United States General Accounting Office

GAO Report to the Honorable

John McCain, U.S. Senate

February 1996 VETERANS’ HEALTH

CARE

Facilities’ Resource

Allocations Could Be

More Equitable

GAO/HEHS-96-48

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-259872 

February 7, 1996

The Honorable John McCain

United States Senate

Dear Senator McCain:

The Department of Veterans Affairs (VA) is faced with the challenge of

equitably allocating more than $16 billion in health care appropriations

across a nationwide network of hospitals, clinics, and nursing homes. The

challenge is made greater by the shifting demographics of veterans. While

nationally the veteran population is declining, veterans have migrated

from northeastern and midwestern states to southeastern and

southwestern states in the past decade, offsetting veteran deaths in these

states.

VA has historically based its allocations to facilities primarily on their past

funding levels—providing incremental increases to facilities’ past budgets.

In an effort to improve its planning, allocation, and management

processes, VA made a considerable investment in implementing a new

system, called the Resource Planning and Management (RPM) system, for

use initially in fiscal year 1994. VA considers RPM to be a management

decision process to use to formulate its budget, allocate most of its

resources, and compare facility performance.1

 As the basis for resource

allocation, RPM classifies each patient into a clinical care group, calculates

average facility costs per patient, and forecasts future workload. VA

envisioned that the system would improve VA’s management of limited

medical care resources, better define future resource requirements, and

enable VA to explore opportunities to improve quality and efficiency in its

health care system. This vision included improving the equity of its

allocations by more closely linking resources with facility workloads and

alleviating inconsistencies in veterans’ access to care across the system.

Two recent events could have significant implications for VA’s resource

allocation system. First, VA is restructuring its organization to establish 22

veterans integrated service networks (VISN) that will replace four regional

offices and assume the individual facilities’ role as the basic budgetary and

planning unit for health care delivery. The new structure will require some

1

VA in 1995 operated 172 hospitals, 375 ambulatory clinics, 133 nursing homes, and 39 domiciliaries.

For resource allocation purposes, RPM combines certain health care facilities that are managerially

associated. In total, the RPM system develops allocations for 167 facilities.

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change in how resources are allocated.2 Second, the Senate passed your

proposed amendment to the VA appropriations bill that would require VA to

develop a plan for the allocation of health care resources among its health

care facilities to ensure that veterans have the same access to quality

health care.3

Because of your interest in this issue, you asked us to review the equity of

VA’s resource allocation system, particularly as it related to the allocations

made to the Carl T. Hayden Medical Center in Phoenix, Arizona. More

specifically, you asked us to determine the following:

• To what extent does VA’s allocation system provide for an equitable

distribution of resources among VA facilities?

• What are the causes of any inequity in the distribution of resources, and

what changes, if any, would help ensure that the system more equitably

distributes resources?

In September 1995, we sent you our preliminary observations.4

 This report

presents our final results.

To accomplish our objectives, we first needed to apply a definition of the

term “equity.” We based our evaluation of the equity of the system’s

distribution on VA’s vision for RPM.

5

 We considered the following two

elements to be characteristics of an equitable system:

• It provides comparable resources for comparable workload.

• It provides resources so that veterans within the same priority categories

have the same availability of care, to the extent practical, throughout the

VA health care system.

We then reviewed VA documents and analyzed RPM system data to

determine the degree to which these two elements were present. We

2

VA officials indicated that as part of this change, the resource planning and management processes it

used would change and the system would be renamed. At the time of our review, the system was

known as RPM.

3

On September 26, 1995, the Senate adopted amendment number 2787 to the VA appropriations bill,

which was in conference at the time of our review. If it becomes law, the provision would require the

Secretary of VA to develop a plan for the allocation of health care resources to ensure that veterans

having similar economic status, eligibility priority, and/or similar medical conditions have similar

access to care regardless of the region in which the veterans reside. The plan will include, among other

things, procedures to identify reasons for variations in operating costs among similar facilities.

4

See VA’s Medical Resource Allocation System (GAO/HEHS-95-252R, Sept. 12, 1995).

5

This vision was described in the Secretary’s statements to the Congress on RPM and in other VA

publications.

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discussed potential reasons for any inequities in allocations with VA

Headquarters, the Boston Development Center, the RPM Committee, and

facility officials in several locations. To assess potential changes to

address inequities, we discussed such changes with VA officials and

reviewed VA documents on its original plans for RPM and minutes of several

RPM committees and work groups. Further details of our scope and

methodology are in appendix I. We performed our review between

December 1994 and October 1995 in accordance with generally accepted

government auditing standards.

Results in Brief The resource allocation system gives VA the ability to identify potential

inequities in resource distribution and to forecast workload changes. Data

generated by the system show wide differences in operating costs among

facilities that VA considers comparable, even after factors such as locality

costs and patient mix differences are considered. VA’s data also show some

facilities’ overall patient workloads increasing by as much as 15 percent

between 1993 and 1995, and others’ workloads declining by as much as

8 percent. However, in the two budget cycles in which RPM has been in

effect, VA used it to make only minimal changes in facilities’ funding

levels—the maximum loss to any facility was about 1 percent of its past

budget and the average gain was also about 1 percent. As such, VA’s

distribution of resources has remained almost exclusively related to

incremental changes to the amount that each facility has received in the

past.

To date, VA has chosen not to use the RPM system to help ensure resources

are allocated more equitably. VA officials indicated that larger reallocations

were not made during the first 2 years of RPM to allow facilities time to

understand the process. VA officials also cited several other reasons that

significantly larger reallocations among facilities could not be made.

Although VA is taking some actions on these issues, it has not fully

addressed concerns that (1) facilities cannot efficiently adjust to large

budget changes, (2) VA needs a better understanding of the reasons for the

variations, and (3) resources allocated to facilities outside the RPM process

should also be considered in judging the equity of distributions. VA’s

reasons for not using RPM to even out differences in veteran access to care

were less clear as there appeared to be confusion within VA about whether

the resource allocation system was intended to achieve this goal.

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Background The VA health care system, established in 1930, is one of the nation’s

largest direct delivery systems. VA’s health care facilities provide services

to veterans both with and without service-connected disabilities.

Individual facilities vary widely in the inpatient, outpatient, and long-term

care services they provide. For example, some facilities provide only basic

clinical care; whereas, others have capabilities to provide special care

such as for organ transplants, spinal cord injuries, or chronic mental

illness.

VA historically allocated funds to its facilities on the basis of the facilities’

past expenditures, with incremental increases for such factors as inflation

and new programs. Beginning in 1985, VA modified its allocation system

because it recognized the need to more directly relate funding to the work

performed and the cost to perform it, and to improve the efficiency and

productivity with which medical care is delivered to veterans.

The Resource Allocation Methodology (RAM) was VA’s first attempt to

better link resources to workload.6 VA ended RAM in 1989 because of

concerns that facilities had inappropriate incentives to perform work

beyond their resources, possibly affecting quality of care and resulting in a

budget crisis at some facilities. Between 1990 and 1993, VA again based

allocations on making incremental changes to facilities’ historical budgets.

But to further its efforts to link resources and workload and to provide

data that it could use to improve quality and efficiency in the system, VA

implemented its current RPM system for the fiscal year 1994 allocation

process.

System Goals and Design The Secretary of VA, in endorsing the new RPM system, stated he hoped it

would improve VA’s management of limited medical care resources, enable

VA to explore opportunities to improve quality and efficiency in its health

care system, and better define future resource requirements. To those

ends, VA’s stated goals for RPM are to (1) improve its resource allocation

methodology, (2) move from retrospective to prospective workload

management, and (3) reform medical care budgeting.7

VA has established high expectations for how RPM would improve the

equity of its allocations. VA hoped to better link resources and facility

6

We reported in 1989 that RAM had little impact on medical center budgets. See VA Health Care:

Resource Allocation Methodology Has Had Little Impact on Medical Centers’ Budgets

(GAO/HRD-89-93, Aug. 18, 1989).

7

Our review was limited to aspects of how RPM has been used to allocate and manage resources.

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workload, move to prospective workload management by forecasting

workload changes, and provide for differences in facility efficiencies in the

allocations. VA also hoped that by forecasting workload changes, it could

better establish and justify its budget requests. VA envisioned the system

overcoming inconsistencies in facilities’ provision of care to veterans by

allowing for a more equitable distribution of resources to meet veteran

needs systemwide. Finally, by identifying facility differences, VA intended

that the system would provide managers with useful information,

including the matching of resources to quality of care issues.

Part of this effort to improve resource allocation involved linking the

budget allocation process to VA’s strategic plan. The strategic plan was to

be the driving force behind RPM, providing it with a set of goals,

performance standards, and workload priorities. Furthermore, the

system’s link to the strategic plan was intended to allow consideration of

service distribution, practice patterns, geographic factors affecting costs,

and access differences.

RPM was also designed to be a patient-based system. It differs from past

resource allocation processes in defining workload as patients served

rather than as procedures performed—this is the basis for VA’s

characterization of RPM as “capitation-based.” For resource allocation

purposes, the RPM database, managed by VA’s Boston Development Center

(BDC) in Braintree, Massachusetts, integrates workload data, case mix, and

costs to project facility-specific resource needs. With significant input

from VA managers in the field and Headquarters, BDC has developed a

complex data analysis process to estimate facility unit costs. Generally,

this process involves adjusting for case mix differences by classifying

patients into clinical classes and groups, forecasting changes by class in

the numbers of patients served, and developing average costs per patient

type that are then applied to the number of expected patients in each

group to achieve a preliminary budget estimate. The facility estimates are

adjusted to reflect inflation, VA regional input, and facility efficiencies. A

further discussion of the RPM system is in appendix II.

Because resource allocation is a sensitive and complex undertaking in VA’s

health care system, VA has made a considerable investment in it.

Significant VA Headquarters and field managers’ time and effort is spent

adjusting the RPM methodology from year to year—one reason the process

is continually changing. In addition to the 26 BDC staff responsible for data

processing and education efforts, VA Headquarters chief financial officer,

quality management, operations, and clinical staff also provide input to the

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process through frequent meetings. Facility directors sit on the RPM Field

Oversight Committee, a group of about 15 managers (with 10 to 20 support

staff and visitors usually present) who meet regularly to discuss

implementation issues. Six technical assistance groups comprising

physicians and other clinicians in each clinical area generally represent

the RPM clinical groups and advise on clinical issues such as the

classification of patients. Other RPM committees include a Planning Group

and a Financial Advisory Group, which assist in determining forecasting

methodologies and advise on the correct allocation of costs. While many

parties provide input to the RPM process, the Budget Policy and Review

Committee, comprising VA associate chief medical directors and other

senior VA managers, makes the final recommendation on the resource

allocation methodology, which the Under Secretary for Health approves.

System’s Potential to

Improve Equity May

Not Be Realized

The resource allocation system shows mixed results with regard to the

two aspects of equity that we examined. The system design produces data

that point to potential inequities so that VA can better link resources to

facility workloads. However, VA has not yet used the system for this

purpose. VA has not designed the system to address the goal of providing

greater consistency in veterans’ systemwide access to services.

System Design Provides

Data on Potential

Inequities

The resource allocation system provides VA managers with data that

compare facility costs on a standardized workload unit basis and in this

way, provides data that could point to potential inequities in allocations.8

Through an outlier process, the system identifies facility cost differences,

a feature that allows VA to reallocate monies from the budgets of the

highest cost facilities to those with the lowest costs. VA places facilities

into one of nine facility groups that it considers comparable based on a

complex consideration of factors such as affiliation with teaching facilities

and size.9

 Then, to provide a fair comparison, the system “levels the

playing field” by adjusting for differences among facilities such as case

mix, locality costs, salaries, training, and research. After adjustments are

made, the system considers variations in workload costs to be more

8

The current system design addresses some of the concerns raised about the RAM system that

preceded it by focusing on patients rather than on programs or procedures. This redefinition of

workload also changes the incentives in the system and makes it less susceptible to attempts to gain

resources through inappropriate performance or recording of workload. For example, under RAM, a

facility could get more workload credit for hospitalizing a patient than if the same care was provided

on an outpatient basis.

9

Specifically, the complexity index applied in developing the groups considered facility size, clinical

variety, size of medical resident teaching mission, variety of medical resident programs, size of allied

health training mission, managerial complexity, and research.

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indicative of efficiency differences than facility characteristics.

Comparative data show that even after adjustments are made, significant

facility cost variations remain. Variations typically ranged 30 percent or

more within each facility group. Appendix III and figure III.3 provide an

example of the variations the RPM data show in adjusted costs per

workload for one group of facilities that VA considered comparable.

Another important aspect of the RPM system is its ability to forecast

workload changes. For each patient class, the system forecasts the

number of patients that facilities are likely to see, based on historical

trends. The forecasting process recognizes that facility workloads are

changing at relatively different rates and that facilities’ clinical workloads

or “case mix” are also changing. For example, the system forecasts that

patient classes for pulmonary disease patients or ear, nose, and throat

patients are generally expected to decrease in fiscal years 1994 and 1995;

whereas, classes for outpatients or human immunodeficiency virus (HIV)

patients are expected to increase. System forecasts showed rates of

change for total patients expected to be seen at facilities ranging from an

8-percent decrease to a 15-percent increase between 1993 and 1995.10

VA Has Done Little to

Change Past Facility

Allocations

Despite cost variations and differing workload changes among facilities

reflected in RPM data, VA has done little to use the data to change facility

allocations. We estimate that 1 percent was the maximum real decrease in

allocations that any facility had in 1995 based on RPM budget adjustments.

While one facility gained as much as 3.4 percent through the process, the

average uninflated gain11 was also about 1 percent. Facility budget

changes for RPM Facility Group 5 are shown in figure 1. Appendix IV

contains data for facilities nationwide.

10We did not review the adequacy of the resource allocation system’s forecasting methodologies

because data to compare actual with forecasted workload and assess the accuracy of the forecasts

over time were unavailable at the time of our review.

11All facilities received larger budgets in fiscal year 1995 than the previous year because of inflation

adjustments. The uninflated gain represents the budget change before the inflation adjustment.

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B-259872 

Figure 1: Facility Group 5 Budget Changes Resulting From RPM Process, Fiscal Year 1995

Phoenix

San Juan

Bay 

Pines

Northport

Sepulveda

Loma Linda

Columbia (SC)

St. Louis

Kansas City

Chicago (L. Side)

Bronx

Allen Park

Brooklyn

Cincinnati

Chicago

(W.Side)

Long Beach 

East Orange

-2

0

2

4

6

8

10

Percentage Change in Budget

Note: L. Side = Lakeside facility; W. Side = Westside facility.

Source: GAO analysis of RPM data.

VA made two significant decisions that limited the resource allocation

adjustments to facilities’ budgets:

• By limiting the movement of resources between the high- and low-cost

facilities, VA in effect allowed the wide variations in patient costs among

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facilities to continue. VA limited the amount of dollars moved between

high- and low-cost facilities to $10 million in fiscal year 1994 and

$20 million in fiscal year 1995.

• VA did not include enough resources in its RPM allocations to fully fund all

the facilities’ expected needs12 and distributed the shortfall by limiting the

amount of resources given to those facilities with growing workloads.13

Furthermore, for those facilities with decreasing workloads, VA chose to

limit their budget decreases. These decisions led to funding for the

projected cost of increased workload at approximately 17 cents on the

dollar. At the same time, facilities with decreasing workloads were given

more money than needed to support the forecasted workload. Appendix

III discusses the impact of this decision in further detail.

Both of these decisions on VA’s part had a greater impact on those facilities

that historically had received less funding for their workloads—and

therefore were shown to have lower workload costs—than those that had

relatively faster growing workloads. For example, the Carl T. Hayden

Medical Center adjusted workload costs were 16.8 percent lower than

those of other facilities that VA considered comparable in mission and size,

and its forecasted workload growth was 4.5 percent—third highest among

comparable facilities between 1993 and 1995. However, because of VA’s

decisions that limited the reallocation of funds, Carl T. Hayden

experienced a 2.2-percent increase in uninflated funding between 1993 and

1995. By comparison, the Long Beach Medical Center—the “high outlier”

in the same comparative facility group as Carl T. Hayden—had adjusted

workload costs that were 13.9 percent higher than other facilities and a

forecasted workload decrease of approximately 1 percent. Long Beach’s

funding decrease was less than 1 percent in 1995 (before the inflation

adjustment). A further discussion and data related to the system’s

provision of funding for workload are in appendixes III and IV.

The System Does Not

Address Veterans’ Unequal

Access to Care

Part of VA’s original plan for RPM was to use it to help alleviate

inconsistencies in veterans’ access to outpatient care—a plan that has not

materialized. Consequently, inconsistencies that we reported in the past

are likely to remain, as demonstrated by differences in facilities’ ability to

provide outpatient care.

12As discussed later in this report, VA excluded over $4 billion, or 25 percent, of its medical care

appropriation from the RPM process.

13While the system data indicated that VA needed $242 million to fund the forecasted increases in

workload for fiscal year 1995, VA provided $42 million.

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We reported in 1993 that veterans’ access to outpatient care at VA facilities

varied widely—veterans within the same priority categories received

outpatient care at some facilities but not at others.14 This occurred

because VA facilities were given discretion to determine whether to ration,

or limit, discretionary or nonmandated care when resources are

insufficient to care for all veterans.15 While considerable numbers of

veterans have migrated to southeastern and southwestern states, there

was little shift in VA resources. As a result, facilities mainly in the eastern

states were more likely to have adequate resources to treat all veterans

seeking care than other facilities. VA facilities in other states have adapted

by restricting veterans’ access to care.

Our 1993 report found that 118 facilities indicated they rationed outpatient

care for nonservice-connected conditions, while 40 facilities reported no

rationing. The facilities that did ration used different methods to

determine who got care. Some rationed on the basis of economic status,

others on the basis of medical service or medical condition. Consequently,

significant inconsistencies existed in veterans’ access to care both among

and within centers.

In responding to our report and in correspondence to the Congress, VA

indicated that the RPM system would consider and help overcome

inconsistencies among facilities in veterans’ access to outpatient care,

allowing for a more equitable distribution of resources to meet outpatient

needs systemwide. However, this vision remains unfulfilled. The system

does not distinguish between facilities’ discretionary and mandatory

workload in determining past and forecasting future workload.

Consequently, the access problems we reported in 1993 are likely to have

continued. VA management systems, however, still lack reliable data on

facilities’ rationing or denial of care, which prevented us from confirming

the extent to which the rationing we reported earlier still exists. But

available data indicate that the ability of facilities to provide care to

discretionary categories of veterans still varies. For example, fiscal year

1994 data indicate that although up to 13 percent of some facilities’

patients were veterans in a discretionary category because they had

14VA Health Care: Variabilities in Outpatient Care Eligibility and Rationing Decisions

(GAO-HRD-93-106, July 16, 1993).

15As we reported in VA Health Care: Issues Affecting Eligibility Reform (GAO/T-HEHS-95-213, July 19,

1995), VA uses a complex priority system—based on such factors as the presence and extent of any

service-connected disability, the incomes of veterans with nonservice-connected disabilities, and the

type and purpose of care needed—to determine which eligible veterans receive care within available

resources.

Page 10 GAO/HEHS-96-48 VA Medical Resources Allocation System
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nonservice-connected conditions and higher incomes, other facilities

treated none of these discretionary patients. Appendix V discusses these

differences further.

VA Barriers to

Equitable Allocations

Can Be Overcome

VA officials offered a number of reasons for not reallocating larger

percentages of dollars in fiscal years 1994 and 1995, thereby addressing the

goal of better linking resources to workload. These reasons included the

need for a transition period, the difficulty facilities would have adjusting

efficiently to large annual budget changes, and the need to evaluate the

reasons for the cost variations and whether to include more of VA’s

resources in the RPM system. With regards to the goal of reducing access

differences, officials expressed uncertainty over how the system could be

used for this purpose.

Although VA is planning to reallocate more funds for the fiscal year 1996

budget cycle, further changes are needed to establish equitable

allocations. VA’s original plans for the system remain valid and in line with

current governmentwide efforts to develop strategic plans and

performance measurement systems. These efforts, legislated under the

Government Performance and Results Act, provide for performance

measurement as the basis for improving government operations and,

eventually, linking desired outcomes to resource allocation. Although we

and others have recognized the inherent difficulties of linking performance

measures and budgeting,16 VA has opportunities to improve the equitability

of its allocations by revisiting its original plans for RPM and forging

long-range plans for working toward its original visions.

VA Cited Several Barriers

to Reallocating More

Money

The basis for VA’s facility allocations remains largely unchanged because

VA officials decided to limit the changes to facilities’ budgets, rather than

because the RPM design or process does not allow them to do so. Officials

cited several reasons for not using the RPM system data to reallocate larger

amounts in fiscal years 1994 and 1995. Among those reasons were the

following:

• A transition period was needed. VA officials indicated that time was needed

to educate facility managers and to obtain facility buy-in to the process.

Also, VA made several changes during the first years of the process to help

16Performance Budgeting: State Experiences and Implications for the Federal Government

(GAO/AFMD-93-41, Feb. 17, 1993).

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address facility concerns about the accuracy of data that facilities submit.17

• Facilities cannot efficiently adjust to large budget changes. VA officials

believed that absent plans to phase in resource changes over a 3- to 5-year

period, facilities could not efficiently adjust to large changes in their

budgets in any single year. A facility does not know what its allocation for

the fiscal year will be until shortly before the year starts—depending on

how soon the VA medical care appropriation is determined. Officials

believed it unreasonable to expect facility directors to adjust to significant

changes given the short lead time between when they learn what their

budget allocations will be and the start of the fiscal year. Furthermore,

officials believed that facility directors had few management options for

reducing operating budgets because 70 percent or more of facilities’

budgets is spent on salaries.18

• Reasons for variations are unclear. Officials indicated that they lacked a

good understanding of what causes the variations, which some thought

could be attributed to factors, such as quality of care, that are not

considered in the adjustment process. For example, high-cost facilities

may provide higher quality or more timely care and may not necessarily

have higher costs because of operating inefficiencies. At the same time,

low-cost facilities may be efficient and may become less so if given more

money for the same workload. Because VA does not have a standard for

what facility unit costs should be, the current process “titrates budgets to

the mean,” that is, only very slowly brings facility budgets closer to the

mean.

VA officials further maintained that the RPM allocations alone could not be

used to judge the equity of facility budgets because facilities get funds that

are not distributed through RPM. About $4.1 billion, or 25 percent, of the

fiscal year 1995 medical budget was allocated to VA facilities by processes

separate from the RPM system. About $2.3 billion of the $4.1 billion was

allocated to facilities at the beginning of the year and included funding for

items such as the community nursing home contract program, activation

of newly constructed facilities, outpatient fee-basis care, prosthetics, and

resident training. The remaining $1.8 billion in non-RPM-allocated funds

17RAM, the system that preceded RPM, was ended in part because of concerns that facilities’ data

coding was affecting resource allocations. For RPM, VA has established facility education and data

validation efforts to help facilities understand RPM reports and to give facilities the opportunity to

make corrections to the data used in the process.

18Largely because of this concern, VA managers have made decisions on RPM methodology in part on

the basis of whether resulting budget changes to individual facility budgets were considered

“manageable.” To do this, the VA managers reviewed a number of different budget scenarios using

varied implementation methodologies. A committee of senior VA managers then chose the

methodology after considering the potential effects on individual facilities.

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paid for leases, travel, and patient care programs such as dental programs

and women veterans health programs. In part, these funds also were to

pay for contingencies that arose through the year.19

An assessment of the equity of these allocations, and their impact on the

relative equity of the RPM system allocations, could not be made with

available data.20 While VA’s financial system accounts for individual

transactions to facilities throughout the year, it does not summarize for

each program the amount received by each facility.21 VA officials agreed

that some non-RPM resources support patient care operations, such as

those for prosthetics or facility activations, and indicated that they had

conducted special evaluations of non-RPM accounts to determine whether

any of the funds should be allocated through the RPM system. As a result of

these evaluations, the percentage of the medical care funds allocated

through RPM increased from 66 percent in fiscal year 1994 to 75 percent in

fiscal year 1995. VA documents indicate that at the time of our review, VA

was considering establishing a formal process to ensure that non-RPM

funds are inventoried, monitored, and considered for possible inclusion in

RPM.

VA Unclear About Why

System Was Not Used to

Address Access

Differences

Why VA has not used its resource allocation system to help overcome

inconsistencies in veterans’ access to care was not clear because

confusion existed at VA over what needs to occur to meet this goal. For

example, some officials indicated that legislative reforms to current

eligibility requirements were needed to ensure greater consistency in

eligibility determinations when veterans seek care. However, other

officials’ statements to us and the Congress indicated that the resource

allocation system would be used regardless of legislative reforms and that

the delay was attributable largely to the absence of useful eligibility data

and the difficulty of incorporating this goal in the RPM model. While we

19In 1989, we reported that regional directors helped centers cope with budget shortages beyond the

initial resource allocations because directors could adjust centers’ budgets throughout the year.

Budget adjustments were made through reserves set aside at the start of a year, supplemental

appropriations, or transfers of funds among centers. Regional directors and Headquarters managers

maintain these “contingency funds”—amounting to about $90 million in fiscal year 1995—for such

purposes.

20For example, VA officials indicated that the Carl T. Hayden Medical Center received $11.3 million in

non-RPM funding for patient care in 1994 and 1995. Because this information was obtained through a

one-time analysis, they could not provide comparable funding-level data for all other facilities.

21Officials gave various reasons why non-RPM accounts were not allocated through the RPM system

(for example, the associated workload had not been properly identified). RPM Field Oversight

Committee meeting minutes indicated that some officials had concerns about the lack of proper

accounting for non-RPM funds (for instance, that non-RPM funding not initially allocated to facilities is

not well tracked to patient care).

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agree that reform that simplifies VA’s complex eligibility requirements

might allow VA to more easily consider veterans’ access differences in

allocating resources, we do not believe such legislation is a prerequisite to

meeting this goal because the Congress has established the priorities for

the provision of veterans’ care. Because this issue has not yet been

resolved within VA, the management support and responsibility for

ensuring the mechanisms are put in place to achieve this goal are lacking.

Changes Needed to

Provide for More Equitable

Facility Allocations

VA officials indicated they were taking several steps to more actively use

the RPM system data and to improve the resource allocation process. First,

given that the initial 2 years of the system’s implementation were intended

to help facilities adjust to the new process, the Deputy Under Secretary for

Health told us in September 1995 that VA was planning to reallocate a

significantly larger amount of money for the fiscal year 1996 facility

budgets based on RPM. Furthermore, officials indicated that they were

implementing a Decision Support System22 to better coordinate VA’s

clinical and financial data systems and allow VA to compute more

accurately the costs of specific services provided to each patient.

Nonetheless, we believe that several additional changes are needed to

foster facility budget changes and to provide for more equitable

allocations. In particular, VA should take steps to address other notable

barriers that limit VA’s ability to reallocate funds, as discussed below.

Linking Strategic Plans to

Resource Allocation Could

Help Facilities Adjust to Budget

Changes

If the provision of comparable resources for comparable workload is a

goal, long-term strategies to help facilities adjust to changing budgets must

be put in place. VA’s resource allocation could be made more equitable if it

is clearly linked to VA’s strategic plan goals, performance standards, and

workload priorities. In particular, VA could coordinate its future plans for

facility missions, services, and capacity with its facility budgets over time,

establishing a plan for phasing in resource changes and giving facilities

and VISN managers financial objectives with which they can plan more than

1 year in advance.

22VA is investing a projected $132 million to implement a medical Decision Support System (DSS).

Such a system has provided hospitals in the private sector with improved data on patterns of patient

care and the cost of providing health care services. However, we reported in September 1995 that VA

had not developed the comprehensive business strategy necessary to achieve the system’s potential

benefits or taken critical steps to ensure that data upon which DSS is based are complete, accurate,

and consistent. It is unknown at what point implementation concerns will be corrected and the system

will be fully operational. Although it appears DSS, if implemented to achieve such a goal, has the

potential to greatly improve on or replace significant parts of the RPM process, such as the process for

patient costing, VA has not clarified how RPM and DSS will interact. See VA’s Decision Support

System: Top Management Leadership Critical to Success of Decision Support System

(GAO/AIMD-95-182, Sept. 29, 1995).

Page 14 GAO/HEHS-96-48 VA Medical Resources Allocation System
B-259872 

Linking resource allocation to VA planning efforts is not a new idea in VA.

Starting in 1992, VA developed what was known as the National Health

Care Plan (NHCP) to coordinate RPM, VA strategic planning, and other VA

planning efforts. NHCP was developed by a multidisciplinary committee

charged with looking at facility missions, identifying gaps and overlaps in

services, and developing a planning process. However, VA officials told us

the draft plan was preempted by the Clinton administration’s push for

national health reform in 1994. Efforts to determine how VA would be

integrated within the administration’s health reform plan superseded other

planning efforts within VA.

After NHCP was dropped, strategic planning reemerged in early 1995 in a

plan that the Under Secretary for Health set forth to the Congress to

restructure VA to make it a more efficient and patient-centered health

system. As previously mentioned, the plan would further decentralize VA

operations by establishing 22 VISNs throughout the country to coordinate

and integrate VA’s health care delivery assets. A key part of the VISN plan is

that VISN directors would be held responsible for strategic planning, with

greater systemwide direction in strategic planning as well. It is not clear

from current VA planning documents how the VISN and VA systemwide

strategic plan might interact with resource allocation and how resources

will be allocated to VISNs. It is not evident what VA’s plan is for moving

facilities and VISNs toward more comparable funding for comparable

workload and achieving the coordination between planning and resource

management envisioned in NHCP. As it implements its new VISN structure,

VA will need to link its planning and resource allocation processes and

establish long-range plans for using resource allocation to help achieve its

goals.

Better Understanding of Cost

Variations Would Help Support

Budget Changes

To better link resources to workload, manage limited resources, and

ensure quality of care, VA could establish a review and evaluation process

as part of the formal RPM system. Although VA has spent considerable time

and effort determining how the system should use and develop data to

produce facility budgets, few resources have been devoted to determining

why the system shows such significant cost variations among facilities.

Understanding these variations could help VA improve its comparisons of

facilities’ efficiencies by providing information on how further

adjustments might increase the comparisons’ fairness. These adjustments

might include other locality-specific, mission-related, or data-reporting

factors that may contribute to cost differences. Finally, VA could identify

potential ways that quality of care or other aspects of facility performance

are affected by resources. With a better understanding of the variations,

Page 15 GAO/HEHS-96-48 VA Medical Resources Allocation System
B-259872 

decisionmakers could make more informed decisions on the RPM system

adjustments necessary to compare facilities fairly and set expectations for

how facilities should adjust to changing resource levels.

Originally, the RPM system was designed to include a review and evaluation

element that could help provide feedback to VA managers on how facilities

performed compared with their expected workloads and costs. Structured

site reviews of high- and low-cost facilities were intended to help

determine possible reasons for the cost variations by identifying

efficiencies and allowing a closer assessment of the potential impact of

resources on quality.23 Furthermore, VA hoped to better link cost data with

quality indicators so an assessment of resources’ impact on quality could

be made. In its 1994 Quality Management Plan, VA set forth how it would

assess progress in delivering quality health care to veterans. VA reported

that it sought to produce resource profiles for each level of the

organization that could be analyzed for connections between quality of

care and resource availability. The RPM system was envisioned as a critical

part of this effort. For example, it was expected to provide information

about facilities with resource profiles that suggested resources were

insufficient and to lead to reviews that could ensure more consistent care

across the VA system. VA anticipated that by the end of fiscal year 1994, RPM

would match resources to quality of care issues and improve information

for management at all levels. None of these original plans for RPM has yet

materialized, apparently because of VA’s priorities, time constraints, data

on quality becoming available only recently, and lack of consensus on how

to implement VA’s original plans.

An example of how decisionmakers can be given information on health

care cost variations was illustrated in a report by the Prospective Payment

Assessment Commission (PROPAC), which advises the Congress on

Medicare issues.24 PROPAC has analyzed state variations in per capita health

care costs in order to understand the implications of the wide variations in

23We have previously reported that VA lacks oversight procedures to effectively assess the operations

of its medical centers and that VA Headquarters should be serving as an information exchange,

identifying and evaluating locally developed programs and methods and disseminating best practices

to other medical centers. We also reported that VA has an opportunity to improve the efficiency of its

facility operations, as VA lags far behind the private sector in this regard. See VA Health Care:

Challenges and Options for the Future (GAO/T-HEHS-95-147, May 9, 1995).

24The option of establishing a formal oversight body such as PROPAC for RPM was suggested by a VA

contractor in a review of RPM. An advantage is that it would ensure the reviews are conducted by an

objective, outside group rather than by stakeholders to the process. As part of its role, the group

charged with examining variations among VA facilities and their expected workloads and costs would

need to advise on adding management incentives for improvements in both quality of care and

cost-effective delivery. Its overall mission could be to provide oversight and analysis to the process to

ensure that quality, access, timeliness, and cost-effectiveness are considered.

Page 16 GAO/HEHS-96-48 VA Medical Resources Allocation System
B-259872 

the delivery and financing of health care nationwide. It has identified

factors that contribute to cost differences across states, such as the mix

and volume of services; mix of physicians, medical specialists, and other

health professionals practicing in a state; and policy-related factors such

as state licensing requirements or regulations that influence the amount of

labor used to provide health services. PROPAC also determined that 6 of the

10 states with the best health status were among the 10 with the lowest

standardized resource costs per enrollee.25

The limited effort VA has put into understanding possible reasons for

variations has already achieved some change in facility management,

according to the VA official overseeing the technical advisory groups of

physicians and other clinicians who advise RPM on clinical issues. The

Chronic Mental Illness Technical Advisory Group had assessed discharge

cost, costs per day (possibly reflecting staffing levels), length of stay, and

other data related to high- and low-cost facilities for chronic mental illness

patients and provided facility management with information on factors

potentially contributing to their facility’s high or low cost.

Explore Options for Tracking

Allocations by Program Area

To ensure that the RPM allocations are coordinated with those made

through other allocation processes, VA needs to establish a formal process

for evaluating whether non-RPM-allocated funds should be incorporated

into the RPM system. In doing so, VA will need to track by facility the

non-RPM allocations, by program, over the course of the year as well as

those made under RPM. VA officials indicated that current financial systems

would allow a manual tracking of these allocations. We believe VA needs to

explore options for using existing financial management systems to

capture these management data. The availability of these data would allow

for better assessments of the total funding provided to facilities for patient

care and the priorities that the various allocation processes use to

distribute facility funding.

Explore Options for

Considering Facility

Differences in the Provision of

Discretionary Care

To ensure that veterans within the same priority categories are afforded

more equal access to care, VA needs to explore options for using the

resource allocation system to achieve this goal. VA would need to assess

the extent that current databases could be used to distinguish and account

for the facility differences in their rationing practices and abilities to

provide discretionary care. VA may also need to determine how to collect

more specific data on differences in facilities’ provision of care, for

example, differences in the extent facilities are providing services to

25PROPAC, Medicare and the American Health Care System, Report to Congress (Washington, D.C.:

June 1995).

Page 17 GAO/HEHS-96-48 VA Medical Resources Allocation System
B-259872 

veterans in their area (market share) or in the extent veterans are denied

health care services because of a lack of resources.

Conclusions VA for years has struggled with implementing an equitable resource

allocation method—one that would link resources to facility workloads

and foster efficiency. The need for such a system has become greater in

recent years as veterans’ demographics shift and as health care delivery

undergoes dramatic changes to adjust to increasingly limited resources.

The resource allocation system can help VA achieve this goal by

forecasting workload changes and providing comparative data on

facilities’ costs. Nonetheless, though VA has understandably focused its

efforts in the first years of RPM on improving the system’s data and design,

VA has not taken steps to address several barriers that prevent it from

acting on the data the system produces. If the system is to live up to its

potential, several changes need to be made, including linking resource

allocation to VA’s strategic plan, conducting a formal review and evaluation

of facility (or VISN) cost variations, evaluating the basis for not allocating

funds through RPM, and using RPM to overcome differences in veterans’

access to care.

Recommendations We recommend that the Secretary of Veterans Affairs direct the Under

Secretary for Health to

• link the resource allocation process to the strategic planning process in

the VISN structure so that (1) allocations are more clearly associated with

VA’s long-range goals, performance standards, and workload priorities; and

(2) facility and VISN managers are given short- and long-range financial

objectives;

• institute a formal review and evaluation process within the resource

allocation system to examine the reasons for cost variations among

facilities and VISNs;

• establish a process for evaluating non-RPM patient care funds to determine

whether they can be included in the RPM allocation system, including

exploring options for using existing financial management systems to

capture data on the provision of non-RPM allocated funds by facility and

program area; and

• explore options for using existing or improved databases to

(1) understand the extent to which veterans within the same priority

categories have consistent access to care within the VA health care system

Page 18 GAO/HEHS-96-48 VA Medical Resources Allocation System
B-259872 

and (2) include such data in VA’s resource allocation system to help ensure

that veterans have consistent access to care throughout the system.

Agency Comments

and Our Evaluation

The Deputy Under Secretary for Health, the Chief Financial Officer, and

other VA officials provided comments on our draft report. They stated that

the report represents an accurate and balanced analysis of VA’s past

efforts. The Deputy Under Secretary pointed out that VA has recently taken

steps to implement changes to the resource allocation process that are

consistent with the draft report’s overall recommendations. He also

indicated that although equity of access for veterans is a laudable goal,

incorporating this goal in the allocation of resources is necessarily

complex.

More specifically, VA concurred with our recommendation to link the

resource allocation system with its strategic plan for its VISN structure and

indicated that VISN directors have been charged with formulating

long-range VISN plans. VA also concurred with our recommendation to

institute a formal review and evaluation process within the RPM system to

examine reasons for cost variations among facilities and VISNs, and cited

some efforts already in place to begin studying these cost variations. These

efforts, such as the analyses of the Chronic Mental Illness Technical

Advisory Group, which we describe in the report, represent, in our view, a

step in the right direction. Our recommendation for a formal review and

evaluation process, however, envisioned a more structured, detailed

process using the RPM database and other performance measure databases.

Such a process would not only address ways to improve efficient delivery

of quality care but also ways to improve the estimates and comparisons

made by the resource allocation system.

VA also concurred with our recommendation to establish a process for

evaluating non-RPM patient care funds to determine whether they can be

included in the RPM allocation system. VA indicated that this process had

already begun in that criteria for determining when resources should and

should not be allocated through the RPM process had been established. VA

hoped to include 90 to 95 percent of VA’s health care budget in the RPM

allocations system by fiscal year 1997. Because of the large proportion of

resources it plans to include in the RPM process, VA stated that the second

part of this recommendation—to explore options for capturing data on the

non-RPM funds by facility and program area—would be unnecessary. In our

view, VA’s plans appear to meet the intent of our recommendation.

Nevertheless, there still may be a need to track non-RPM funds by facility or

Page 19 GAO/HEHS-96-48 VA Medical Resources Allocation System
B-259872 

VISN if VA falls short of its stated objectives for including the maximum

practical amount of health care funding in RPM. As a result, we have not

changed our recommendation.

VA concurred with qualifications with our final recommendation that VA

explore options for (1) using existing or improved databases to

understand the extent to which veterans receive consistent access to care

and (2) including such data in the resource allocation process. VA agreed

with the need to explore options for improving information about

veterans’ access to care. However, VA also stressed that before it knows

whether it could use that information to allocate resources, it would first

need to define what “consistent access” really means. The agency

expressed its commitment to developing that definition, even though it

acknowledged that the plan for how it would do so was not fully

developed. In VA’s opinion, consistent access to care is complex and not

easy to implement fairly so that special populations, such as the homeless

and women veterans, are not adversely affected. VA stated that improving

access is more fundamental than a database issue.

We acknowledge the complexity of access issues and agree that this is

more than a database issue. However, we continue to believe that VA

should—at a minimum—know the extent to which veterans in the

different statutorily determined priority categories are being served in

different medical centers and take those categories into consideration in

its allocation of resources.

As arranged with your staff, unless you announce its contents earlier, we

plan no further distribution of this report until 7 days after its issue date.

At that time, we will send copies to the Secretary of Veterans Affairs,

interested congressional committees, and other interested parties. We will

also make copies available to others upon request.

Page 20 GAO/HEHS-96-48 VA Medical Resources Allocation System
B-259872 

If you have any questions about this report, please call me or David P.

Baine, Director, at (202) 512-7101. Other major contributors to this report

included Frank C. Pasquier, Assistant Director; Katherine M. Iritani,

Evaluator-in-Charge; Linda Bade, Senior Evaluator; Doug Sanner,

Evaluator; and Evan Stoll, Technical Analyst.

Sincerely yours,

Carlotta C. Joyner

Associate Director

Health Care Delivery

 and Quality Issues

Page 21 GAO/HEHS-96-48 VA Medical Resources Allocation System
Contents

Letter 1

Appendix I 

Scope and

Methodology

26

Appendix II 

VA’s Resource

Planning and

Management System

28

VA Resource Allocation History 28

RPM Committee Structure 29

Summary of the Process 29

RPM Data Sources and Sensitivity to Data Errors 33

Process Changes 34

Appendix III 

Provisions for

Comparable

Resources for

Comparable

Workloads

36

Changing Veteran Demographics 36

Facility Variations in Resource Distribution and Workload

Changes

38

Facility Budget Changes Under RPM 44

Resource Shifts Over the Last Decade Within VA 48

Appendix IV 

RPM Budget Changes

by Region and

Facility, Fiscal Years

1994 and 1995

50

Appendix V 

RPM’s Provision for

Facility Differences in

Veterans’ Access to

Care

65

Availability of Care Is Uneven 65

Related GAO Products 72

Page 22 GAO/HEHS-96-48 VA Medical Resources Allocation System
Contents

Table Table III.1: VA Analysis of Percentage of Budget Reallocations

Among Regions

49

Figures Figure 1: Facility Group 5 Budget Changes Resulting From RPM

Process, Fiscal Year 1995

8

Figure III.1: Projected Change in Veteran Population by State,

1989 to 2000

37

Figure III.2: Facility Unadjusted per Patient Cost Differences,

Facility Group 5

39

Figure III.3: Facility Adjusted Costs per Workload Unit, Facility

Group 5

40

Figure III.4: Variations in Full-Time Employees per 1,000

Workload Units, Facility Group 5

41

Figure III.5: Variations in Forecasted Workload Changes, Fiscal

Years 1993 to 1995, Facility Group 5

42

Figure III.6: RPM Adjustments, Fiscal Year 1995 Allocations 44

Figure III.7: Comparison of Funding Adjustments:

Implementation Rate Versus Pro Rata Adjustment

47

Figure IV.1: Eastern Region, Fiscal Year 1995 50

Figure IV.2: Southern Region, Fiscal Year 1995 52

Figure IV.3: Central Region, Fiscal Year 1995 54

Figure IV.4: Western Region, Fiscal Year 1995 56

Figure IV.5: Eastern Region, Fiscal Year 1994 57

Figure IV.6: Southern Region, Fiscal Year 1994 59

Figure IV.7: Central Region, Fiscal Year 1994 61

Figure IV.8: Western Region, Fiscal Year 1994 63

Figure V.1: Nonrationing VA Medical Centers in Fiscal Year 1991 66

Page 23 GAO/HEHS-96-48 VA Medical Resources Allocation System
Contents

Abbreviations

BDC Boston Development Center

DSS Decision Support System

FY fiscal year

HD Highland Drive [facility]

HIV human immunodeficiency virus

NHCP National Health Care Plan

OPC outpatient clinic

PROPAC Prospective Payment Assessment Commission

RAM Resource Allocation Methodology

RPM Resource Planning and Management

UD University Drive [facility]

VA Department of Veterans Affairs

VISN veterans integrated service network

Page 24 GAO/HEHS-96-48 VA Medical Resources Allocation System
Page 25 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix I 

Scope and Methodology

To determine the extent to which VA’s RPM system provides for an equitable

distribution of resources among VA facilities, we reviewed two aspects of

the system as originally envisioned by VA. First, we determined the extent

that it provided for comparable resources for comparable workloads.

Second, we assessed the extent it provided for resources so that facilities

can serve comparable categories of veterans. To make these

determinations, we documented the system design and analyzed the

system’s impact on facility budgets.

We reviewed documents and discussed the resource allocation system

with the Director and analysts of VA’s Boston Development Center.

Documents reviewed included the RPM Handbook, RPM Primer, BDC Draft

Development Plan, and relevant BDC Newsline newsletters. We interviewed

the leaders and some members of various RPM committees, including the

RPM Field Oversight Committee, RPM Incentives Subgroup, the RPM Outlier

Group, the Reinventing RPM Subcommittee, and the RPM Financial Advisory

Committee. We also reviewed committee reports and meeting minutes.

We also analyzed various BDC RPM data files to determine the impact of VA

decisions on facility budgets. The data reviewed included workload

forecasts and allocation amounts related to various decisions occurring as

part of the process. We relied on VA analyses of the impact of RAM and RPM

on regional allocations over the past decade. We also analyzed veteran

eligibility data in VA’s Outpatient File and summarized by the National

Center for Veteran Analysis and Statistics in its Summary of Medical

Programs to assess the variations among facilities in the provision of care

to discretionary categories of veterans.

Finally, we tested the sensitivity of the allocations to the accuracy of the

cost and workload data feeding the RPM system to determine how coding

or other errors in the cost and workload data may affect allocations under

the system’s current design.

To address the causes of any inequities in the distribution of resources, we

interviewed various VA officials, including the Deputy Under Secretary for

Health; Associate Deputy Chief Medical Director; Associate Chief Medical

Director for Quality Management; Deputy Director, Quality Management

Systems Office; Director, Budget Office; Chief, Medical Formulation

Branch; Assistant Director for Budget Execution; Chief, Allocation and

Control Branch; Chief, Health Resources Management Branch; Acting

Director, Strategic Planning and Policy Office; Director and analysts of the

Management Sciences Group; and Director and analysts of the National

Page 26 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix I 

Scope and Methodology

Center for Cost Containment. To address the changes that could help

ensure that the system more equitably distributes resources, we reviewed

various related studies, including a contractor’s study conducted in 199226

and a VA Inspector General report on physician staffing, Audit of Veterans

Health Administration Resource Allocation Issues: Physician Staffing

Levels.

27 Finally, we reviewed VA strategic plans, including VA’s Blueprint

for Quality, the unpublished National Health Care Plan, and the VA

Secretary’s plan for restructuring VA, entitled Vision for Change.

To understand the RPM system’s impact on the Carl T. Hayden Medical

Center in Phoenix, we visited the facility and interviewed key management

officials. We also reviewed the report of a Western Region task force

looking at the allocations awarded to Carl T. Hayden and met with officials

of the Western Regional Office.

Our review was limited to the resource allocation process as it operated

for the fiscal year 1994 and 1995 allocation process. The VA appropriation

for fiscal year 1996 had not been determined at the time of our review. Our

review was limited primarily to the process as it was used to allocate and

manage facility budgets and did not include a review of other goals, such

as how the process is used to formulate VA’s budget.

Our review was conducted between December 1994 and October 1995 in

accordance with generally accepted government auditing standards.

26Ann M. Hendricks and Henry G. Dove, Review of the Resources Planning and Management System:

Report to the Management Decision and Research Center (Boston: Management Decision and

Research Center, Nov. 1992).

27Report No. 5R8-A19-113 (Washington, D.C.: Sept. 29, 1995).

Page 27 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix II 

VA’s Resource Planning and Management

System

The Resource Planning and Management system is the management

decision process VA uses to allocate most of its resources and to compare

VA medical facilities’ performance. The system provides the information VA

uses as a basis for resource allocation by classifying each patient into a

clinical care group, calculating the cost per patient, and forecasting future

patients. The system also provides comparative data on facility cost per

workload unit so that funds can be reallocated from the high- to low-cost

facilities.

VA Resource

Allocation History

Each year, VA receives an appropriation to operate its health care

system—about $16.2 billion in fiscal year 1995. To finance its medical care

system, VA uses what is considered a “global budgeting” system. VA calls it

that because of its fixed budget—resources are first approved by the

Congress, then allocated to individual facilities for the ensuing fiscal year.

VA facility directors are charged with managing their assigned workload

targets within their allocated budgets. Before 1985, VA Headquarters

developed facility budgets by incrementally adjusting the facilities’ past

budgets rather than building the budget based on the facilities’ expected

workload.

Beginning in fiscal year 1985, VA attempted to modify its incremental

budgeting process of making adjustments to historical budgets. This new

system, called the Resource Allocation Methodology, was intended to

provide a more equitable distribution of available funds by adjusting

budgets according to the work produced and its associated cost. RAM tried

to match resources to facility workloads by linking allocations to the

reported clinical services or procedures performed in each of three

areas—acute care, ambulatory care, and long-term care. RAM was

suspended in 1990, however, because of concerns about the unintended

impact on clinical practice patterns and administrative management of VA

medical care. Under RAM, facilities and regions competed with each other

for a fixed resource pool. Facilities began acting as if VA had an

open-ended reimbursement system—having incentive to perform work

beyond their resources—when in reality it was a closed, fixed budget

system. This open-ended expansion of workload led to a budget crisis at a

number of VA facilities and caused concern about the potential impact on

quality of care.

After RAM was suspended, VA began moving to a new system—RPM—that

would be more prospective and capitation-based—in line with where the

private sector was heading. RPM was to be prospective in that the process

Page 28 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix II 

VA’s Resource Planning and Management

System

forecasted workload changes and future facility resource requirements,

enabling VA to use the data to formulate its budget. RPM was “capitation

like” in that it was designed to consider workload on a per person basis,

rather than as procedures performed.28 This new definition of workload

was expected to lessen the incentive to inappropriately provide care. RPM

was used for the first time to allocate facility resources for fiscal year

1994.

The RPM system differed from RAM in several ways. First, VA envisioned a

broad management decision process with RPM that would integrate

planning, budgeting, and operational management. VA expected RPM to be

used to formulate the Veterans Health Administration’s budget from year

to year, to be linked to and driven by VA’s strategic plan, and to be used to

review and evaluate facilities’ unit costs.

RPM Committee

Structure

VA’s considerable investment in RPM is reflected in the significant

involvement of VA managers, technicians, and physicians from throughout

the country serving on RPM committees. In total, several major committees

and subcommittees, six technical advisory groups of clinicians generally

representing the RPM clinical patient groups, and key VA Headquarters

managers have been involved in RPM’s design and implementation.

Operationally, the Boston Development Center, a group of about 26 staff

with a fiscal year 1995 budget of $3.3 million, is responsible for RPM data

processing and education. The RPM development and management

structure includes the RPM Subcommittee and Field Oversight Committee

and the technical advisory groups, which are responsible for, among other

things, incorporating clinical definitions into the RPM system. In addition,

the process includes input from each of the four VA regions (replaced by

VISNs in fiscal year 1996) and all facilities. While the various RPM

committees, subcommittees, and advisory groups make recommendations

on how the system should be implemented, the Budget Policy and Review

Committee, comprising VA associate chief medical directors and other

senior VA managers, makes the final recommendation on RPM methodology,

which the Under Secretary for Health approves.

Summary of the

Process

BDC uses a complex data compilation and analysis process to develop data

that VA Headquarters and other managers use to determine facility

28Generally, capitation means paying providers a flat fee in advance to take care of members’ health

care needs during a defined period according to an agreed-upon benefit package and copayments, as

necessary. For VA to have such a system, many legislative and other barriers would have to be

addressed. See Barriers to VA Managed Care (GAO/HEHS-95-84R, Apr. 20, 1995).

Page 29 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix II 

VA’s Resource Planning and Management

System

allocations. Key decisions made by RPM committees and approved by

Headquarters managers have dictated the final outcome of the facility

allocations, as described here and in appendix III. Generally, the RPM

budget allocations to the facilities have been driven by the number of

(case-mix-adjusted) unique patients expected to be seen and the

facility-specific unit cost of providing care. “Unit costs” refer to each

facility’s average cost for treating a patient in each of five RPM patient

groups. The key steps in the process are as follows:

• Patient classification: Using clinical information, VA classifies each veteran

seen in the base year into one of 49 clinical classes ranked by resource

intensity.29 The patient classes are intended to reflect the kinds of medical

care being provided. A patient who qualifies for two or more classes is

placed in the most resource-intensive class.

• Patient (workload) counts: VA counts the unique patients in each class at

each facility.

• Workload forecasts: VA predicts changes to the numbers of patients

expected to be seen within each class by applying forecasting methods to

historical trend data.30

• Patient costing: Using facility “bed-days of care” provided and other

clinical information from VA’s Patient Treatment File, Outpatient File,

Patient Assessment File, and other data sources, combined with facility

cost data from the Cost Distribution and other cost reports, VA estimates a

total cost for each patient.

• Patient groups: VA groups the patients within each class into one of five

major patient groups and calculates an average facility cost per patient

within each group.

Using the data developed in these steps, VA establishes the facility target

budget allocation through a series of calculations. First, average facility

costs per patient group are multiplied by the expected numbers of patients

to be seen at the facility within each group. These initial facility numbers

are then adjusted to reflect marginal costs associated with increased and

decreased workload, VA budget constraints, facility efficiencies, inflation,

29Unique patients are classified into one of 49 classes (such as lung transplants, end stage renal

disease, stroke, substance abuse, and oncology) that are then contained within one of five patient care

groups—transplants, special care, extended care, chronic mental illness care, and primary care. For

the fiscal year 1996 process, VA intends to increase the number of patient classes to 51.

30RPM used actual patient data through fiscal year 1993 as the basis for fiscal year 1995 allocations and

future budget projections. RPM forecasts patients at the class level using one of five methodologies

(population-based, Bayesian, rate-based, average of population and Bayesian, and manually set

forecasts). RPM applies the projection methodology selected by VA management to best represent

national and facility workload trends or national policy direction.

Page 30 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix II 

VA’s Resource Planning and Management

System

and VA regional input. These adjustments are described in detail in the

sections that follow.

Marginal Rate Adjustment The RPM process has applied “marginal rates” in calculating the

incremental resource needs facilities have given their changing workloads.

In other words, marginal rates account for the expected resources needed

for seeing one additional or one less patient. VA decided to use marginal

rates because of the assumptions that, given the relatively fixed nature of

some operating costs such as salaries, workload increases would not have

to be funded at the same rate as the base budget workload and that

facilities with decreasing numbers of patients could not be expected to

reduce their per patient costs at the same rate as their base budget. VA has

not determined the true incremental cost per patient, however. Officials

indicated they judgmentally chose a 75-percent marginal rate for workload

increases and a 50-percent marginal rate for workload decreases to reflect

incremental costs associated with workload changes.31

Adjustment to

Accommodate Budget

Shortfalls

Because VA has not had enough funds to fully cover all of the expected

facility costs, VA officials chose to address the shortfall in both fiscal years

1994 and 1995 by applying an “implementation rate” to provide a

percentage of the funding that facilities had been expected to get for

workload changes. The implementation rate in both fiscal years 1994 and

1995 was 17.36 percent. The impact of the implementation rate, and how it

was applied, is more fully discussed in appendix III.

Cost-Efficiency

Adjustment

To measure and provide in the allocations for differences in facility

efficiency, the RPM system uses a complex process for comparing like

facilities’ costs. Through this process, VA removes funds from the budgets

of the “least efficient” facilities (called high outliers) to provide more

funds to the “most efficient.” The outlier process involves grouping

comparable facilities, adjusting costs to make comparisons more

equitable, and developing cost-efficiency and productivity data for facility

comparisons and for the outlier process.

VA Facility Groupings To compare facility costs, the process first groups facilities considered

comparable. The nine medical center groups used in the fiscal year 1995

31The VA Budget Director indicated the 75/50 marginal rate percentages were a result of

knowledgeable VA officials’ judgment and consideration of several years’ experience. He also

indicated that the marginal rate for fiscal year 1996 is expected to be 75 percent for both workload

increases and decreases.

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VA’s Resource Planning and Management

System

process were created by merging the hospital groups used for planning

purposes and a complexity index. The complexity index is based on a

number of variables, including facility size, clinical variety, resident

teaching mission, resident programs, allied health training, managerial

complexity, and research.

VA Cost Adjustments for

Facility Comparisons

To more fairly compare facility costs per workload, the process adjusts for

case mix differences (that is, differences in the types of patients treated at

each facility) by developing a standardized workload measure called

facility work or facwork. Facwork is an age- and case-mix-adjusted

workload measure that recognizes that different classes of patients have

different resource intensities. For example, a transplant patient is more

resource intensive than a primary care patient. Facwork is calculated

solely on costs, recognizes that VA patients may visit more than one

facility, and allows workload credit to be shared among facilities.

In fiscal year 1995, a cost adjustment process was developed to “level the

playing field” by adjusting for facility-specific cost and workload factors in

order to make fairer cost comparisons. The costs removed from the

facility comparisons included those for resident training, research,

geographic pay, and specialized programs. In addition, workload was

adjusted for fee and contract programs and for high-cost programs. This

process ensured that the costs for a facility that provided extensive

resident training, for example, were not used in comparing that facility

with others in its group.

VA Efficiency Comparisons and

Allocation Adjustments

Once the cost adjustments were made to provide for fairer comparisons,

VA ranked the facilities within each facility group. This ranking and the

supporting data were provided to each facility for data validation before

the final allocations were made. RPM also produced data showing

productivity comparisons, that is, comparisons for facilities within each

facility group of the staff level per workload.

VA used the resulting cost comparisons in its outlier process to adjust the

initial allocations. Through this process, funds from the initial projected

budgets of high-cost facilities were removed and added to the budgets of

low-cost facilities. The high- and low-outlier facilities were identified

based on their differences from the group average. RPM resources were

withdrawn for high outliers using a sliding scale of up to 1 percent and

added to low outliers at a flat rate of 1.25 percent until the amount that VA

officials decided to reallocate was reached. Approximately $10 million was

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VA’s Resource Planning and Management

System

moved between the high- and low-cost outliers in fiscal year 1994, and

approximately $20 million was moved in fiscal year 1995.

Inflation The inflation adjustment is facility-specific and is based on locality pay

adjustments and specific assumptions included in the President’s medical

care budget. Inflation rates varied from 4.1 to 16.7 percent in fiscal year

1995 and averaged 6.3 percent.

Regional Directors’

Adjustments

The four regional directors had the authority to change the initial

allocations that BDC produces through its data analyses process; however,

we identified few instances in which regional directors actually changed

the initial allocation numbers. Regional input to the facility allocation

process has been mainly through a $5 million allocation over which each

regional director had discretion and for which facilities “negotiated.” The

negotiations were considered part of RPM’s management process, which

was intended to allow for facility-specific factors not captured in the RPM

data. Each regional director developed his or her own criteria for

allocating resources, subject to VA Headquarters approval. The criteria and

methodologies used by regional directors for their allocation funds varied.

For example, one region in the fiscal year 1995 process allocated its

$5 million on the basis of facility market share, unit cost differences, and

the impact of workload and outlier adjustments. Another region removed

allocations for forecasted workload increases from high outliers to create

a regional contingency fund.32

In the fiscal year 1995 negotiation process, 56 percent of the facilities had

their dollar base adjusted, with 84 facilities gaining and 10 facilities losing

funds. The gains ranged from $2,798 to $1.5 million, and losses ranged

from $83,000 to $712,277. See appendix IV for fiscal year 1994 and 1995

RPM adjustments for each facility.

RPM Data Sources

and Sensitivity to Data

Errors

The RPM system relies on data from many data sources within VA, including

the Cost Distribution Report, Patient Treatment File, Outpatient File,

Patient Assessment File, Fee File, Immunology Case Registry, and the

Home Dialysis Reporting System. Each facility director is responsible for

ensuring the accuracy of patient care workload and cost data, and most

facilities have data validation committees responsible for the review of

32These allocations in some cases acted as a buffer to the outlier changes because regional directors

provided funding to high outliers that had lost money through the outlier process.

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VA’s Resource Planning and Management

System

internal controls, data collection procedures, and adherence to reporting

instructions, among other things. Once BDC obtains facility data, it merges

the basic patient care data sets into its relational databases and produces

RPM reports known as the facility “tables.” These tables are distributed to

facilities for data validation.

We have previously reported concerns about some aspects of VA’s cost and

workload system. Specifically, we reported in 1987 that one problem VA

had in implementing RAM, RPM’s predecessor, was that unreliable clinical

and financial databases limited VA’s ability to establish accurate target

allowances for individual facilities.33

RPM relies less on specific clinical diagnoses coding than RAM because

workload is defined as the whole patient and the patient’s associated costs

rather than being based on specific clinical diagnoses. Furthermore, RPM

includes most facility operating costs in developing patient cost averages

and uses each facility’s historical workload costs in developing

allocations, reducing the chance that facility cost errors would

significantly affect allocations. For example, costs inappropriately

allocated to one cost center would result in lower than actual costs being

reflected in others. Because RPM captures most patient care costs in

calculating patient cost averages, these misallocations would show higher

than actual costs for some patient types, but lower than actual costs for

others. For these reasons, it appears that potential inaccuracies in the

clinical and cost data are less likely to affect facility allocations under RPM

than under RAM.

Our sensitivity analysis of the RPM facility allocations to workload and cost

errors supports this conclusion. Our analysis found that even with

potential errors of up to 50 percent in the reported workload levels or

patient group costs, the budget allocation for the majority of the facilities

would change less than 1.2 percent. The maximum change for any facility

under our analysis was a 2.03-percent increase in allocation and a

2.27-percent decrease. We believe that our tests represent extreme error

rates and that these changes are far greater than those VA is likely to

experience.

Process Changes The RPM process has changed significantly from year to year and continues

to do so. For example, the fiscal year 1994 facility budgets were developed

33See VA Health Care: Resource Allocation Methodology Should Improve VA’s Financial Management

(GAO/HRD-87-123BR, Aug. 31, 1987).

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VA’s Resource Planning and Management

System

using per patient average costs for each of the 49 patient class levels;

whereas, fiscal year 1995 funding was based on the average patient costs

within each of the five patient groups. VA hoped that the move to group

costs would reward those facilities that increased the number of low-cost

patients. The move to group costs was also intended to eliminate the

significant incentive to admit a patient just to obtain funding at the higher

valued RPM class.

The fiscal year 1996 RPM allocation is expected to shift the funding

mechanism from facility-specific patient costs more toward a systemwide

capitation rate. For the first time, VA officials told us, they intend to base

RPM allocations on a “blended rate” to achieve a balance among national,

regional, and local cost considerations. The blended rate may include

facility, medical center group, VISN/regional, and national components. The

magnitude of blended rates at the facility level depends heavily on the

relative weights attributed to each component; for example, the blended

rate could be based on 90 percent of each facility’s costs, with the

remaining 10 percent based on average national and facility group costs.

VA officials indicated that blended rates will eliminate the outlier

adjustment process that has been in place for the last two RPM allocations.

Under a blended rate, all facilities, rather than only those considered

“outlier” facilities, would see their initial budgets change based on the

process. The farther the facility lies above or below the mean, the more

the facility would lose or gain under the process.

Resource allocation within VA could further change with the VISN

implementation. A significant goal for the agency under the VISN

reorganization is to move to a full capitation system in which a unit of

payment is based on the enrollee—for example, a certain fee would be

paid per member per month or year of enrollment for a defined package of

covered health services. At issue is how soon, given the many barriers to

implementing full capitation, VA will be in a position to allocate resources

under full capitation.

Page 35 GAO/HEHS-96-48 VA Medical Resources Allocation System
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Provisions for Comparable Resources for

Comparable Workloads

For the last decade, VA has sought through its resource allocation systems

to better link resources to workload and depart from its traditional

process of basing allocations on historical budgets. Part of the need for

this better link stems from the shifting demographics of veterans across

the nation. RPM data show that facilities’ per patient costs vary widely,

even after adjustments are made to ensure cost comparisons fairly exclude

costs that facilities cannot control. The data also show changing facility

workloads. VA changes to facility budgets have generally averaged about

1 percent per year through the process. Two key VA decisions account for

the limited change: the funding of workload changes was limited and the

adjustments from high- to low-cost facilities were limited. This

conservative implementation of RPM continues VA’s history of limiting

changes to facility budgets from year to year.

Changing Veteran

Demographics

Over the last decade, although the overall veteran population has

decreased, veterans have been migrating from northeastern and

midwestern states to southeastern and southwestern states. Nationally

and in each of the 50 states and the District of Columbia, veteran deaths

are expected to outnumber separations from the armed forces. Therefore,

the only states expected to have stable numbers of veterans in their

populations through the year 2000 are those to which enough veterans

migrate to offset deaths of veterans in the states’ existing populations. For

example, 60,000 veterans are expected to move to Arizona between 1989

and 2000, offsetting the deaths of veterans already living in that state.

Figure III.1 shows projected veteran population change by state, based on

Census data, from 1989 to 2000.

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Provisions for Comparable Resources for

Comparable Workloads

Figure III.1: Projected Change in Veteran Population by State, 1989 to 2000

Decrease 15.1 to 20.9% (11 States)

Decrease 10.1 to 15% (22 States)

Decrease 5.1 to 10% (10 States)

Decrease 1.1 to 5% (5 States)

Change ± 1% (2 States)

Increase 2.9% (1 State)

Source: VA Statistical Service, Research Division.

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Provisions for Comparable Resources for

Comparable Workloads

Facility Variations in

Resource Distribution

and Workload

Changes

Per patient facility costs vary significantly among facilities, ranging from

less than $800 per patient to over $11,000 per patient. While the basis for

allocations is each facility’s historical average cost per patient within each

of the five RPM patient groups, the system also provides comparative data

to include facilities’ cost efficiency, productivity, and workload changes. A

discussion of some of the facility comparisons shown by the RPM system

follows.

Cost-Efficiency Data Much of the difference in facility per patient costs can be explained by

differences in mission, for example, the level of specialized care facilities

may be providing. An outpatient clinic, for example, is likely to spend to

spend far less per patient than a hospital that provides specialized services

such as organ transplants. As discussed in appendix II, to provide for

comparative data, the system places facilities into groups with other

facilities VA considers comparable. This “grouping” of comparable

facilities, along with the classification of patients by clinical type, lessens

the range of differences in costs, as shown in figure III.2 for Facility

Group 5.

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Comparable Workloads

Figure III.2: Facility Unadjusted Per Patient Cost Differences, Facility Group 5

Bay Pines

Phoenix

Columbia (SC)

San Juan

Chicago (W. Side)

Allen Park

Chicago (L. Side)

Kansas City

Loma Linda

St. Louis

Cincinnati

East Orange

Bronx

Long Beach

Brooklyn

Northport

Sepulveda

-60

-40

-20

0

20

40

60

Percentage Difference From Average 

Note: L. Side = Lakeside facility; W. Side = Westside facility.

Source: GAO analysis of RPM data.

Even after adjusting for facility locality pay and other uncontrollable cost

differences, variations among facilities within each of the RPM groups

remain, as shown in figure III.3.

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Comparable Workloads

Figure III.3: Facility Adjusted Costs Per Workload Unit, Facility Group 5

Phoenix

San Juan

Columbia (SC)

Chicago (L. Side)

Allen Park

Bay Pines

St. Louis

Northport

Loma Linda

Kansas

City

Brooklyn

Bronx

Chicago

(W. Side)

Cincinnati

Sepulveda

East Orange

Long Beach

-60

-40

-20

0

20

40

60

Percentage Difference From Average 

Note: L. Side = Lakeside facility; W. Side = Westside facility.

Source: VA RPM data.

Productivity Data The system also produces data on productivity differences among

facilities, as shown, for example, by differences in physicians per standard

workload units34 as well as total staffing per workload unit. Figure III.4

shows an example of these data for Facility Group 5.

34These standardized workload units, called facility work or facwork, are described in appendix II.

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Comparable Workloads

Figure III.4: Variations in Full-Time Employees Per 1,000 Workload Units, Facility Group 5

Full-Time Employees per 1,000 Workload Units

Phoenix

Bay Pines

Columbia (SC)

San Juan

Allen Park

St. Louis

Kansas City

Chicago (L.Side)

Chicago (W. Side)

Loma Linda

Cincinnati

Northport

Brooklyn

Bronx

East Orange

Sepulveda

Long Beach

0

20

40

60

80

100

Note: L. Side = Lakeside facility; W. Side = Westside facility.

Source: VA RPM data.

Data on Workload Changes As discussed in appendix I, the system estimates workload changes

through its forecasting process. The differences in expected workload for

Facility Group 5 are shown in figure III.5.

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Figure III.5: Variations in Forecasted Workload Changes, Fiscal Years 1993 to 1995, Facility Group 5

Bay Pines

Sepulveda

Phoenix

Northport

Columbia (SC)

St. Louis

Kansas

City

Chicago (L. Side)

East Orange

Allen Park

Long Beach

Bronx

Cincinnati

Brooklyn

Loma Linda

Chicago (W. Side)

San Juan

-10

-8

-6

-4

-2

0

2

4

6

8

Percentage Change in Patients

Note: L. Side = Lakeside facility; W. Side = Westside facility.

Source: VA RPM data.

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The system increases or decreases occur in three areas—forecasted

workload changes, the outlier adjustments, and negotiation adjustments.

Facility-specific inflation adjustments are also built into the facility

budgets.35 The extent of these changes nationally is shown in figure III.6.

Appendix IV contains facility-specific RPM budget adjustments.

35For the purposes of our review, inflation adjustments were not considered part of the RPM system

adjustments. The adjustments are discussed further in appendix II.

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Figure III.6: RPM Adjustments, Fiscal

Year 1995 Allocations FY 93 RPM Resources

FY 95 RPM Resources

RPM Adjustments

Inflation Adjustment

• $12.1 Billion

• $700.3 Million

• $11.4 Billion

•

•

•

Workload: $42.2 Million

Outlier: $20 Million

Negotiation: $20 Million

Source: GAO analysis of RPM data.

Facility Budget

Changes Under RPM

The actual impact of the RPM system on historical facility budgets has been

small. RPM-related budget adjustments to the facilities’ fiscal year 1995

budgets generally represented less than 1 percent of the total dollars

budgeted. The maximum real loss any facility had because of RPM

adjustments was 1 percent. While one facility gained as much as

3.4 percent in uninflated funds through the process, the average gain was

also about 1 percent.

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Comparable Workloads

Key VA Decisions Limiting

Facility Budget Change

VA’s decisions to limit the budget changes of facilities are reflected in two

key ways: the manner in which VA decided to fund workload changes and

deal with shortfalls between expected resource needs and the actual funds

available, and the amount of money VA decided to reallocate among

facilities after comparing their workload costs.

Funding of Workload Changes

Was Limited

Because the RPM system forecasts showed that facilities would need more

money than was actually available, VA officials decided to address the

shortfall by funding only a proportion of facilities’ expected needs. The

implementation rate, however, was applied in a manner to reduce only

those funds going for expected workload increases, that is, the costs for

workload above and beyond each facility’s historical workload base. So,

although facilities were funded at 100 percent of their past budgets, the

facilities’ costs for forecasted additional patients were funded at

17.36 percent. Because VA already reduced expected needs to account for

marginal costs associated with workload changes, in effect, a facility with

a forecasted increase of one patient received a funding increase of

13 percent of its historical per patient costs.

VA officials also applied the implementation rate to budgeted costs for

workload decreases. This had the effect of limiting the amount of

resources a facility lost through the process and of giving more money to

facilities with decreasing workloads than they were projected to need.

Facilities with forecasted decreases received only a funding reduction of

8.8 percent of their historical patient costs for each patient they were

expected to lose. One facility that would have lost over $3 million in fiscal

year 1995 because of forecasted workload decreases at the marginal rate

lost only about $533,000 after the implementation rate was applied.

For fiscal year 1995, all facilities received workload adjustments to reflect

forecasted patient changes, with 147 facilities receiving additional funds

and 20 facilities receiving less funds. The gains ranged from about $700 to

$1.4 million, and the losses ranged from about $80 to $533,000. For fiscal

year 1994, 124 facilities received additional funds for workload increases,

and 43 received funding reductions for workload decreases. Gains for

fiscal year 1994 ranged from about $1,200 to $1.6 million, and losses

ranged from $2,300 to $676,300. See appendix IV for facility-specific RPM

budget adjustments.

VA’s decision to fully fund historical workload and limit workload changes

favors the status quo. For example, VA could have treated historical and

forecasted workload equally within its fixed budget. By applying an

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Provisions for Comparable Resources for

Comparable Workloads

implementation rate to workload changes, rather than the cost of all

workload, VA limited the impact of the budget changes that facilities would

have faced if funding were available for all workload. The impact of the

implementation rate compared with the impact of taking a pro rata share

of each facility’s total budget is shown in figure III.7.36

36Analysis does not include regional directors’ adjustments because these were considered

management decisions apart from the RPM forecast and outlier analyses and were not included in the

RPM database. Appendix IV contains all RPM adjustments for each facility.

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Comparable Workloads

Figure III.7: Comparison of Funding Adjustments: Implementation Rate Versus Pro Rata Adjustment

0

2

4

6

8

Percentage Change

-2

-4

-6

-8

0

Facilities Ranked by Percentage Change

Change With Pro Rata Adjustment

Change Due to Implementation Rate

20 40 60 80 100 120 140 160 180

Source: GAO analysis.

VA Efficiency Adjustments

Limited

One of VA’s original visions for the RPM system was to use it to lower unit

costs or promote efficiency. Through the adjustment process, VA moves

resources from the “least efficient” or high-cost facilities to the “most

efficient” or low-cost facilities. Despite wide variations in the workload

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Provisions for Comparable Resources for

Comparable Workloads

costs among facilities, VA has limited the reallocation of dollars to promote

efficiencies among facilities to a small portion of their overall budgets.

Part of the reason for this conservatism is that VA does not have a standard

measure for what facilities’ unit costs should be. Furthermore, VA has not

determined how other elements of workload, such as the timeliness or

quality of care, should be considered.

VA officials have chosen to limit the outlier impact on any facility to 1

percent of its historical budget and to limit the total outlier adjustments to

$10 million among all facilities in fiscal year 1994 and $20 million in fiscal

year 1995. In the most recent outlier process (fiscal year 1995), 35 percent

of the facilities had their dollar bases adjusted, with 32 high outliers and 27

low outliers. The gains ranged from about $226,000 to $2 million, and

losses ranged from about $100,000 to $1.6 million. Appendix IV contains

facility-specific RPM budget adjustments.

VA officials indicated that the reallocation of funds through the outlier

process is difficult in part because of the lack of a standard within VA for

what unit costs should be. Without such a standard, it is unknown whether

high-cost facilities do not represent what costs should be or whether

low-cost facilities are actually ideally efficient and should not be made

inefficient by providing them with more funds. Further complicating the

matter is the concern that workload is also subject to differences in quality

of care. Facilities may have higher costs because of quality differences

rather than simple inefficiencies, for example.

VA, as part of its VISN plan, is working to agree upon performance measures

that could be used in assessing VISN managers’ performance. Many

measures that VA is currently capturing are being considered, such as

those measuring patient satisfaction, inpatient and ambulatory quality of

care, and financial management and efficiency. However, whether the

measures, once agreed upon, will be used in resource allocation decisions

is not specified in VA’s VISN plan.

Resource Shifts Over

the Last Decade

Within VA

The trend over the last decade within VA—not just the 2 years that RPM has

been used to allocate resources—has been to limit the extent facilities

experienced budget shifts from year to year. Our 1989 report on VA

resource allocation and VA analyses of budget changes over the last decade

indicate that resource shifts among facilities and regions have been a small

percentage of overall budgets since 1985 when VA first implemented RAM.

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Comparable Workloads

In August 1989, we reported that the RAM-related efficiency adjustments to

facilities’ budgets generally represented less than 2 percent of the total

dollars budgeted.37 The adjustments were small in relation to the facilities’

budgets because VA established a maximum amount that a facility’s budget

would be increased or reduced to cushion RAM’s financial impact. We also

reported that as facilities incurred expenses during the year, facility

directors could request additional funds from regional directors. Thus, the

regions served as safety nets to help facilities cope with financial

pressures.

Had the caps on budget adjustments not been in place, the facilities would

have experienced significantly larger gains or reductions as a result of the

RAM process. The funds transferred among facilities would have totaled

$153.2 million, or 223 percent more than the $47.4 million transferred.

VA documentation confirms that the allocations made among VA regions

based on the RAM and RPM system data were relatively small, as shown in

table III.1.

Table III.1: VA Analysis of Percentage

of Budget Reallocations Among

Regions FY 1985-90 FY 1994-95

Percentage change

6 years

under RAM

2 years

under RPM

8 years

under

RAM/RPM

Region 1 –2 0 –2

Region 2 0 1 1

Region 3 1 1 2

Region 4 –1 1 0

Net change –1 1 0

Source: VA RPM Financial Advisory Committee.

37GAO/HRD-89-93, Aug. 18, 1989.

Page 49 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix IV 

RPM Budget Changes by Region and

Facility, Fiscal Years 1994 and 1995

Figure IV.1: Eastern Region, Fiscal Year 1995

Percentage

RPM increase/

RPM adjustments FY 95 historical decrease 

State Facility Workload Outlier Negotiation Total RPM budget FY 1993-95

Connecticut Newington $216,859 $0 $61,742 $278,601 $31,838,195 0.88

West Haven 511,037 0 541,172 1,052,209 99,545,523 1.06

District of Columbia Washington 673,467 1,316,204 1,044,661 3,034,332 105,296,256 2.88

Delaware Wilmington 179,037 0 0 179,037 40,110,926 0.45

Massachusetts Bedford 353,838 0 0 353,838 67,236,219 0.53

Boston (396,659) 0 0 (396,659) 126,964,495 -0.31

Brockton/West Roxbury 236,376 (1,210,923) (236,000) (1,210,547) 131,622,031 -0.92

Northampton 158,871 0 387,485 546,356 43,402,729 1.26

Maryland Baltimore 111,566 0 0 111,566 73,546,234 0.15

Fort Howard (177,411) (248,040) 3,852,277 3,426,826 25,571,137 13.40

Perry Point 363,896 0 382,681 746,577 58,085,727 1.29

Maine Togus 587,122 (546,985) (587,000) (546,863) 55,814,809 -0.98

New Hampshire Manchester 178,974 0 0 178,974 33,988,004 0.53

New Jersey East Orange 286,957 (1,103,528) (287,000) (1,103,571) 128,317,213 -0.86

Lyons 361,569 (769,179) (362,000) (769,610) 90,491,597 -0.85

New York Albany 643,014 0 0 643,014 86,688,382 0.74

Batavia (52,281) (201,640) 0 (253,921) 21,917,403 -1.16

Bath (62,871) 0 171,843 108,972 34,448,191 0.32

Bronx 114,724 0 0 114,724 120,129,540 0.10

Brooklyn 18,410 0 0 18,410 161,703,585 0.01

Buffalo 56,615 0 0 56,615 99,957,051 0.06

Canandaigua 319,145 (482,081) (319,000) (481,936) 54,781,934 -0.88

Castle Point 234,708 (383,596) (235,000) (383,888) 38,747,035 -0.99

Montrose 281,135 (740,747) (281,000) (740,611) 77,161,128 -0.96

New York (64,577) 0 0 (64,577) 140,320,575 -0.05

Northport 724,930 0 0 724,930 112,603,170 0.64

Syracuse 64,450 696,792 470,571 1,231,813 55,743,369 2.21

Pennsylvania Altoona (10,480) (189,293) 0 (199,772) 22,269,707 -0.90

Butler (74,026) (276,823) 0 (350,850) 31,818,757 -1.10

Coatesville 273,737 (665,156) (274,000) (665,418) 70,016,365 -0.95

Erie 133,177 0 0 133,177 22,402,803 0.59

Lebanon 332,526 712,277 (712,277) 332,526 56,982,122 0.58

Philadelphia 82,844 (1,038,620) (83,000) (1,038,776) 115,402,246 -0.90

Pittsburgh HD 328,604 655,284 554,103 1,537,990 52,422,685 2.93

Pittsburgh UD (69,601) (952,321) 0 (1,021,922) 105,813,350 -0.97

Wilkes-Barre 280,474 0 0 280,474 64,452,608 0.44

Rhode Island Providence 158,524 0 83,927 242,451 48,582,484 0.50

Virginia Hampton 718,422 0 0 718,422 66,542,573 1.08

Richmond 1,368,278 0 429,636 1,797,914 117,920,080 1.52

Salem 456,844 0 0 456,844 79,951,649 0.57

Vermont White River Junction 238,980 471,037 396,179 1,106,196 37,682,992 2.94

West Virginia Beckley (192) 0 0 (192) 21,991,596 0.00

Clarksburg 42,139 0 0 42,139 31,978,830 0.13

Huntington 421,616 0 0 421,616 46,864,486 0.90

Martinsburg 519,988 0 0 519,988 60,775,103 0.86

Region subtotal $11,124,756 ($4,957,337) $5,000,000 $11,167,418 $3,169,902,894

(Figure notes on next page)

Page 50 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix IV 

RPM Budget Changes by Region and

Facility, Fiscal Years 1994 and 1995

Notes: HD = Highland Drive facility; UD = University Drive facility.

In considering the range of adjustments to facility budgets through RPM reallocations, we did not

include the Fort Howard budget increase of 13.4 percent. The Region 1 regional director

adjustment for fiscal year 1995 is stated for administrative purposes to be $3.85 million. However,

VA officials told us that the facility did not receive the funds for patient care. Instead, the funds

were considered a reserve for regional office use.

Data represent RPM adjustments prior to inflation.

Numbers in parentheses are negative numbers.

Source: VA RPM data.

Page 51 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix IV 

RPM Budget Changes by Region and

Facility, Fiscal Years 1994 and 1995

Figure IV.2: Southern Region, Fiscal Year 1995

Percentage

RPM increase/

RPM adjustments FY 93 historical decrease 

State Facility Workload Outlier Negotiation Total RPM budget FY 1993-95

Alabama Birmingham $418,458 $0 $74,206 $492,664 $80,718,257 0.61

Montgomery 247,367 (253,355) 0 (5,988) 28,150,603 -0.02

Tuscaloosa 424,581 569,533 0 994,114 45,562,652 2.18

Tuskegee 579,410 0 122,174 701,584 64,010,719 1.10

Arkansas Fayetteville (AR) 259,552 341,919 0 601,471 27,353,492 2.20

Little Rock 305,261 0 0 305,261 151,558,834 0.20

Florida Bay Pines 817,576 0 0 817,576 113,482,296 0.72

Miami 971,220 0 0 971,220 153,710,929 0.63

Gainesville 189,161 0 0 189,161 101,670,059 0.19

Lake City 456,531 569,106 20,709 1,046,346 45,528,489 2.30

Tampa 241,799 0 68,835 310,634 132,419,607 0.23

Georgia Atlanta 188,970 0 390,819 579,789 88,441,996 0.66

Augusta 659,971 (1,063,310) 596,553 193,214 114,334,420 0.17

Dublin 34,810 0 264,124 298,934 43,351,007 0.69

Louisiana Alexandria (92,244) 0 121,965 29,721 50,548,415 0.06

New Orleans (150,162) 0 0 (150,162) 98,338,481 -0.15

Shreveport (142,457) 0 0 (142,457) 59,514,824 -0.24

Mississippi Biloxi 418,719 0 523,980 942,699 78,054,727 1.21

Jackson 2,503 1,018,383 0 1,020,885 81,470,607 1.25

North Carolina Durham 438,338 0 161,901 600,239 84,824,496 0.71

Fayetteville (NC) 442,970 0 0 442,970 39,110,154 1.13

Asheville 219,649 0 0 219,649 56,541,850 0.39

Salisbury 655,205 0 0 655,205 66,824,340 0.98

Oklahoma Muskogee 149,748 0 75,338 225,086 39,471,600 0.57

Oklahoma City 147,608 0 159,238 306,846 82,917,279 0.37

Puerto Rico San Juan (533,007) 1,481,526 351,343 1,299,862 118,522,126 1.10

South Carolina Charleston 411,874 0 114,144 526,018 59,803,480 0.88

Columbia (SC) 285,709 0 135,698 421,407 71,096,332 0.59

Tennessee Memphis 58,602 0 0 58,602 113,237,128 0.05

Mountain Home 136,473 0 205,233 341,706 75,336,571 0.45

Murfreesboro 212,791 813,813 0 1,026,604 65,105,000 1.58

Nashville 260,637 0 495,954 756,591 83,952,218 0.90

Texas Amarillo 54,959 0 164,966 219,925 40,288,870 0.55

Big Spring 205,811 0 3,961 209,772 22,025,943 0.95

Bonham 112,008 252,956 8,362 373,327 20,236,509 1.84

Dallas 848,816 0 246,296 1,095,112 124,965,187 0.88

Houston 24,349 2,036,667 0 2,061,016 162,933,404 1.26

Kerrville 50,329 358,796 0 409,124 28,703,644 1.43

Marlin 62,159 0 212,482 274,641 15,592,981 1.76

San Antonio 346,957 0 330,374 677,331 121,661,557 0.56

Temple 219,214 0 151,345 370,559 79,293,993 0.47

Waco 290,423 (530,950) 0 (240,527) 62,464,671 -0.39

El Paso OPC 48,328 0 0 48,328 14,171,046 0.34

Region subtotal $10,980,975 $5,595,083 $5,000,000 $21,576,058 $3,207,300,793

(Figure notes on next page)

Page 52 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix IV 

RPM Budget Changes by Region and

Facility, Fiscal Years 1994 and 1995

Notes: OPC = outpatient clinic.

Data represent RPM adjustments prior to inflation.

Numbers in parentheses are negative numbers.

Source: VA RPM data.

Page 53 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix IV 

RPM Budget Changes by Region and

Facility, Fiscal Years 1994 and 1995

Figure IV.3: Central Region, Fiscal Year 1995

Percentage

RPM increase/

RPM adjustments FY 93 historical decrease 

State Facility Workload Outlier Negotiation Total RPM budget FY 1993-95

Iowa Des Moines $97,985 ($369,263) $350,000 $78,722 $40,137,263 0.20

Iowa City 522,833 723,137 741,720 1,987,690 57,850,975 3.44

Knoxville 374,181 0 0 374,181 40,755,199 0.92

Illinois Chicago (L.Side) 216,658 0 15,434 232,092 74,399,680 0.31

Chicago (W.Side) (237,414) 0 121,447 (115,967) 92,934,534 -0.12

Danville 329,978 0 2,830 332,808 67,880,543 0.49

North Chicago (Downey) 117,174 (875,633) 26,889 (731,570) 96,223,370 -0.76

Hines 379,043 0 106,472 485,515 176,729,835 0.27

Marion (IL) 304,770 372,841 211,628 889,240 29,827,306 2.98

Indiana Fort Wayne 116,689 0 8,673 125,362 20,793,655 0.60

Indianapolis 630,851 (899,100) 34,534 (233,715) 97,728,268 -0.24

Marion (IN) 294,264 (427,976) 0 (133,712) 46,519,091 -0.29

Kansas Wichita 163,857 0 23,909 187,766 31,611,694 0.59

Topeka 175,613 0 39,298 214,911 64,174,731 0.33

Leavenworth 250,359 0 4,210 254,569 48,624,380 0.52

Kentucky Lexington 117,372 0 0 117,372 98,603,452 0.12

Louisville 179,781 0 5,853 185,634 67,685,420 0.27

Michigan Ann Arbor 695,115 0 457,810 1,152,925 86,885,184 1.33

Battle Creek 535,207 0 2,798 538,005 70,346,823 0.76

Allen Park 79,200 0 0 79,200 88,900,558 0.09

Iron Mountain 105,677 0 69,216 174,893 20,490,980 0.85

Saginaw 169,224 (236,382) 248,225 181,067 25,976,056 0.70

Minnesota Minneapolis 97,412 0 362,275 459,687 161,591,961 0.28

St. Cloud 264,458 551,366 0 815,824 44,109,270 1.85

Missouri Columbia (MO) 207,936 690,615 223,786 1,122,337 55,249,224 2.03

Kansas City 252,672 0 5,826 258,498 78,518,781 0.33

Poplar Bluff 174,557 270,968 12,604 458,129 21,677,414 2.11

St. Louis 360,060 0 74,936 434,996 127,967,160 0.34

North Dakota Fargo 87,684 0 4,122 91,806 29,909,021 0.31

Nebraska Grand Island (62,481) (169,148) 84,574 (147,056) 16,914,826 -0.87

Lincoln 71,464 0 41,550 113,014 22,849,627 0.49

Omaha 46,014 0 67,302 113,316 53,110,899 0.21

Ohio Chillicothe 352,879 733,167 3,359 1,089,404 58,653,320 1.86

Cincinnati (7,026) 0 0 (7,026) 71,109,964 -0.01

Cleveland 584,147 0 50,846 634,993 155,693,711 0.41

Dayton 307,982 (872,118) 874,330 310,194 100,243,452 0.31

Columbus OPC 711 0 0 711 14,345,869 0.00

South Dakota Sioux Falls 233,938 0 21,561 255,499 35,155,718 0.73

Fort Meade 200,256 (258,954) 621,685 562,987 29,764,871 1.89

Hot Springs 117,413 0 0 117,413 25,078,437 0.47

Wisconsin Madison 299,306 0 17,559 316,865 52,921,810 0.60

Tomah 234,875 0 6,658 241,533 42,064,105 0.57

Milwaukee 340,603 (1,097,960) 56,081 (701,276) 120,655,003 -0.58

Region subtotal $9,783,278 ($1,864,440) $5,000,000 $12,918,838 $2,762,663,440

(Figure notes on next page)

Page 54 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix IV 

RPM Budget Changes by Region and

Facility, Fiscal Years 1994 and 1995

Notes: L. Side = Lakeside facility; W. Side = Westside facility; OPC = outpatient clinic.

Data represent RPM adjustments prior to inflation.

Numbers in parentheses are negative numbers.

Source: VA RPM data.

Page 55 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix IV 

RPM Budget Changes by Region and

Facility, Fiscal Years 1994 and 1995

Figure IV.4: Western Region, Fiscal Year 1995

Percentage

RPM increase/

RPM adjustments FY 93 historical decrease 

State Facility Workload Outlier Negotiation Total RPM budget FY 1993-95

Alaska Anchorage $194,051 $0 ($200,000) ($5,950) $11,912,260 -0.05

Arizona Phoenix 402,905 1,021,763 400,000 1,824,668 81,741,074 2.23

Prescott 288,881 0 0 288,881 30,134,075 0.96

Tucson 229,018 0 187,000 416,018 73,452,703 0.57

California Fresno 362,659 0 0 362,659 50,968,054 0.71

Livermore 292,414 (276,713) 0 15,701 29,437,559 0.05

Long Beach 321,196 (1,632,715) 0 (1,311,519) 183,451,123 -0.71

Loma Linda 146,773 0 400,000 546,773 89,223,365 0.61

Martinez (49,340) 0 1,500,000 1,450,660 53,640,283 2.70

Palo Alto 1,243,211 0 0 1,243,211 192,666,261 0.65

San Francisco 497,045 0 500,000 997,045 113,000,833 0.88

San Diego 655,810 1,321,700 0 1,977,510 105,736,047 1.87

Sepulveda 690,466 0 0 690,466 108,833,648 0.63

West Los Angeles 589,472 0 0 589,472 208,621,136 0.28

Los Angeles OPC (174,606) 0 0 (174,606) 28,952,292 -0.60

Colorado Denver 479,258 1,054,539 527,000 2,060,797 84,363,102 2.44

Fort Lyon (27,523) (261,704) 0 (289,227) 26,704,489 -1.08

Grand Junction 216,902 231,961 0 448,862 18,556,840 2.42

Hawaii Honolulu 123,549 0 0 123,549 15,238,957 0.81

Idaho Boise 63,769 0 0 63,769 33,878,144 0.19

Montana Fort Harrison 95,485 226,095 0 321,580 18,087,580 1.78

Miles City 124,187 (99,676) 0 24,511 11,326,811 0.22

New Mexico Albuquerque 679,819 1,153,781 0 1,833,600 92,302,510 1.99

Nevada Reno 521,707 0 0 521,707 42,834,038 1.22

Las Vegas OPC (78) 0 203,000 202,922 14,432,345 1.41

Oregon Portland 247,593 0 0 247,593 129,525,022 0.19

Roseburg 165,502 0 300,000 465,502 33,788,456 1.38

White City 53,406 0 0 53,406 20,958,988 0.25

Philippines Manila 3,000 0 0 3,000 1,618,732 0.19

Utah Salt Lake City 173,549 949,010 0 1,122,559 75,920,779 1.48

Washington American Lake Tacoma 167,851 0 341,000 508,851 44,458,745 1.14

Seattle 722,740 0 450,000 1,172,740 103,508,273 1.13

Spokane 403,507 0 300,000 703,507 26,128,212 2.69

Walla Walla 53,123 0 0 53,123 17,879,453 0.30

Wyoming Cheyenne 41,610 (184,641) 92,000 (51,031) 18,650,582 -0.27

Sheridan 269,811 (219,339) 0 50,472 23,088,349 0.22

Region subtotal $10,268,719 $3,284,060 $5,000,000 $18,552,779 $2,215,021,120

National total $42,157,727 $2,057,366 $20,000,000 $64,215,093 $11,354,888,247 0.50%

Notes: OPC = outpatient clinic.

Data represent RPM adjustments prior to inflation.

Numbers in parentheses are negative numbers.

Source: VA RPM data.

Page 56 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix IV 

RPM Budget Changes by Region and

Facility, Fiscal Years 1994 and 1995

Figure IV.5: Eastern Region, Fiscal Year 1994

Percentage

RPM increase/

RPM adjustments FY 92 historical decrease 

State Facility Workload Outlier Negotiation Total RPM budget FY 1992-94

Connecticut Newington $430,666 $0 $210,452 $641,118 $28,298,967 2.27

West Haven 701,165 0 630,000 1,331,165 81,882,692 1.63

District of Columbia Washington 915,079 0 0 915,079 96,814,359 0.95

Delaware Wilmington 178,529 0 49,562 228,091 35,559,488 0.64

Massachusetts Bedford 156,266 0 0 156,266 61,879,481 0.25

Boston (194,807) 0 0 (194,807) 115,953,355 -0.17

Brockton/West Roxbury 245,607 (1,183,748) 351,962 (586,180) 118,374,840 -0.50

Northampton 122,959 0 0 122,959 40,684,327 0.30

Maryland Baltimore (21,072) 0 1,108,813 1,087,741 63,524,677 1.71

Fort Howard (103,064) (231,693) 231,693 (103,063) 23,169,252 -0.44

Perry Point (117,175) 0 0 (117,175) 52,696,933 -0.22

Maine Togus 117,563 0 0 117,563 49,109,017 0.24

New Hampshire Manchester 195,998 0 0 195,998 31,710,028 0.62

New Jersey East Orange 895,664 0 0 895,664 112,525,423 0.80

Lyons (2,277) 0 0 (2,277) 80,398,192 0.00

New York Albany 595,338 0 0 595,338 78,365,984 0.76

Batavia (46,884) 0 870,000 823,116 19,608,370 4.20

Bath 144,744 0 0 144,744 32,162,468 0.45

Bronx 264,069 (1,102,019) 0 (837,949) 110,201,874 -0.76

Brooklyn 1,073,566 0 0 1,073,566 148,957,221 0.72

Buffalo 398,110 0 0 398,110 92,424,922 0.43

Canandaigua 270,308 0 75,167 345,475 50,753,564 0.68

Castle Point (40,815) (351,962) 200,000 (192,778) 35,196,238 -0.55

Montrose 161,995 (711,154) 0 (549,160) 71,115,415 -0.77

New York 882,370 0 0 882,370 127,610,357 0.69

Northport 517,214 0 0 517,214 104,375,728 0.50

Syracuse 418,221 0 0 418,221 49,040,047 0.85

Pennsylvania Altoona 181,294 0 0 181,294 20,274,201 0.89

Butler 3,417 (292,146) 0 (288,729) 29,214,588 -0.99

Coatesville 99,498 0 0 99,498 62,140,152 0.16

Erie 47,988 0 0 47,988 19,942,462 0.24

Lebanon 141,001 506,846 300,000 947,847 50,684,564 1.87

Philadelphia 1,116,228 (1,022,523) 0 93,706 102,252,289 0.09

Pittsburgh HD 174,683 0 0 174,683 47,764,874 0.37

Pittsburgh UD 93,616 0 0 93,616 92,892,540 0.10

Wilkes-Barre 65,188 0 0 65,188 60,264,353 0.11

Rhode Island Providence 368,221 0 0 368,221 45,498,893 0.81

Virginia Hampton (177,304) 0 55,257 (122,047) 62,454,102 -0.20

Richmond 225,352 0 637,185 862,537 107,750,116 0.80

Salem (219,948) 0 0 (219,948) 70,890,886 -0.31

Vermont White River Junction 159,832 0 0 159,832 35,529,398 0.45

West Virginia Beckley (12,535) 0 79,909 67,374 18,917,453 0.36

Clarksburg 25,985 0 700,000 725,985 28,091,999 2.58

Huntington 348,907 0 0 348,907 38,012,240 0.92

Martinsburg (10,564) 0 0 (10,564) 54,779,761 -0.02

Region subtotal $10,790,196 ($4,388,399) $5,500,000 $11,901,797 $2,859,748,090

(Figure notes on next page)

Page 57 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix IV 

RPM Budget Changes by Region and

Facility, Fiscal Years 1994 and 1995

Notes: HD = Highland Drive facility; UD = University Drive facility

Data represent RPM adjustments prior to inflation.

Numbers in parentheses are negative numbers.

Source: VA RPM data.

Page 58 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix IV 

RPM Budget Changes by Region and

Facility, Fiscal Years 1994 and 1995

Figure IV.6: Southern Region, Fiscal Year 1994

Percentage

RPM increase/

RPM adjustments FY 92 historical decrease 

State Facility Workload Outlier Negotiation Total RPM budget FY 1992-94

Alabama Birmingham ($8,182) $0 $451,270 $443,088 $73,726,435 0.60

Montgomery 51,679 0 92,886 144,565 25,222,108 0.57

Tuscaloosa (17,129) 0 127,271 110,142 42,289,723 0.26

Tuskegee 596,999 0 0 596,999 59,642,317 1.00

Arkansas Fayetteville (AR) 157,745 0 250,000 407,745 24,598,666 1.66

Little Rock (119,370) 0 419,211 299,841 139,295,325 0.22

Florida Bay Pines 658,053 1,036,056 174,195 1,868,304 103,605,597 1.80

Gainesville 10,257 0 0 10,257 92,971,128 0.01

Lake City 114,503 0 0 114,503 40,864,013 0.28

Miami 960,072 0 0 960,072 142,332,813 0.67

Tampa 643,242 0 866,196 1,509,438 123,524,555 1.22

Georgia Augusta 82,415 0 86,008 168,423 105,694,346 0.16

Atlanta 110,885 806,443 94,967 1,012,295 80,644,316 1.26

Dublin 0 0 22,964 22,964 39,404,957 0.06

Louisiana Alexandria (281,186) 0 281,186 0 46,095,349 0.00

New Orleans 355,543 0 0 355,543 87,997,689 0.40

Shreveport (676,282) 0 696,773 20,491 55,360,504 0.04

Mississippi Biloxi 174,791 693,530 24,631 892,952 69,353,035 1.29

Jackson (21,794) 0 0 (21,794) 72,941,142 -0.03

North Carolina Asheville (113,822) 0 0 (113,822) 52,193,476 -0.22

Durham 116,396 0 0 116,396 72,458,075 0.16

Fayetteville (NC) 45,600 0 23,960 69,560 35,722,042 0.19

Salisbury (108,470) 0 0 (108,470) 62,185,387 -0.17

Oklahoma Muskogee 233,227 0 106,039 339,266 35,234,760 0.96

Oklahoma City 269,643 0 227,402 497,045 75,561,153 0.66

Puerto Rico San Juan 427,502 1,073,517 385,061 1,886,080 107,351,729 1.76

South Carolina Charleston 341,310 0 0 341,310 55,563,075 0.61

Columbia (SC) 37,621 641,156 151,039 829,816 64,115,645 1.29

Tennessee Memphis 249,996 0 63,755 313,751 105,397,435 0.30

Mountain Home 261,947 0 201,093 463,040 66,818,725 0.69

Murfreesboro 306,248 597,719 22,808 926,776 59,771,931 1.55

Nashville 14,667 670,115 32,787 717,570 67,011,534 1.07

Texas Amarillo 220,996 0 38,760 259,756 38,337,474 0.68

Big Spring 63,526 0 0 63,526 20,635,045 0.31

Bonham 108,012 184,264 15,358 307,633 18,426,383 1.67

Dallas (9,064) 0 344,026 334,962 114,313,003 0.29

El Paso OPC 48,431 0 0 48,431 12,381,390 0.39

Houston 791,257 1,526,482 79,355 2,397,094 152,648,186 1.57

Kerrville 146,713 0 0 146,713 26,780,361 0.55

Marlin 142,724 0 17,461 160,185 13,860,860 1.16

San Antonio 475,250 0 986,068 1,461,318 110,573,272 1.32

Temple 195,385 0 217,470 412,855 72,260,705 0.57

Waco 250,692 0 0 250,692 56,348,285 0.44

Region subtotal $7,308,028 $7,229,282 $6,500,000 $21,037,311 $2,921,513,949

(Figure notes on next page)

Page 59 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix IV 

RPM Budget Changes by Region and

Facility, Fiscal Years 1994 and 1995

Notes: OPC = outpatient clinic.

Data represent RPM adjustments prior to inflation.

Numbers in parentheses are negative numbers.

Source: VA RPM data.

Page 60 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix IV 

RPM Budget Changes by Region and

Facility, Fiscal Years 1994 and 1995

Figure IV.7: Central Region, Fiscal Year 1994

Percentage

RPM increase/

RPM adjustments FY 92 historical decrease 

State Facility Workload Outlier Negotiation Total RPM budget FY 1992-94

Iowa Des Moines ($76,259) $0 $0 ($76,259) $37,113,652 -0.21

Iowa City 220,519 0 0 220,519 52,841,384 0.42

Knoxville 273,355 0 0 273,355 37,265,045 0.73

Illinois Chicago (L.Side) 168,080 0 678,500 846,580 68,738,295 1.23

Chicago (W.Side) (50,012) 0 352,800 302,788 84,700,768 0.36

Danville 434,620 0 0 434,620 63,042,748 0.69

Hines (346,123) 0 246,700 (99,423) 159,946,385 -0.06

Marion (IL) 228,635 279,880 370,000 878,515 27,988,005 3.14

North Chicago (Downey) 162,956 (851,916) 852,000 163,040 85,191,578 0.19

Indiana Fort Wayne (27,973) 0 0 (27,973) 18,787,435 -0.15

Indianapolis 83,328 0 0 83,328 84,424,279 0.10

Marion (IN) (61,593) 0 0 (61,593) 43,592,909 -0.14

Kansas Leavenworth 151,984 0 0 151,984 45,795,015 0.33

Topeka 215,205 0 0 215,205 59,327,377 0.36

Wichita (88,298) 0 0 (88,298) 28,751,686 -0.31

Kentucky Lexington 87,128 0 24,000 111,128 91,604,086 0.12

Louisville (496,090) 0 584,200 88,110 62,924,357 0.14

Michigan Allen Park 248,221 0 0 248,221 78,450,680 0.32

Ann Arbor 696,825 0 200,000 896,825 75,880,961 1.18

Battle Creek 205,134 0 0 205,134 64,881,740 0.32

Iron Mountain 49,623 0 0 49,623 19,292,806 0.26

Saginaw (3,846) 0 58,000 54,154 21,355,494 0.25

Minnesota Minneapolis 400,650 0 800,000 1,200,650 147,069,021 0.82

St. Cloud 139,089 0 300,000 439,089 40,545,627 1.08

Missouri Columbia (MO) 314,746 504,707 1,015,000 1,834,453 50,470,672 3.63

Kansas City 91,965 0 0 91,965 70,820,728 0.13

Poplar Bluff 69,507 0 21,500 91,007 19,518,611 0.47

St. Louis 406,628 0 0 406,628 113,837,207 0.36

North Dakota Fargo 65,585 0 550,000 615,585 26,347,554 2.34

Nebraska Grand Island 5,608 0 80,000 85,608 15,740,315 0.54

Lincoln 145,850 0 0 145,850 20,642,056 0.71

Omaha 63,650 0 600,000 663,650 48,521,485 1.37

Ohio Chillicothe (17,622) 543,901 400,000 926,278 54,390,049 1.70

Cincinnati 645,930 0 0 645,930 65,783,511 0.98

Cleveland 668,107 0 184,300 852,407 140,385,750 0.61

Columbus OPC 228,942 0 0 228,942 13,256,488 1.73

Dayton (180,810) 0 38,000 (142,810) 93,066,125 -0.15

South Dakota Fort Meade 197,960 0 0 197,960 27,271,073 0.73

Hot Springs (87,416) 0 0 (87,416) 23,490,371 -0.37

Sioux Falls 147,250 0 0 147,250 31,970,308 0.46

Wisconsin Madison 15,634 0 0 15,634 47,881,942 0.03

Milwaukee 200,021 0 645,000 845,021 109,576,928 0.77

Tomah 120,977 0 0 120,977 39,256,153 0.31

Region subtotal $5,717,670 $476,572 $8,000,000 $14,194,241 $2,511,738,659

(Figure notes on next page)

Page 61 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix IV 

RPM Budget Changes by Region and

Facility, Fiscal Years 1994 and 1995

Notes: L. Side = Lakeside facility; W. Side = Westside facility; OPC = outpatient clinic.

Data represent RPM adjustments prior to inflation.

Numbers in parentheses are negative numbers.

Source: VA RPM data.

Page 62 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix IV 

RPM Budget Changes by Region and

Facility, Fiscal Years 1994 and 1995

Figure IV.8: Western Region, Fiscal Year 1994

Percentage

RPM increase/

RPM adjustments FY 92 historical decrease 

State Facility Workload Outlier Negotiation Total RPM budget FY 1992-94

Alaska Anchorage $0 $0 $0 $0 $8,704,163 0.00

Arizona Phoenix 358,631 765,579 577,791 1,702,001 76,557,851 2.22

Prescott 114,257 0 0 114,257 27,341,748 0.42

Tucson 336,331 0 117,788 454,119 65,225,396 0.70

California Fresno 379,315 0 (379,315) 0 42,697,343 0.00

Livermore 254,697 (250,853) 0 3,844 25,085,332 0.02

Loma Linda (288,055) 0 295,871 7,816 81,627,406 0.01

Long Beach (39,594) (1,669,161) 882,576 (826,179) 166,916,125 0.49

Los Angeles OPC 0 0 0 0 23,160,177 0.00

Martinez 698,964 0 (656,963) 42,001 70,452,328 0.06

Palo Alto 1,590,928 (1,655,702) 4,774 (60,000) 165,570,210 -0.04

San Diego 494,166 0 0 494,166 94,483,159 0.52

San Francisco 882,417 0 (788,157) 94,260 90,270,972 0.10

Sepulveda 278,677 (976,897) 333,370 (364,851) 97,689,753 -0.37

West Los Angeles 801,359 0 128,000 929,359 187,960,967 0.49

Colorado Denver 293,993 0 1,268,766 1,562,759 77,822,972 2.01

Fort Lyon (132,070) 0 132,662 592 24,976,890 0.00

Grand Junction 69,278 0 565,838 635,116 16,872,766 3.76

Hawaii Honolulu 89,765 0 0 89,765 11,343,258 0.79

Idaho Boise 44,766 0 300,000 344,766 30,443,914 1.13

Montana Fort Harrison (42,354) 164,937 0 122,583 16,493,702 0.74

Miles City (54,710) (98,837) 80,360 (73,187) 9,883,688 -0.74

New Mexico Albuquerque 554,667 0 91,258 645,925 83,480,747 0.77

Nevada Las Vegas OPC 0 0 400,000 400,000 10,922,061 3.66

Reno 332,313 0 (283,190) 49,123 35,376,964 0.14

Oregon Portland (170,815) 0 371,933 201,118 116,676,424 0.17

Roseburg 1,990 0 0 1,990 31,630,803 0.01

White City (112,846) 0 118,208 5,362 19,064,907 0.03

Philippines Manila 22,541 0 221,921 244,462 1,425,144 17.15

Utah Salt Lake City 141,782 0 610,486 752,268 68,709,004 1.09

Washington American Lake Tacoma 25,365 0 437,786 463,151 40,950,455 1.13

Seattle 273,438 0 57,600 331,038 95,842,511 0.35

Spokane (83,299) 0 110,637 27,338 23,605,637 0.12

Walla Walla 46,090 0 0 46,090 15,580,186 0.30

Wyoming Cheyenne 50,437 0 0 50,437 14,891,193 0.34

Sheridan 6,939 0 0 6,939 21,230,950 0.03

Region subtotal $7,219,363 ($3,720,934) $5,000,000 $8,498,428 $1,990,967,106

National total $31,035,257 ($403,479) $25,000,000 $55,631,777 $10,283,967,804 0.54

(Figure notes on next page)

Page 63 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix IV 

RPM Budget Changes by Region and

Facility, Fiscal Years 1994 and 1995

Notes: OPC = outpatient clinic.

Data represent RPM adjustments prior to inflation.

Numbers in parentheses are negative numbers.

Source: VA RPM data.

VA RPM data.

Page 64 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix V 

RPM’s Provision for Facility Differences in

Veterans’ Access to Care

One of the ways that VA facilities adjust to resource limitations is by

rationing care to veterans. As a result, there are differences in the

provision of care to veterans among facilities. Some facilities have

adequate resources to provide services to all categories of veterans;

whereas, others find they must curtail their services. They do so by

limiting the categories of veterans served, the types of services offered,

and the conditions for which veterans can receive care.

When we reported on these differences in 1993, VA responded that the RPM

system—under development at the time—would help overcome these

differences.38 Specifically, VA officials indicated that to address wide

variations in veterans’ access to health care systemwide, VA was designing

a new resource planning and management process with several objectives,

including the elimination of gaps in service to veterans systemwide. The

Secretary of VA reiterated in February 1994 correspondence to the

Congress that the RPM system would begin to alleviate some of the

inconsistencies in veterans’ access to care noted in our report. However,

this objective has not been incorporated in the RPM model.

Availability of Care Is

Uneven

The Congress established general priorities for VA to use when providing

outpatient care when resources are not available to care for all veterans.

VA, in turn, has delegated rationing decisions to its facilities. Each facility

independently chooses when and how to ration care. Our 1993 report

found that 118 centers reported rationing care and 40 reported no

rationing, as shown in figure V.1.

38GAO/HRD-93-106, July 16, 1993.

Page 65 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix V 

RPM’s Provision for Facility Differences in

Veterans’ Access to Care

Figure V.1: Nonrationing VA Medical Centers in Fiscal Year 1991

Fort Meade

Big

Spring

Waco

Bonham

Albuquerque

Medical Centers That Did Not Ration Care

Houston

Hot Springs

Sioux Falls

Grand Island

Lincoln

Omaha

Leavenworth

Topeka

Wichita

Oklahoma

City

Muskogee

Dallas

Marlin

Temple

Kerrville

San Antonio

Tucson

Phoenix

Medical Centers That Rationed Care

San Diego

Loma Linda

West

Los Angeles

Long Beach

Sepulveda

Fresno

Martinez

Boise

Roseburg

Portland

Tacoma

Seattle

Walla Walla

Spokane

Livermore

Palo Alto

San

Francisco

Reno

Prescott

Fargo

Fort Harrison

Miles City

Sheridan

Cheyenne

Salt Lake City

Denver

Grand Junction

Fort Lyon

Amarillo

Page 66 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix V 

RPM’s Provision for Facility Differences in

Veterans’ Access to Care

Brockton

Northampton

Providence

West Haven

Montrose

Northport, L.I.

Brooklyn

East Orange

Lyons

Baltimore

Fort Howard

Washington, D.C.

San Juan

Lake City

Dublin

Augusta

Columbia

Salisbury

Tuskegee

Alexandria

Miami

Gainesville

Atlanta

Charleston

Asheville Fayetteville

Durham

Hampton

Salem

Tuscaloosa

Montgomery

Jackson

Biloxi

New Orleans

Shreveport

Little Rock

Fayetteville

Poplar Bluff

Saint Louis

Kansas City

Columbia

Knoxville

Iowa City

Des Moines

Tomah

Madison

N. Chicago

Milwaukee

Danville

Hines

Chicago (Westside)

Marion

Marion

Memphis

Knoxville

Mountain

Home

Louisville

Lexington

Murfreesboro

Tampa

Bay Pines

Birmingham

Richmond

Dayton

Cleveland

Erie

Bedford

Bath

Boston

Newington

Bronx

New York

Philadelphia

Wilmington

Perry Point

Iron

Mountain

St. Cloud

Saginaw

Minneapolis

Nashville

Battle

Creek

Allen Park

Togus

Ann Arbor

Fort Wayne

Indianapolis

Chicago (Lakeside)

Chillicothe

Cincinnati

Clarksburg

Huntington

Martinsburg

Beckley

White River

Junction

Manchester

Albany

Buffalo

Butler

Wilkes-Barre

Altoona

Pittsburgh

Batavia

Castle

Point

Syracuse

Canadaigua

(Figure notes on next page)

Page 67 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix V 

RPM’s Provision for Facility Differences in

Veterans’ Access to Care

Source: VA Health Care: Variabilities in Outpatient Care Eligibility and Rationing Decisions

(GAO/HRD-93-106, July 16, 1993).

Because of differences in facility rationing practices, veterans’ access to

care systemwide is uneven. We found that higher income veterans

received care at many facilities, while lower income veterans were turned

away at other facilities. Differences in who was served occurred even

within the same facility because of rationing. Some facilities that rationed

care by medical service or condition sometimes turned away lower

income veterans who needed certain types of services and provided care

for higher income veterans who needed other services.

Complex eligibility categories complicate the determinations of priorities

for care as well as the extent that facilities are providing care to various

categories of veterans. VA’s priority system considers factors such as the

presence and extent of any service-connected disability, the incomes of

veterans with nonservice-connected disabilities, and the type and purpose

of care needed to determine which eligible veterans receive care within

available resources. (An eligible veteran is any person who served on

active duty in the uniformed services for the minimum time specified by

law and who was discharged, released, or retired under other than

dishonorable conditions.) While VA’s systems do not allow us to confirm

the extent that the rationing we reported in 1993 still exists, available data

indicate that the ability of facilities to provide care to discretionary

categories of veterans still varies. VA systems record the numbers of

unique patients served by facilities who have traditionally been considered

“discretionary,” that is, nonservice-connected, higher-income veterans.

These data show that although up to 13 percent of some facilities’ patients

were from the discretionary category in fiscal year 1994, other facilities

treated none.

Page 68 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix V 

RPM’s Provision for Facility Differences in

Veterans’ Access to Care

Page 69 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix V 

RPM’s Provision for Facility Differences in

Veterans’ Access to Care

Page 70 GAO/HEHS-96-48 VA Medical Resources Allocation System
Appendix V 

RPM’s Provision for Facility Differences in

Veterans’ Access to Care

Page 71 GAO/HEHS-96-48 VA Medical Resources Allocation System
Related GAO Products

VA Decision Support System: Top Management Leadership Critical to

Success (GAO/AIMD-95-182, Sept. 29, 1995).

VA’s Medical Resource Allocation System (GAO/HEHS-95-252R, Sept. 12, 1995).

VA Health Care: Issues Affecting Eligibility Reform (GAO/T-HEHS-95-213,

July 19, 1995).

VA Health Care: Challenges and Options for the Future (GAO/T-HEHS-95-147,

May 9, 1995).

VA Health Care: Barriers to VA Managed Care (GAO/HEHS-95-84R, April 20,

1995).

Veteran Affairs: Accessibility of Outpatient Care at VA Medical Centers

(GAO/T-HRD-93-29, July 21, 1993).

VA Health Care: Variabilities in Outpatient Care Eligibility and Rationing

Decisions (GAO/HRD-93-106, July 16, 1993).

VA Health Care: Veterans’ Efforts to Obtain Outpatient Care From

Alternative Sources (GAO/HRD-93-123, June 30, 1993).

VA Health Care: Resource Allocation Methodology Has Had Little Impact

on Medical Centers’ Budgets (GAO/HRD-89-93, Aug. 18, 1989).

VA Health Care: Resource Allocation Methodology Should Improve VA’s

Financial Management (GAO/HRD-87-123BR, Aug. 31, 1987).

(101465) Page 72 GAO/HEHS-96-48 VA Medical Resources Allocation System
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