation to its costs.

To clarify IT requirements within the Executive Agreement, to enable VA 

and DOD to make an informed recommendation about whether the FHCC 

should continue after the end of the demonstration, and to provide useful 

information for other integrations that may be considered in the future, we 

Recommendations for 

Executive Action
 

Page 24 GAO-12-669 VA and DOD Federal Health Care Center Update

recommend that the Secretaries of Veterans Affairs and Defense take the 

following four actions:

• determine the costs associated with the workarounds required 

because of delayed IT capabilities at the FHCC for each year of the 

demonstration, including the costs of hiring additional staff and of 

managing the administrative burden caused by the workarounds;

• develop plans with clear definitions and specific deliverables, 

including time frames for two IT capabilities—documentation of patient 

care to support medical and dental operational readiness and 

outpatient appointment enhancements—and formalize these plans,

for example, by incorporating them into the Executive Agreement;

• expeditiously develop and agree to an evaluation plan, including the 

performance measures and standards, such as target scores, to be 

used to evaluate the FHCC demonstration, and formalize the plan, for 

example, by incorporating it into the Executive Agreement; and

• establish measures related to the cost-effectiveness of the FHCC’s 

care and operations to be included as a part of the evaluation plan.

DOD and VA each provided comments on a draft of this report. In their 

comments, both agencies generally concurred with each of the four 

recommendations to the Secretaries of Defense and Veterans Affairs. 

(DOD’s comments are reprinted in app. II; VA’s comments are reprinted 

in app. III.) In addition, both VA and DOD provided technical comments 

which we have incorporated as appropriate. The agencies’ specific 

responses to each of our recommendations are as follows:

• To determine the costs associated with the workarounds required 

because of delayed IT capabilities at the FHCC, DOD indicated that it 

will collaborate with VA to determine these costs. VA stated the FHCC 

will convene a workgroup to review these costs and to identify any 

additional needs associated with IT development delays. VA 

suggested changing “workaround” to “impacts and changes to 

business practices.” We maintain that “workaround” is used 

appropriately in the context of this report because we use it to 

describe processes that are temporarily in place for the purpose of 

mitigating IT delays rather than permanent changes to business 

practices.

Agency Comments 

and Our Evaluation
 

Page 25 GAO-12-669 VA and DOD Federal Health Care Center Update

• To develop plans with clear definitions and specific deliverables, 

including time frames for two IT capabilities, both VA and DOD stated 

that they are working together through their joint Interagency Program 

Office to develop and formalize these plans. DOD added that the 

Interagency Program Office will also consider how these plans relate 

to the larger effort to implement an integrated electronic health record. 

Both agencies noted that formalization of these plans does not require 

incorporation into the Executive Agreement. We offered amending the 

Executive Agreement as an example of how plans could be 

formalized and leave it to the agencies’ discretion how best to do so.

• To expeditiously develop and agree to an evaluation plan, VA and 

DOD mentioned that although a methodology and framework for a 

final evaluation have not been determined, they are tracking some 

measures of performance through the 15 integration benchmarks. In 

addition, VA stated that the JEC has directed the HEC to outline an 

evaluation plan to include analysis of personnel, logistics, resources, 

and regulatory issues. Again, both agencies noted that formalizing of 

the evaluation plan does not require incorporation into the Executive 

Agreement. As we noted above, amending the Executive Agreement 

is one option for how the plan could be formalized and the agencies 

may determine the most effective way to do so.

• To establish measures related to the cost-effectiveness of the FHCC’s 

care and operations to be included as a part of the evaluation plan, 

VA stated that it will develop a process to expedite creation of an 

evaluation plan. Both agencies concurred with the recommendation to 

include cost-related measures.

VA provided an additional comment regarding the issue of MTF 

designation at the FHCC. They suggest that VA and DOD agree on the 

matter of seeking an MTF designation before any action is taken 

regarding establishing the FHCC as an MTF.

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

Secretary of Veterans Affairs, and appropriate congressional committees. 

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

http://www.gao.gov. 
 

Page 26 GAO-12-669 VA and DOD Federal Health Care Center Update

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

me at (202) 512-7114 or draperd@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 major contributions to this report 

are listed in appendix IV.

Debra A. Draper

Director, Health Care
Page 27 GAO-12-669 VA and DOD Federal Health Care Center Update

List of Committees

The Honorable Carl Levin

Chairman

The Honorable John S. McCain

Ranking Member

Committee on Armed Services

United States Senate

The Honorable Patty Murray

Chairman

The Honorable Richard Burr

Ranking Member

Committee on Veterans’ Affairs

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 Jeff Miller

Chairman

The Honorable Bob Filner

Ranking Member

Committee on Veterans’ Affairs

House of Representatives 
Appendix I: Federal Health Care Center 

Integration Benchmarks, by Number of 

Reported Measures

Page 28 GAO-12-669 VA and DOD Federal Health Care Center Update

Integration benchmarks

Number of individual performance 

measures to be reported

1. Patient satisfaction measures meet Federal Health Care Center (FHCC) targets. 2 

2. Staff surveys meet FHCC targets. 2 

3. Health profession trainee satisfaction measures meet FHCC targets. 1 

4. Stakeholders Advisory Council determination that the FHCC meets both Department 

of Veterans Affairs (VA) and Department of Defense (DOD) missions.a 1 

5. Clinical and administrative performance measures meet FHCC targets. 4 

6. Patient access to care meets FHCC targets. 3 

7. Evidence-based health care measures meet FHCC targets. 2 

8. Clinical/dental productivity meets FHCC targets. 3 

9. Information technology solution timeline is met and has no negative impact on 

patient safety. 1 

10. Pre-FHCC academic and clinical research missions are maintained. 2 

11. Navy servicemember medical readiness for duty meets Navy targets. 3 

12. Navy advancement/retention meets Navy targets. 3 

13. Successful annual GAO review. 1 

14. Validation of FHCC fiscal reconciliation model by an annual independent audit. 1 

15. Satisfactory facility and clinical inspection, accreditation, and compliance outcomes 

from several external oversight/groups, such as VA and DOD Offices of the 

Inspector General and The Joint Commission.b 9 

Total 38

Source: GAO.

a

The Stakeholders Advisory Council is composed of members from various organizations 

representing FHCC interests, including a local government representative, as well as officials from 

TRICARE and nearby VA medical facilities located in Hines, Illinois, and Milwaukee, Wisconsin. It 

provides feedback on how well the FHCC is meeting customers’ needs and whether the FHCC is 

meeting VA and DOD missions.

b

The Joint Commission is an independent organization that accredits and certifies health care 

organizations and programs in the United States.

Appendix I: Federal Health Care Center 

Integration Benchmarks, by Number of 

Reported Measures 
Appendix II: Comments from the Department 

of Defense

Page 29 GAO-12-669 VA and DOD Federal Health Care Center Update

Appendix II: Comments from the Department 

of Defense

Note: GAO received 

DOD’s letter commenting 

on a draft of this report on 

June 11, 2012.
Appendix II: Comments from the Department 

of Defense

Page 30 GAO-12-669 VA and DOD Federal Health Care Center Update
Appendix II: Comments from the Department 

of Defense

Page 31 GAO-12-669 VA and DOD Federal Health Care Center Update
Appendix II: Comments from the Department 

of Defense

Page 32 GAO-12-669 VA and DOD Federal Health Care Center Update
Appendix II: Comments from the Department 

of Defense

Page 33 GAO-12-669 VA and DOD Federal Health Care Center Update
Appendix II: Comments from the Department 

of Defense

Page 34 GAO-12-669 VA and DOD Federal Health Care Center Update
Appendix II: Comments from the Department 

of Defense

Page 35 GAO-12-669 VA and DOD Federal Health Care Center Update
Appendix III: Comments from the Department 

of Veterans Affairs

Page 36 GAO-12-669 VA and DOD Federal Health Care Center Update

Appendix III: Comments from the 

Department of Veterans Affairs
Appendix III: Comments from the Department 

of Veterans Affairs

Page 37 GAO-12-669 VA and DOD Federal Health Care Center Update
Appendix III: Comments from the Department 

of Veterans Affairs

Page 38 GAO-12-669 VA and DOD Federal Health Care Center Update
Appendix III: Comments from the Department 

of Veterans Affairs

Page 39 GAO-12-669 VA and DOD Federal Health Care Center Update
Appendix III: Comments from the Department 

of Veterans Affairs

Page 40 GAO-12-669 VA and DOD Federal Health Care Center Update
Appendix III: Comments from the Department 

of Veterans Affairs

Page 41 GAO-12-669 VA and DOD Federal Health Care Center Update
Appendix III: Comments from the Department 

of Veterans Affairs

Page 42 GAO-12-669 VA and DOD Federal Health Care Center Update
Appendix III: Comments from the Department 

of Veterans Affairs

Page 43 GAO-12-669 VA and DOD Federal Health Care Center Update
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 44 GAO-12-669 VA and DOD Federal Health Care Center Update

Debra A. Draper, (202) 512-7114 or draperd@gao.gov

In addition to the contact named above, Marcia A. Mann, Assistant 

Director; Jill K. Center; Regina Lohr; and Rasanjali Wickrema made key 

contributions to this report. Lisa A. Motley provided legal support, and 

Jennie F. Apter assisted in message and report development.

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(290987)
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