January 2001 Major Managem

Challenges and 

Program Risks

Department of Veterans 

GAO-01-255

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Letter 

Overview 

Major 

Performance 

and 

Accountability 

Challenges

Related GAO 

Products

Performance 

and 

Accountability 

Series
Page 2 GAO-01-255 V
of th

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United States General Accounting Office

Washington, D.C. 20548

January 2001

The President of the Senate

The Speaker of the House of Representati

This report addresses the major performa

accountability challenges facing the Depa

Veterans Affairs (VA) as it seeks “to care f

shall have borne the battle and for his wid

orphan”stated in words VA adopted fro

Lincoln’s Second Inaugural Address. It inc

summary of actions that VA has taken and 

way to address these challenges. It also ou

actions that GAO believes are needed. Th

should help the new Congress and admini

out their responsibilities and improve gov

the benefit of the American people.

This report is part of a special series, first 

January 1999, entitled the Performance an

Accountability Series: Major Management 

and Program Risks. In that series, GAO ad

Congress that it planned to reassess the m

and criteria used to determine which fede

government operations and functions sho

highlighted and which should be designat

risk.” GAO completed the assessment, con

comments provided on a publicly availabl

draft, and published its guidance docume

Determining Performance and Accountab

Challenges and High Risks (GAO-01-159SP

November 2000.

This 2001 Performance and Accountabilit

contains separate reports on 21 agencies

department, most major independent agen

U.S. Postal Service. The series also includ
Page 4 GAO-01-255 V

governmentwide perspective on performanc

management challenges across the federal g

As a companion volume to this series, GAO i

update on those government operations and 

that its work identified as “high risk” becaus

their greater vulnerabilities to waste, fraud, a

mismanagement or major challenges associa

their economy, efficiency, or effectiveness.

David M. Walker

Comptroller General

of the United States
Page 5 GAO-01-25
Page 6 GAO-01-25

The Department of Veterans Affairs’ (VA) 

reflects the nation’s historic commitment 

veterans, their families, and their survivor

administers a variety of programs, includi

world’s largest health care systems. The D

estimates that, in fiscal year 2000, it spent 

$42 billion—more than 80 percent of its to

provide health care services to 3.6 million 

to pay disability compensation and pensio

2.5 million veterans and their families and 

providing these services and benefits, VA 

performance and accountability challenge

Health Care Access Over the past several years, VA has under

initiatives to improve veterans’ overall acc

provided health care, such as shifting its e

inpatient to outpatient primary care and in

number of outpatient clinics it operates. V

undertaken efforts to improve the quality 

provides, including introducing patient sa

• Ensure timely and equitable access to qua

health care

• Maximize VA's ability to provide health care 

available resources

• Process veterans' disability claims promptly 

accurately

• Develop sound agencywide management 

strategies to build a high-performing organi
Page 7 GAO-01-25

However, several areas require continued 

is to achieve its goals. For example, VA ca

that veterans receive timely care at VA me

Nor can it ensure that it has maintained th

provide veterans who have spinal cord inj

mental illnesses, or other special needs th

they require, as mandated by the Congress

assess its capacity to provide long-term ca

veteran population and respond to emergi

needs, such as treating veterans for hepat

same time, VA is facing a potential shortag

nurses—if nationwide projections for the 

years bear out—which could have a signif

VA’s quality of care initiatives. 

To begin to respond to these concerns, VA 

long-standing weaknesses in the quality an

its workload and cost data. Without good 

cannot link its strategic planning to areas 

improvement or emphasis, appropriately b

allocate funds and other resources, or me

performance in providing care for all vete

in its health care system. We have made 

recommendations related to improving da

times and services for disabled veterans. M

specifically, we recommended that VA det

extent and causes of waiting times and th

spending plan with initiatives that would 

identified problems, as well as enhance m

potential service delivery problems for ve

Health Care 

Resource Utilization

To expand care to more veterans and resp

emerging health care needs, VA must cont

aggressively pursue opportunities to use i

resources—including its appropriation of 

billion—more wisely. VA has reduced its p

costs—one of its key performance measu

percent, but it could achieve additional ef

realigning capital assets and human capita
Page 8 GAO-01-255 V

changing demographics and veterans’ health 

For example, VA needs to further modify its 

infrastructure to support its increased relian

outpatient health care services and expand i

alternative methods for acquiring support se

as food and laundry. VA spends as much as o

of its annual health care budget to operate an

about 4,700 buildings and 18,000 acres of pro

also needs to pursue additional opportunitie

Department of Defense (DOD) to determine 

effective ways to serve both veterans and mi

personnel, including sharing services and fac

addition, VA must ensure that it collects the 

entitled to from third-party payers for health 

services provided to veterans whose conditi

service-connected.

To start to realize these efficiencies, VA has c

to systematically assessing its future infrastr

health care services needs within its 22 Veter

Integrated Service Networks (VISN) as well 

continuing to involve key officials in its strat

planning efforts and decision-making proces

have made several recommendations to VA t

help improve its infrastructure planning, pro

cost-effective support services, and enhance 

with DOD.

1

As part of its restructuring, VA decentralized basic bud

planning, and operating decisionmaking to its 22 VISNs. 

are responsible for ensuring that the funds allocated to 

are used as efficiently as possible and for identifying wa

health care services more efficiently. Also, VISN directo

responsible for assessing the future health care needs o

their networks and planning their facilities and services 

for example, proposing new outpatient clinics and cons

facilities.
Page 9 GAO-01-25

Compensation and 

Pension Claims 

Processing

VA must also continue to seek ways to en

veterans are compensated for reduced ea

due to disabilities sustained or aggravated 

military service. VA has had long-standing 

ensuring timely and accurate decisions on 

claims for disability compensation. VA ha

quality assurance system in response to o

recommendations, but large and growing 

pending claims and lengthy processing tim

Moreover, veterans are raising concerns t

decisions are inconsistent across VA’s 57 r

offices. VA has taken steps to improve its 

systems, performance measures, training 

processes for reviewing claims accuracy. 

However, VA also needs better analyses o

in order to target error-prone types of cas

processing bottlenecks—as well as determ

performance goals are realistic. VA also n

vigilant in its human capital strategies to e

maintains the necessary expertise to proc

newly hired employees replace many exp

claims processors over the next 5 years. V

capital problems can be seen as part of a 

pattern of human capital shortcomings tha

mission capabilities across the federal gov

our High-Risk Series Update, GAO-01-263

a discussion of human capital as a newly 

governmentwide high-risk area.)

Management 

Capacity

Finally, VA has more work to do to becom

performing organization and increase vete

satisfaction with its services. It must revis

structure and develop long-term, agencyw

for ensuring an appropriate information te

infrastructure and sound financial manag

budgetary structure linked funding to per

goals, rather than program operations, VA 
Page 10 GAO-01-255 V

Congress would be better positioned to dete

Department’s funding needs. VA’s IT strategy, 

to provide veterans and their families coordi

services, must be successfully executed to e

VA can produce reliable performance and wo

and safeguard financial, health care, and ben

payment information. Last, similar to most o

agencies, VA’s financial management strategi

ensure that its systems produce reliable cost 

address material internal control weaknesse

Federal Financial Management Improvemen

(FFMIA) requirements.
Page 11 GAO-01-25

y g

VA’s mission is “to care for him who shall h

battle and for his widow and orphan”—st

VA adopted from Abraham Lincoln’s Seco

Address. VA provides primary care, specia

related medical and social support service

4 million health care enrollees—about on

total veteran population—through its mor

service delivery locations or by purchasin

other providers. VA also supports medical 

research and serves as primary backup to 

agencies during national emergencies. In 

responsible for providing compensation a

benefits for disabled veterans.

These responsibilities are carried out prim

Veterans Health Administration (VHA) an

Benefits Administration (VBA) under num

care and compensation and benefits progr

years, we have identified significant perfo

accountability challenges in these program

needs to address to ensure that it is effect

efficiently achieving its mission to serve v

their families.

Ensure Timely and 

Equitable Access

to Quality VA 

Health Care

As part of its effort to “honor and serve ve

and “restore the capability of disabled vet

greatest extent possible”—two of VA’s stra

VA has taken significant steps to improve 

access to health care. Access to high-qual

is critical to VA’s accomplishing these goa

past several years, VA has created hundre

community-based outpatient clinics (CBO

care to veterans in outpatient settings rath

efficient inpatient settings. VA expects tha

fiscal years 1997 and 2001, the number of 

receive VA care will increase by 24 percen

(see fig. 1).
Page 12 GAO-01-255 V

Figure 1: Increases in VA Patients and Community-Based Outpatient Clinics, Fiscal 

2001

Note: Figures for fiscal years 2000 and 2001 are goals 

Source: VHA data.

VA is challenged to ensure that veterans rece

they need, when they need it, and that the ca

meets standards of quality. However, the lac

adequate data often hampers VA’s ability to d

the most appropriate use of its resources an

the quality and timeliness of the care it provi

lack of data also limits VA’s ability to identify 

0

100

200

300

400

500

600

700

800

900

1000

1997 1998 1999 2000

(Estimate)

200

(Estim

CBOCs

Patients (Thousands) 

Total Number of CBOCs

Unique Patients Treated (Thousands)

Fiscal year
Page 13 GAO-01-25

performance problems and measures to im

performance.

More Accurate 

Measures of Waiting 

Times and

Health Outcomes Are 

Needed to Improve

Timeliness and 

Quality of Care

Over the past decade, VA has taken steps t

timeliness and quality of VA-provided care

we have reported that veterans’ waiting ti

providers were excessive. Veterans were w

average of 8 to 9 weeks to get an appointm

specialty clinics and frequently waiting up 

certain types of emergency and screening 

provider. VA’s Office of Inspector General 

reported similar findings. Recent anecdot

from VA and veteran service organization 

indicates that veterans continue to experi

obtaining care. 

In response to these concerns and those o

service organizations, VA has established 

targets for the time it takes for veterans to 

appointment with a VA provider and the ti

waiting in a provider’s office. VA’s target fo

initial, nonurgent appointments and speci

appointments is 30 days (average); its targ

spent in the waiting room to see a provide

minutes or less of the scheduled appointm

intends to spend $400 million in fiscal yea

meeting these waiting time targets. As par

to reduce waiting times, VA has entered in

contracts with consultants to help reduce 

specialty appointments. 

While the Department has begun to system

collect and improve the quality of waiting 

its outpatient care, it currently does not h

data to identify the magnitude of waiting t

or the facilities with the most serious prob

does it have data to isolate the causes of p

measure the effectiveness of its initiatives 

waiting times. In May 2000, we recommen
Page 14 GAO-01-255 V

first determine the extent of waiting times an

causes and then develop a spending plan wit

that will result in solving waiting time proble

recommended that VA develop a mechanism 

monitoring and tracking expenditures for im

timeliness to evaluate how well targeted fun

reduced waiting times. Until these data are a

will not be able to (1) set realistic annual nat

local performance goals and determine if its 

help veterans avoid unnecessary delays and 

inconvenience in obtaining care are successf

target future spending on the most effective s

reduce waiting times. To identify how much 

needed and how it should be spent, VA need

its budget formulation and execution practic

VA also has a number of initiatives under wa

improve the quality of VA-provided care, incl

developing or revising systems for detecting 

preventing adverse events that could harm p

Some VA systems are exemplary—such as th

incorporating the use of bar code technology 

medical errors. However, VA is in the early s

implementing its quality of care initiatives an

other health care providers, has a long way t

Improved strategic planning could help VA fu

efforts. For example, while VA’s strategic pla

years 2001 through 2006 lists improved patie

a goal, it does not include outcome measure

determining the effectiveness of its patient s

initiatives. We noted that VA could also bette

that it meets its goals if it identified how and 

various patient safety initiatives will be impl

how they are aligned to support improved pa

and what contribution each initiative can be 

make toward the goal of improved patient sa
Page 15 GAO-01-25

Lack of Data and 

Decentralization 

Weaken VA’s Ability 

to Ensure Adequate 

Capacity for Treating 

Veterans With Special 

Disabilities

Facing budget pressures as it reorganized 

system, VA has been challenged to ensure 

with certain disabling conditions continue 

reasonable access to specialized treatmen

rehabilitative services, as mandated by th

While VA has concluded that it has mainta

capacity to serve these veterans, it does n

sufficient data to support this conclusion. 

VA does not have precise enough data to c

workload and expenditure statistics for ve

special disabilities. Moreover, VA based it

on national statistics that indicated more 

veterans were served with fewer resource

because VA has not yet fully developed ou

measures—which it committed to do by 1

determine whether the quality of the care 

veterans in special disability categories ha

maintained, enhanced, or diminished.

Accountability is difficult to assign becau

responsibility for implementing the manda

capacity in special disability programs is d

several headquarters units, including the O

and Planning, the Chief Network Office, a

of Patient Care Services. The Office of Po

Planning is primarily responsible for coor

development of capacity statistics and pro

definitions; the Chief Network Officer is t

contact for VISNs, providing operational d

supervision; and the Office of Patient Car

develops patient care policies and guideli

program consultant to the special disabili

and provides advice and consultation to V

facility directors. However, none has resp

1

Six disabling conditions were identified by the Con

spinal cord dysfunction, blindness, amputation, serio

traumatic brain injury, and post-traumatic stress dis
Page 16 GAO-01-255 V

monitoring field locations’ capacity to serve 

disability populations. We recommended tha

a lead office to be accountable for enhanced 

and follow-up to augment VA’s current limite

measures and performance monitors. In add

helping identify data reliability issues, such m

efforts could also identify locations with pot

service delivery problems to special disabilit

populations. Although VA appointed a Clinic

Coordinator for Special Disability Programs

specifically addressed developing employee 

performance standards.

VA Needs to Better 

Position Itself to

Respond to Shifts in 

Veterans’ Health

Care Needs and 

Workforce Issues

VA officials estimate that as much as 10 perc

approximately 4 million health care system e

infected with the hepatitis C virus—a rate fiv

of the general U.S. population. Over the past 

has earmarked more than $260 million of its 

funding to screen all patients for hepatitis C r

develop treatment protocols, and create a pu

awareness campaign. VA projects that it will 

additional $340 million in fiscal year 2001 for 

hepatitis C efforts. However, VA has not prov

guidance to its 22 VISNs on this initiative, no

developed basic procedures to capture accu

hepatitis C workload data. Moreover, only on

the funding reflected in VA’s fiscal year 2000 

hepatitis C was spent on activities supportin

initiative. Consequently, VA cannot determin

veterans with the hepatitis C virus have been 

nor can it fully account for its fiscal year 2000 

expenditures to ensure that these funds have 

appropriately targeted.

VA must also position itself to be able to mee

changing health care needs of an aging veter

population. VA expects the number of vetera

85 to almost double between fiscal years 199

and double again over the following decade, 
Page 17 GAO-01-25

about 1.3 million by fiscal year 2013. This 

to add to the demand for long-term care b

prevalence of chronic health conditions a

increases markedly at advanced age. How

currently positioned to meet this demand

implications are uncertain. Ensuring the q

care provided will also pose a challenge. V

explore alternatives, such as home- and c

based settings, for providing long-term ca

homes—the costliest long-term care settin

second most-used setting for long-term ca

recent legislation limits the extent to whic

provide care through other long-term care 

reduce its use of VA nursing homes, VA ha

options. For example, the Veterans Millen

Care and Benefits Act (P.L. 106-117), enac

November 1999, authorizes VA to conduct 

program to evaluate the feasibility of usin

living services as an alternative to nursing 

VA task force is reviewing the Departmen

VA also faces workforce challenges. For e

between 1983 and 1998, the number of wo

younger than 30 decreased by 41 percent 

the number of all workers in the United S

decreased less than 1 percent. Moreover, 

new nursing graduates entering the profes

keeping up with the number of nurses lea

profession due to retirement or other reas

national nursing shortage could adversely 

efforts to improve patient safety in VA fac

veterans at risk. According to the Institute 

sufficient staffing, workloads, and patient 

directly related to safety. VA is assessing th

its current nursing workforce. Recent legi

2

Institute of Medicine, To Err Is Human: Building a S

System (Washington, D.C.: National Academy Press
Page 18 GAO-01-255 V

authorizing higher salaries for VA nurses cou

in these efforts. 

Key Contact Cynthia A. Bascetta, Director

Health Care, Veterans Health and Benefit Iss

(202) 512-7101

bascettac@gao.gov

Maximize VA’s 

Ability to Provide 

Health Care Within 

Available Resources 

Over the past several years, VA has made mu

efficient use of its available health care resou

critical element to VA achieving its strategic 

Department is serving more patients, provid

care in less costly outpatient settings, and ac

some health care efficiency improvements (s

VA estimates that between fiscal years 1997 

will have reduced its per-patient costs—one 

performance goals—by 16 percent.
Page 19 GAO-01-25

Figure 2: Inpatient and Outpatient Care, Fiscal Years 1997-2001

Source: VHA data.

However, these significant accomplishme

introduce additional challenges to VA bec

the facilities it owns, which cost vast sum

maintain, are unoccupied or underused. T

progress in both increasing access and imp

of care, VA must (1) realign its capital ass

the best use of its resources; (2) continue 

use of cost-effective alternatives to provid

services, such as food and laundry; and (3

additional opportunities to share health c

and facilities with DOD. In addition, VA ne

steps to reverse the decline in collections 

party insurers.

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1997 1998 1999 2000

(Estimate)

Inpatient

Outpatient (Thou

Inpatient Visits

Outpatient Visits
Page 20 GAO-01-255 V

Further Realignment 

of VA’s Infrastructure 

Could Better Meet 

Veterans’ Health Care 

Needs

As much as 25 percent of VA’s annual health 

could be spent to operate, maintain, and imp

roughly 4,700 buildings and 18,000 acres of p

including unused and underused hospitals an

facilities. While VA has closed several underu

inpatient facilities as it increased its use of C

further realignment of its capital assets coul

significant funds for patient treatment. In the 

area alone, we found that as much as $20 mi

be freed up annually through capital asset re

VA served this population with three instead 

hospitals.

Realigning VA’s infrastructure to achieve effic

effectively meet veterans’ current and future 

while mitigating the potential effects on staf

communities, and other VA missions—will re

skilled capital asset management. VA’s realig

decisions have largely been made ad hoc and 

subjective criteria without proactive senior m

involvement. In addition, realignment decisio

often met with public opposition and concer

medical schools affiliated with VA facilities. 

Realignment in the Chicago area, for exampl

affiliation agreements among four medical s

four VA hospitals. As a result, VA’s decisions 

to realign its assets—especially those aimed 

consolidating administrative and clinical serv

two or more nearby medical centers—have o

delayed.

In August 1999, we recommended that VA de

restructuring plans for its 106 health care ma

guide its planning and management of health 

assets. In response, VA established the Capit

Realignment for Enhanced Services (CARES

which is designed to provide objective criter

senior management a more proactive leader

The program calls for assessments of vetera
Page 21 GAO-01-25

care needs and available service delivery 

meet those needs in each health care mar

developed specific criteria for making the

assessments. In addition, current testing o

Chicago will provide valuable information 

feasibility and credibility of the program. 

success of this program depends on good 

planning and appropriate organizational r

Expanded Use of 

Alternative Methods 

for Support

Services Could 

Realize Additional 

Savings

VA facilities have initiated management ef

variety of nonpatient care support service

example, some VA facilities consolidated 

and laundry services. Over the past severa

has consolidated 28 food production loca

used lower-cost Veterans Canteen Service 

workers instead of higher-paid Nutrition a

Service workers in 9 locations, and contra

services at 2 locations. VA has also consol

laundries into 67; contracted for labor to o

laundries; and contracted out laundry at 1

10 commercial laundries.

However, VA needs to systematically expl

strategic planning, further use of such opt

health care system. We have identified an

production locations that could be consol

saving an estimated $12 million annually, 

$11 million investment in one-time equipm

purchases. Using lower-cost VCS employe

food production locations could save an a

million annually. We similarly found the p

savings in laundry services. We estimated 

additional $2 million could be saved by co

laundries, plus avoiding an estimated $9 m

time equipment and renovation costs. VA 

3

These assessments are expected to be completed o

years.
Page 22 GAO-01-255 V

able to reduce its food and laundry service co

facilities through competitive outsourcing—

would determine whether it would be more 

effective to contract out these services or pr

inhouse. In November 2000, we recommende

conduct studies at all of its food preparation 

locations to identify and implement the mos

effective way to provide these services at ea

However, VA must ensure that contract term

payments and service quality standards are m

example, we found that weaknesses in the m

VA’s Albany, New York, laundry contract app

resulted in overpayments, reducing potentia

VA and DOD Need to 

Increase Joint 

Activities to

Maximize Federal 

Health Care 

Resources

In an effort to save federal dollars, VA and D

sought ways to share excess health care reso

example, local VA medical centers and milita

treatment facilities have entered into agreem

exchange inpatient, outpatient, and specialty 

services, as well as support services. Some l

DOD facilities have entered into joint ventur

resources to build a joint medical facility or c

an existing facility. Local facilities have also 

jointly purchase pharmaceuticals, laboratory 

medical supplies, and equipment.

VA and DOD officials have found that, by sha

resources, better use has been made of their 

facilities, staff, and equipment; in some case

beneficiary access and patient satisfaction h

improved. However, most sharing activity is 

through a relatively small number of sharing 

and joint ventures. Overall, 75 percent of dir

care episodes provided under the sharing pr

occurred under just 12 agreements for inpati

agreements for outpatient care, and 

12 agreements for ancillary care. Most joint v

activity occurred in Albuquerque, New Mexi

southern Nevada. In addition, relatively few V
Page 23 GAO-01-25

are participating in national sharing initia

developed by the VA/DOD Executive Cou

To ensure sharing occurs to the fullest ext

VA needs to continue to work with DOD t

number of barriers. For example, some VA 

facilities try to shift responsibility to each 

treatment and payment of dual eligible be

retired military who are also veterans—m

difficult to reach agreements for treating t

beneficiaries.

It is particularly critical that VA take a lon

approach to improving the sharing databa

administers. While the database captures i

the number of agreements and the range o

covered, these data are inadequate to asse

VA and DOD need to collect data on the v

services provided, the amounts of reimbu

collected, and the costs avoided through t

sharing agreements. Further, improvemen

in the accuracy of information in the joint 

database. Without a baseline of activity or 

accurate data, VA and DOD—and the Con

assess the progress of VA and DOD sharin

several recommendations aimed at remov

sharing and for improving information on 

sharing agreements in the joint VA/DOD s

database.

Additional opportunities also exist for VA 

jointly purchase pharmaceuticals and exa

discounts from manufacturers. VA and DO

annual spending for pharmaceuticals is m

$2.4 billion. In fiscal year 2000, the two De

saved an estimated $51 million from joint

national committed-use contracts with su

purchase 4 percent of their total drug requ

While these savings are impressive, our an
Page 24 GAO-01-255 V

actual purchases has shown that significantl

federal health care dollars could be saved if V

expanded the use of national committed-use 

However, officials from VA and DOD indicat

prospects for further joint contracting are lim

because their patient populations and drug f

differ. VA needs to continue to work with DO

advantage of recent legislation encouraging 

Departments to increase their cooperation in 

procurement of pharmaceuticals to the maxi

possible.

VA Efforts May Not 

Reverse Declining

Third-Party 

Collections

Over the past 5 fiscal years, collections from 

insurers, which VA relies on to supplement i

care appropriations, have declined.5

 In fiscal 

VA collected $387 million from third-party ins

million less than collected the year before (s

4

A formulary is a list of drugs, grouped by therapeutic c

health care organization prefers that its physicians pres

5

VA can bill insurers for care it provides to veterans for 

conditions not related to service-connected disabilities. 

cannot bill Medicare without legislative action giving it 

so, VA reduced its third-party collection goals. Historica

collections have determined, in part, VA’s appropriation
Page 25 GAO-01-25

Figure 3: VA Third-Party Collections, Fiscal Yea

Source: VHA data.

Several factors contributing to this declin

VA’s control. For example, an increasing p

veterans are becoming eligible for Medica

law, cannot pay for VA-provided care. Mor

also enrolling in managed care organizatio

which VA cannot typically collect because 

participating provider. In addition, the net 

VA’s shift to less expensive outpatient car

collections is uncertain.

In September 1999, VA began to bill insure

“reasonable charges” for actual care prov

than charging rates based on average cost 

VA expects its new billing to increase coll

reverses in declining third-party collection

0

100

200

300

400

500

600

1995 1996 1997 1998 1999 

Dollars in Millions

Fiscal Year
Page 26 GAO-01-255 V

occur until VA implements its improved billi

processes. For example, information on vete

insurance coverage that VA has collected ha

inadequate to identify opportunities to bill in

avoid billing insurers inappropriately for car

covered. VA’s processes for following up on o

bills have also been inadequate to guarantee 

payments from insurers. Weaknesses such a

affect collections under VA’s reasonable char

For example, to meet the strict standards pla

private providers who bill the Medicare prog

must accurately and completely document th

provided.

VA has begun to update its billing and record

and bring them in line with industry standard

to continue these efforts. VA has also underta

initiatives to address collections weaknesses

has contracted with a collection agency to a

facilities in collecting third-party bills that ar

outstanding for more than 90 days. VA has al

distributed brochures to veterans and VA co

staff explaining the need for information on 

insurance coverage. Finally, VA has begun to 

training for medical records staff in docume

coding of care provided to patients and has p

training to staff responsible for obtaining 

precertifications from insurers.

Key Contact Stephen P. Backhus, Director

Health Care, Veterans and Military Health Ca

(202) 512-7101

backhuss@gao.gov

Cynthia A. Bascetta, Director

Health Care, Veterans Health and Benefit Iss

(202) 512-7101

bascettac@gao.gov
Page 27 GAO-01-25

Process Veterans’ 

Disability Claims 

Promptly and 

Accurately

As part of its effort to “restore the capabil

veterans to the greatest extent possible an

quality of their lives,” VA provides over $2

in disability compensation and pension be

than 2.5 million veterans, family members

survivors. However, long-standing proces

have resulted in an increasing backlog of v

and repeat claims for disability compensa

fiscal years 1995 and 1999, the average tim

processing initial compensation claims jum

days to 205 days (see fig. 4), and the avera

resolve veterans’ appeals of VA’s claims de

continued to exceed 2 years. 

6

VA reviews veterans’ initial claims to establish eligi

benefits and reviews repeat claims to increase the a

compensated.
Page 28 GAO-01-255 V

Figure 4: Average Number of Days for Processing of VA Initial Compensation Claims

1990-1999

Source: VBA data.

By the end of fiscal year 1999, about 69,000 i

compensation claims were pending—34 perc

which had been pending for more than 6 mo

VA had a backlog of about 138,000 repeat cla

veterans who already received compensation

addition to these delays and backlogs, there 

concerns about the high rate of claims error

the consistency of decisions among VA’s 57 r

offices. Under its current quality measureme

VA found that nearly one-third of decisions a

or have technical or procedural errors. Delay

errors also affect veterans’ eligibility and pri

other VA benefits and services, such as healt

vocational rehabilitation, since they are base

VA’s assigned disability ratings.

0

50

100

150

200

250

Number of Days

1990 1991 1992 1994 1995 1998 1993 1996 1997 

151

164 164

213

161 168

133

189

144

Fiscal Year
Page 29 GAO-01-25

VA has addressed a number of key manag

such as implementing new performance m

modernizing its information technology sy

developing training. However, it is unclea

extent these measures will improve the ti

accuracy of its claims processing because 

underlying causes of the problems have n

identified. At the same time, many experie

expected to retire and veterans are seekin

compensation for more service-connected 

per claim. Many of these problems stem f

growing complexity of claims processing 

increased procedural and documentation 

Effectiveness of VA’s 

Efforts to Improve 

Claims Processing 

Performance Not Yet 

Known

Addressing the problems that weaken its 

processing performance—including impro

quality of its data and ensuring sufficient s

claims—are major management challenge

VA has taken a number of steps to addres

problems, it has not identified their under

Without such information, VA cannot ensu

corrective actions will improve its claims 

performance. In addition, VA’s training an

programs may not be adequate to ensure 

workforce of competent claims processor

Consequently, existing problems of claims 

errors will likely persist, delaying outcom

veterans and their families with timely an

disability payments.

In September 1998, VA’s Inspector General 

due to data entry errors, VA’s claims proce

overstated claims processing timeliness. I

we found that while VA has taken signific

measure the accuracy of its claims proces

additional measures are needed to ensure 

prone cases are identified and processes f

the accuracy of claims meet the governme
Page 30 GAO-01-255 V

control standards. In light of these findings a

recommendations, VA is implementing

• a system to identify regional offices with 

problems, so that more detailed reviews c

at these offices to identify the underlying 

inaccuracies, corrective actions, and nee

additional staff training;

• a case management approach to claims pr

hold individuals and teams accountable f

aspect of the claims process and to estab

manager contact to keep the veteran info

status of the claim; and

• a major IT effort to replace its existing co

and pension payment systems with a new 

the-art system expected to manage claim

development processes, establish veteran

compute the award or payment amount b

results of the rating process, develop the 

record, and handle all accounting functio

However, until VBA identifies the underlying 

its claims processing problems and measure

progress, the effectiveness of these initiative

determined. Moreover, VA’s top management 

approve a complete IT management plan and 

or an approved strategy to convert data from 

existing systems into the new system. VBA o

acknowledged these issues and informed us 

are under way to address them.

VA has also been faced with the challenge of 

adequate workforce to process claims. VA es

by 2005, 1,100 of its claims processing workf

retire. To prepare for this loss of experience

planned to add more than 400 new staff to it

compensation and pension programs in fisca

VA plans to redirect or hire an additional 400 

fiscal year 2001. While VA plans to provide tr
Page 31 GAO-01-25

new staff, their lack of experience will lik

ability to ensure that the benefits and pen

process will be timely and accurate. Acco

takes 2 to 3 years on the job for claims pr

achieve a full level of decision-making exp

it critical that an effective training progra

VBA has begun to implement a centralized 

program. However, the comprehensivenes

effectiveness of this program are unknow

External Challenges 

May Constrain VA’s 

Ability to Improve Its 

Claims Processing 

Performance

Prior to 1989, veterans dissatisfied with th

determinations could ask for a review of t

the Board of Veterans’ Appeals, whose de

final. Veterans now have the option to app

decision to an independent Court of Veter

Further, both veterans and VA may appea

decisions to the Court of Appeals for the F

The establishment of the Court of Veteran

introduced a number of complex procedu

documentation requirements with which V

comply. Before 1989, the rationale for VA’s 

determination—including the degree of th

each disability claimed—was summarized 

statement for each claim. Under the new 

VA claims processing staff must describe 

disability issue the evidence and rationale 

decision. While this initial investment may 

veteran satisfaction—and increase unders

factors that led to the decision—providing 

adds up-front time to process cases. In th

however, time may be saved if this effort r

decrease in remands.

Individual veteran’s cases are also becom

complex, complicating the claims process

7

The court was established under the Veterans’ Judi

1988 (P.L. 100-687).
Page 32 GAO-01-255 V

in fiscal year 1998, VA found that a sample o

69,000 veterans filed claims for a total of abo

disabilities. Each of these disabilities require

rating. In addition, veterans can file repeat c

include new evidence or to respond to chang

regulations that occur after a case has been 

Appeals Board. Veterans can also file as man

claims for disability compensation as they de

condition worsens or if they develop a new d

fiscal year 1998, repeat claims outnumbered 

claims by about three to one, further burden

office workloads.

Key Contact Cynthia A. Bascetta, Director

Health Care, Veterans Health and Benefit Iss

(202) 512-7101

bascettac@gao.gov

Develop Sound 

Agencywide 

Management 

Strategies to Build 

a High-Performing 

Organization

VA faces additional challenges in several area

building a high-performing organization: bud

formulation and execution, information tech

financial management. To meet its strategic 

create an environment that fosters the delive

VA” world-class service to veterans and their 

VA has begun to address some of these issue

its plans to implement an information techno

framework that supports the integration of i

across the Department and to continue to ac

unqualified audit opinions on its annual finan

statements. 

VA’s Budget Systems 

Need to Be Aligned to 

Link Funding to 

Performance

A significant management challenge for VA is 

budget formulation and execution systems t

to link the funds it spends, or proposes to sp

performance—as required by the Governme

Performance and Results Act. However, VA’s 

budget structure—like those of other federa
Page 33 GAO-01-25

does not allow such linkages. Most of VA’s 

accounts are organized around program e

than strategic goals and objectives. For ex

medical care budget account is organized 

program activities based on types of healt

provided—such as acute hospital care and 

care. VA’s compensation and pension acco

compensation and pension funding accor

veterans’ periods of military service. Inste

its budget request to show the amount of 

requires to meet the levels of performanc

achieve.

VA is working with the Office of Managem

Budget on developing a performance-base

fiscal year 2001 budget request included s

improvement in presenting budget inform

performance measurement. VBA’s request 

business plan, with information on the am

funding requested for specific initiatives. 

initiatives were, in turn, tied to specific pe

goals to improve VBA’s program operation

claims processing timeliness and accuracy

VBA’s request identified the funding and s

increases requested to implement its Syst

Technical Accuracy Review (STAR) system

designed to identify VBA regional offices 

processing problems, so VBA can target tr

claims processing staff to these offices. A

improvement is in the National Cemetery 

Administration’s (NCA) budget request. In 

providing information on funding needs to 

specific performance improvement initiat

provided a summary of VA’s requests and 

funding data for seven accounts that help 

burial program, including accounts that fu

cemetery operations, grants to states for c

state veterans’ cemeteries, funding for co

expansion of VA national cemeteries, and 
Page 34 GAO-01-255 V

memorial activities such as the acquisition o

headstones and grave markers.

Another budget formulation and execution c

VA is to implement systems that provide ade

workload and cost data. Such data are neede

determine the levels of performance it can e

different levels of funding and to ensure that 

allocated to VA facilities in ways that ensure 

veterans receive equitable VA services nation

example, to ensure equitable access to healt

veterans across the country, VA needs adequ

identify the locations and causes of access p

Because VA lacks such data, it cannot target 

earmarked for improving equity of access to 

facilities where they are needed most.

VA has implemented a health care workload 

information system—the Decision Support S

(DSS)—for VISNs and individual facilities to 

prepare budgets, allocate resources, and gen

productivity analyses and patient-specific co

However, only one VISN has reported using 

resource allocation, and only eight reported 

budget formulation. To ensure that all of its h

networks and facilities are using this system

required that fiscal year 2002 funding allocat

based on DSS data and that VISNs’ applicatio

CBOCs include data on VA health care users 

without reasonable access to care.

VA’s Efforts to Use 

Information 

Technology to Help 

Serve Veterans Need 

Improvement

Since 1996, VA has spent an estimated $5 bill

initiatives to help realize its vision of providin

service to veterans and their families. VA exp

expenditures to increase over the next 5 yea

about $1.5 billion in fiscal year 2001 to more 

billion by fiscal year 2005. VA’s IT strategy m

successfully executed to ensure that VA can 

reliable performance and workload data, as 
Page 35 GAO-01-25

safeguard financial, health care, and bene

information.

In 1999, we noted that VA had made progr

addressing year 2000 challenges but still h

issues to address. The Department addres

issues and made a successful transition to 

without any significant incidents, disrupti

to veterans, or risk to patient health and s

August 2000, we recommended that VA ta

actions to improve its IT investment decis

process and fully implement key provision

Clinger-Cohen Act of 1996, which aims to 

leadership and management at federal age

However, the Department is struggling wi

integrate complex technologies and mana

processes so that they are aligned with VA

goals, strategies, programs, and business 

has yet to sufficiently address seven chall

strengthen the leadership and managemen

initiatives. Table 1 summarizes these chall

status in responding to each.

Table 1: Status of IT Challenges Facing VA

Challenge Status

Appointment of Chief Information Officer (CIO)

CIOs provide leadership and partner with senior 

officials to develop strategic plans and policies, 

build credible information management 

organizations, and develop and organize 

information management capabilities to meet 

agency mission needs.

In 1998, VA established the position 

secretary for information and techno

VA’s CIO. However, the President d

someone to the position until Septe

the position remains unfilled.
Page 36 GAO-01-255 V

IT investment management

VA needs to maximize the value and return on its 

IT investments and mitigate associated risks.

In 1999, VA established a process for s

controlling, and evaluating its IT capital 

VA has efforts under way to implement 

improvements we recommended: (1) e

monitor deadlines for completing forma

reviews at key project milestones, (2) p

to decisionmakers on lessons learned 

implementation reviews, and (3) develo

to better manage projects below thresh

established by VA’s Capital Investment 

Integrated business process reengineering

Before making major IT investments, agencies are 

required under the Clinger-Cohen Act to analyze 

their missions and revise and improve missionrelated and administrative processes accordingly. 

To do this, agencies should have an overall 

business process improvement strategy—one that 

coordinates and integrates ongoing reengineering 

and improvement projects, sets priorities, and 

makes appropriate departmentwide budget 

decisions.

VA has not developed a departmentwid

specifying needed reengineering and i

projects or their relation and priority. VA 

concur with our August 2000 recomme

reassess its decision to delegate busin

reengineering to individual administrat

plans to rely on VHA, VBA, and its othe

administrations to pursue their own ree

initiatives, believing they best understa

means to achieve their missions. Howe

develops a departmentwide reenginee

it is unlikely to achieve its “One VA” vis

Integrated IT architecture

In achieving the agency’s strategic and IT goals, 

CIOs are charged with implementing a twocomponent architecture that will provide a 

framework for maintaining existing IT and for 

acquiring new IT.b

To date, VA has completed only the tec

component of its architecture. For the s

component, the logical architecture, VA 

implement a strategy that will likely res

three separate architectures. To help a

“One VA” vision—and comply with requ

the Clinger-Cohen Act—VA needs to re

strategy and work with VBA and VHA t

integrated, departmentwide logical arc

Tracking IT expenditures

VA needs to establish a uniform mechanism for 

tracking IT expenditures to make informed 

decisions about whether to modify, accelerate, or 

discontinue projects.

Although VA Directive 6000c

 and VA’s c

investment guide require it to maintain 

and accurate cost data for IT projects, 

uniform mechanism for tracking IT exp

across the department. VA has delega

responsibility to managers in VA’s adm

and offices, resulting in varying tracking 

and difficulty in identifying VA’s total IT 

Assessing IT performance

The Clinger-Cohen Act requires executive branch 

agencies to establish performance measures that 

relate to how well IT supports their programs.

While VA’s FY 2001 performance plan 

initiatives for improving claims process

and timeliness, it did not include perform

Without such goals, it will be difficult to 

performance of these initiatives.

(Continued From Previous Page)

Challenge Status
Page 37 GAO-01-25

a

The Capital Investment Board reviews projects tha

dollar thresholds set for each of VA’s administration

as high risk or high visibility.

b

An integrated IT architecture is a blueprint, consist

technical components, to guide and constrain the d

evolution of a collection of related systems. At the lo

architecture provides a high-level description of an 

mission, the business functions performed and the 

among them, the information needed to perform the 

flow of information among functions. At the technica

architecture provides the rules and standards need

the interrelated systems are built to be interoperable 

maintainable. These include specifications of critica

component systems’ hardware, software, communic

security, and performance characteristics.

c

VA Information Resources Management Framewor

6000, Sept. 17, 1997.

Many Financial 

Management 

Weaknesses Remain 

Despite Unqualified 

Audit Opinion

In March 2000, VA’s Office of Inspector Ge

issued an unqualified audit opinion on VA’

financial statements for fiscal years 1999 

However, many systems and control prob

reported by VA’s OIG and by GAO, remain 

For example, VA’s accounting systems stil

Computer security

VA also needs to implement appropriate security 

measures to ensure that financial, health care, 

and benefits payment information are not at risk of 

inadvertent or deliberate misuse, fraud, improper 

disclosure, or destruction.

Since September 1998, we have re

computer security weaknesses, wh

financial, health care, and benefits 

information at risk of misuse, fraud, 

disclosure, or destruction—possibly 

without detection. VA has not adeq

access granted to authorized users

incompatible duties among comput

managed user identification and pa

monitored access activity. As of Se

VA had not yet fully implemented a

security management program and 

effectively managed computer secu

medical facilities. Agreeing with our 

recommendation to create a compr

coordinated security management 

would encompass VHA and other V

VA intends to develop an accelerate

improve information security at its f

plans to develop departmentwide p

and processes.

(Continued From Previous Page)

Challenge Status
Page 38 GAO-01-255 V

updating, and several material internal contr

weaknesses have not yet been corrected. In 

VA’s accounting systems—similar to those of 

major agencies—did not comply substantiall

Federal Financial Management Improvemen

(FFMIA) requirements. These weaknesses c

make VA’s program and financial data vulnera

and fraud and limit the Department’s ability 

programs through timely internal financial re

throughout the fiscal year.

VA’s unqualified opinion was achieved by rec

medical accounts receivable balances and co

number of material credit reform and loan gu

accounting deficiencies. While this was a ma

accomplishment for VA, the OIG’s audit repo

points out a number of material internal con

weaknesses related to information security c

Housing Credit Assistance (HCA) program a

and fund balance with Treasury reconciliatio

Specifically, VA’s OIG found that

• departmentwide weaknesses in general co

automated data processing continue to m

program and financial data vulnerable to 

fraud;

• material weaknesses continue to impede 

completion of financial statements and re

use and value of internal financial reports 

management control and program monito

direct loans and related foreclosed prope

8

See Report of Audit of the Department of Veterans Affa

Consolidated Financial Statements for Fiscal Years 1999 

(Report No. 99.00006.46, Mar. 14, 2000).

9

The Department reported information systems security 

HCA program accounting issues as material weaknesse

FFMIA reports for fiscal years 1999 and 1998.
Page 39 GAO-01-25

• the Austin Finance Service Center’s re

were incomplete due to cumbersome, l

processes, and weaknesses in the exis

accounting system and Treasury repor

reconciliation processes.

The VA OIG’s audit report also discusses V

noncompliance with several FFMIA requi

impeding VA’s ability to provide reliable, u

timely information needed to manage day

operations. First, VA’s HCA financial mana

systems were not in substantial complianc

financial system requirements. Specificall

general ledger and subsidiary program sys

interface with VA’s core financial system, 

were not in place for reconciling general l

subsidiary foreclosed property data and f

reliable financial information that could b

monitor HCA programs. Additionally, the 

did not provide the timely data necessary 

VA’s Consolidated Financial Statements. S

OIG reported that, with the exception of t

Automation Center, VA lacked sufficient i

system security, making VA’s program and 

vulnerable to error or fraud. Finally, VA’s s

accumulate and report cost data at the ac

Reliable cost information is needed for VA 

operating performance. However, in prepa

year 1999 financial statements, VA was ab

and allocate costs on a reasonable basis t

business defined in the Statement of Net C

In 1999, we reported that VA’s managemen

operational controls were insufficient to m

accountability over its direct loan and loa

activities and did not comply with credit r

accounting requirements. For example, w

transferred the servicing of its direct loan 

contractor in fiscal year 1997, it shut down 

direct loan system and surrendered to the 
Page 40 GAO-01-255 V

almost all hard copy loan records needed to 

loans.10 As a result, VA was unable to determ

composition and value of its loan portfolio, r

cash flows, or properly monitor the contract

We also found that VA’s failure to monitor in 

manner the contractors that service loans th

allowed inefficiencies and improper actions 

unchecked, costing VA more than $6 million

VA has made substantial progress in implem

recommendations for gaining accountability 

over its direct loan and loan sale activities an

complying with credit reform accounting req

However, it still needs to develop a direct loa

that includes a complete inventory of all loan

originated and a database to record all loans 

assumed by VA to provide a basis for monito

controlling loan and foreclosed property ass

Key Contacts Cynthia A. Bascetta, Director

Health Care, Veterans Health and Benefit Iss

(202) 512-7101

bascettac@gao.gov

Joel Willemssen, Managing Director

Information Technology Issues

(202) 512-6408

willemsenj@gao.gov

McCoy Williams, Acting Director

Financial Management and Assurance

(202) 512-6906

williamsml@gao.gov

10The data transferred to the contractor were also incom

inconsistent.
Page 41 GAO-01-25

Provide Timely 

and Equitable 

Access to Quality 

VA Health Care

VA Patient Safety: Initiatives Promising bu

Progress Requires Culture Change

(GAO/T-HEHS-00-167, July 27, 2000).

Veterans’ Health Care: VA Needs Better D

and Causes of Waiting Times (GAO/HEHS

2000).

Disabled Veterans’ Care: Better Data and 

Accountability Needed to Adequately Ass

(GAO/HEHS-00-57, Apr. 21, 2000).

Maximize VA’s 

Ability to Provide 

Health Care Within 

Available 

Resources

VA Laundry Services: Consolidations and 

Sourcing Services Could Save Millions (G

Nov. 30, 2000).

VA Health Care: Expanding Food Service 

Could Save Millions (GAO-01-64, Nov. 30, 

VA and Defense Health Care: Evolving He

Systems Require Rethinking of Resource 

Strategies (GAO/HEHS-00-52, May 17, 200

VA Health Care: VA Is Struggling to Addre

Realignment Challenges (GAO/T-HEHS-00

2000).

VA Health Care: Collections Fall Short of 

(GAO/T-HEHS-99-196, Sept. 23, 1999).

VA Health Care: Improvements Needed in 

Planning and Budgeting (GAO/HEHS-99-1

1999).
Page 42 GAO-01-255 V

Process Veterans’ 

Disability Claims 

Promptly and 

Accurately

Veterans Benefits Administration: Problems 

Challenges Facing Disability Claims Process

(GAO/T-HEHS/AIMD-00-146, May 18, 2000).

Develop Sound 

Agencywide 

Management 

Strategies to Build a 

High-Performing 

Organization

Managing for Results: Emerging Benefits Fro

Agencies’ Use of Performance Agreements (G

Oct. 30, 2000).

VA Information Technology: Progress Contin

Although Vulnerabilities Remain (GAO/T-AIM

Sept. 21, 2000).

Computer Security: Critical Operations and A

Remain at Risk (GAO/T-AIMD-00-314, Sept. 1

VA Information Systems: Computer Security 

Weaknesses Persist at the Veterans Health 

Administration (GAO/AIMD-00-232, Sept. 8, 2

Information Technology: VA Actions Needed 

Implement Critical Reforms (GAO/AIMD-00-

Aug. 16, 2000).

Information Technology: Update on VA Actio

Implement Critical Reforms (GAO/T-AIMD-0

May 11, 2000).

CIO Executive Guide: Maximizing the Succe

Information Officers, Lessons From Leading 

Organizations (GAO/AIMD-00-83, Mar. 2000)

Information Systems: The Status of Compute

at the Department of Veterans Affairs (GAO/

Oct. 4, 1999).
Page 43 GAO-01-25

Internal Controls: VA Lacked Accountabil

Direct Loan and Loan Sale Activities (GAO

Mar. 24, 1999).

Credit Reform: Key Credit Agencies Had D

Making Reasonable Loan Program Cost E

(GAO/AIMD-99-31, Jan. 29, 1999).

Information Systems: VA Computer Contr

Increase Risk of Fraud, Misuse, and Impro

Disclosure (GAO-AIMD-98-175, Sept. 23, 1

Business Process Reengineering Guide

(GAO/AIMD-10.1.15, Apr. 1, 1997).

Observations on the Department of Vetera

Fiscal Year 1999 Performance Report and 

2001 Performance Plan (HEHS-00-124R, J
Page 44 GAO-01-25

Major Management Challenges and Progr

Governmentwide Perspective (GAO-01-24

Major Management Challenges and Progr

Department of Agriculture (GAO-01-242)

Major Management Challenges and Progr

Department of Commerce (GAO-01-243)

Major Management Challenges and Progr

Department of Defense (GAO-01-244)

Major Management Challenges and Progr

Department of Education (GAO-01-245)

Major Management Challenges and Progr

Department of Energy (GAO-01-246)

Major Management Challenges and Progr

Department of Health and Human Service

(GAO-01-247)

Major Management Challenges and Progr

Department of Housing and Urban Develo

(GAO-01-248)

Major Management Challenges and Progr

Department of the Interior (GAO-01-249)

Major Management Challenges and Progr

Department of Justice (GAO-01-250)

Major Management Challenges and Progr

Department of Labor (GAO-01-251)

Major Management Challenges and Progr

Department of State (GAO-01-252)
Page 45 GAO-01-25

Major Management Challenges and Progr

Department of Transportation (GAO-01-25

Major Management Challenges and Progr

Department of the Treasury (GAO-01-254)

Major Management Challenges and Progr

Department of Veterans Affairs (GAO-01-2

Major Management Challenges and Progr

Agency for International Development (G

Major Management Challenges and Progr

Environmental Protection Agency (GAO-0

Major Management Challenges and Progr

National Aeronautics and Space Administ

(GAO-01-258)

Major Management Challenges and Progr

Nuclear Regulatory Commission (GAO-01

Major Management Challenges and Progr

Small Business Administration (GAO-01-2

Major Management Challenges and Progr

Social Security Administration (GAO-01-2

Major Management Challenges and Progr

U.S. Postal Service (GAO-01-262)

High-Risk Series: An Update (GAO-01-263

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