GAO-04-495R DOD and VA Incentives Program for Sharing Health Resources

United States General Accounting Office

Washington, DC 20548 

February 27, 2004 

Congressional Committees 

Subject: DOD and VA Health Care: Incentives Program for Sharing Resources

Combined, the Department of Defense (DOD) and the Department of Veterans Affairs 

(VA) provide health care services to about 12 million beneficiaries at an estimated 

cost of about $53 billion for fiscal year 2004—$26.7 billion for DOD and $26.5 billion 

for VA. In 1982 the Congress passed the VA and DOD Health Resources Sharing and 

Emergency Operations Act (Sharing Act) to promote more cost-effective use of 

health care resources and more efficient delivery of care.1

 Specifically, the Congress 

authorized military treatment facilities and VA medical centers to enter into sharing 

agreements to buy, sell, and barter medical and support services. To further 

encourage on-going collaboration, the Congress, in section 721 of the Bob Stump 

National Defense Authorization Act (NDAA) for Fiscal Year 20032, directed the 

Secretary of Defense and the Secretary of Veterans Affairs to establish a joint 

incentives program to identify and provide incentives to implement, fund, and 

evaluate creative health care coordination and sharing initiatives between DOD and 

VA. To facilitate the program, each Secretary is required to contribute a minimum of 

$15 million from each department’s appropriation into an account established in the 

U. S. Treasury3 for each fiscal year from 2004 through 2007. DOD’s TRICARE 

Management Activity and VA’s Medical Sharing Office administer the incentive fund 

program. The offices have jointly issued a request for proposals from DOD and VA 

medical facilities around the country. 

 

The NDAA requires that we submit a report on the implementation and effectiveness 

of the program by February 28, 2004, and by February 28th for each year thereafter 

that the program is in effect. As discussed with the committees of jurisdiction, since 

the program is in its initial development stage, our objective was limited to reviewing 

the status of the program’s implementation phase—primarily the process for 

selecting proposals—during the first five months of fiscal year 2004. To do so, we 

reviewed the DOD’s and VA’s plans for implementing the DOD-VA Health Care 

Sharing Incentive Fund—including proposal submission guidelines and evaluation 

and selection criteria—and interviewed agency officials from DOD and VA involved 

 

1

 Pub. L. No. 97-174, 96 Stat. 70. 

2

 Pub. L. No. 107-314, §721(a)(1), 116 Stat. 2589, 2595 (2002). 

3

DOD-VA Health Care Sharing Incentive Fund. 
2 GAO-04-495R DOD and VA Incentives Program for Sharing Health Resources 

in the oversight of the program. Our work was conducted from October 2003 through 

February 2004 in accordance with generally accepted government auditing standards. 

Results in Brief 

During the first five months of the program DOD and VA have established criteria for 

evaluating proposals. As of February 25, 2004, the departments are reviewing 57 

proposals that have been submitted. DOD and VA program officials have not 

established a firm date for final selection but anticipate it will take place during the 

summer of 2004. While the agencies have made progress in implementing the 

program, they have not made contributions to the fund; they anticipate doing so by 

March 31, 2004. VA has raised a concern whether services provided to veterans will 

have to be commensurate with its contributions to the sharing incentive fund. DOD 

and VA officials are discussing how the fund contributions will be used. DOD and VA 

officials agreed the information in this report is accurate. 

Proposal Submission and Selection Process 

The 57 proposals that are under review by DOD and VA are considered concept 

proposals—they contain a broad range of sharing activities. DOD and VA agency 

officials at each submitting medical facility jointly developed these concept 

proposals. Examples of sharing services and resources included in the concept 

proposals are 

• magnetic resonance imaging, 

• staffing, 

• telemedicine, 

• cardiac catheterization laboratories, 

• outpatient care, 

• sleep study analysis, and 

• information management/information technology. 

According to program officials, the two agencies will review the concept proposals 

and select the most promising. The selection and evaluation criteria for the concept 

proposals include the following: 

• support DOD’s and VA’s joint long-term approach to meeting the health care 

needs of their beneficiary populations, 

• improve beneficiary access, 

• exportability to other facilities, 

• maximize the number of beneficiaries that would benefit from the initiative, 

• result in cost savings or cost avoidance, 

• develop in-house capability at a lesser cost for services now obtained by 

contract, and 

• demonstrate that the initiative will be self-sustaining—that is, a separate 

source of funding other than the incentive fund for recurring costs—within 

one or two years of the initial award. 
3 GAO-04-495R DOD and VA Incentives Program for Sharing Health Resources

Officials at each location whose proposals are selected will be asked to submit a 

more detailed final proposal with a business case analysis that will be reviewed by 

DOD’s and VA’s Chief Financial Officers and approved by the interagency Health 

Executive Committee4. 

Program Funding and Use of Funds 

VA has raised a concern about the extent to which restrictions on the use of its 

medical appropriations would continue to apply once funds from those 

appropriations are transferred to the DOD-VA Health Care Sharing Incentive Fund5. 

DOD and VA officials are discussing how the fund contributions will be used and plan 

to reach agreement before final proposals for projects are selected. DOD and VA 

expect to transfer funds to the DOD-VA Health Care Sharing Incentive Fund by March 

31, 2004, so that money is available when selection of final proposals is made during 

the summer of 2004. 

DOD and VA program officials as well as DOD’s and VA’s Offices of General Counsel 

reviewed a draft of this report and provided technical comments, which were 

included where appropriate. They agreed the information in the report is accurate. 

- - - - - 

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

Veterans Affairs, and other interested parties. We will provide copies of this report to 

others upon request. In addition, the report is available at no charge on the GAO Web 

site at http://www.gao.gov. If you or your staffs have any questions, please contact 

me at (202) 512-7101 or Michael T. Blair, Jr., at (404) 679-1944. Aditi Archer and 

Helen Desaulniers made key contributions to this report. 

Cynthia A. Bascetta 

Director, Health Care—Veterans’ 

 Health and Benefits Issues 

 

4

 The Health Executive Committee membership includes senior leaders from DOD and VA who are 

working to institutionalize DOD and VA sharing and collaboration to ensure the efficient use of health 

services and resources. The committee is co-chaired by the Assistant Secretary of Defense for Health 

Affairs and the Department of Veterans Affairs Under Secretary for Health. 5

 VA's medical care appropriations are available for the expenses of medical services, medical 

administration, and medical facilities for VA beneficiaries. Section 1301(a) of title 31, United States 

Code, provides that appropriations shall be applied only to the objects for which they were made, 

except as otherwise authorized. In addition, section 1532 provides that, in the absence of statutory 

provisions to the contrary, appropriations authorized to be transferred from one account to another 

are available for the same purpose provided by the law appropriating the funds. 
4 GAO-04-495R DOD and VA Incentives Program for Sharing Health Resources 

Congressional Committees 

The Honorable John Warner 

Chairman 

The Honorable Carl Levin 

Ranking Minority Member 

Committee on Armed Services 

United States Senate 

The Honorable Arlen Specter 

Chairman 

The Honorable Bob Graham 

Ranking Minority Member 

Committee on Veterans’ Affairs 

United States Senate 

The Honorable Duncan Hunter 

Chairman 

The Honorable Ike Skelton 

Ranking Minority Member 

Committee on Armed Services 

House of Representatives 

The Honorable Christopher Smith 

Chairman 

The Honorable Lane Evans 

Ranking Minority Member 

Committee on Veterans’ Affairs 

House of Representatives 

(290276) 
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
GAO’s Mission The General Accounting Office, the audit, evaluation and investigative arm of 

Congress, exists to support Congress in meeting its constitutional 

responsibilities and to help improve the performance and accountability of the

federal government for the American people. GAO examines the use of public 

funds; evaluates federal programs and policies; and provides analyses, 

recommendations, and other assistance to help Congress make informed 

oversight, policy, and funding decisions. GAO’s commitment to good 

government is reflected in its core values of accountability, integrity, and 

reliability.

The fastest and easiest way to obtain copies of GAO documents at no cost is 

through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and fulltext files of current reports and testimony and an expanding archive of older 

products. The Web site features a search engine to help you locate documents

using key words and phrases. You can print these documents in their entirety, 

including charts and other graphics. 

Each day, GAO issues a list of newly released reports, testimony, and 

correspondence. GAO posts this list, known as “Today’s Reports,” on its Web 

site daily. The list contains links to the full-text document files. To have GAO email this list to you every afternoon, go to www.gao.gov and select “Subscribe to 

e-mail alerts” under the “Order GAO Products” heading. 

The first copy of each printed report is free. Additional copies are $2 each. A 

check or money order should be made out to the Superintendent of Documents. 

GAO also accepts VISA and Mastercard. Orders for 100 or more copies mailed to

a single address are discounted 25 percent. Orders should be sent to: 

U.S. General Accounting Office 

441 G Street NW, Room LM

Washington, D.C. 20548 

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800 

U.S. General Accounting Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

Obtaining Copies of 

GAO Reports and

Testimony 

Order by Mail or Phone 

To Report Fraud,

Waste, and Abuse in 

Federal Programs 

Public Affairs