United States General Accounting Office

GAO Report to Congressional Requesters

November 1999 DEFENSE HEALTH

CARE

Tri-Service Strategy

Needed to Justify

Medical Resources for

Readiness and

Peacetime Care

GAO/HEHS-00-10

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-282939 

November 3, 1999

The Honorable Stephen E. Buyer

Chairman

The Honorable Neil Abercrombie

Ranking Minority Member

Subcommittee on Military Personnel

Committee on Armed Services

House of Representatives

The Honorable Wayne Allard

Chairman

The Honorable Max Cleland

Ranking Minority Member

Subcommittee on Personnel

Committee on Armed Services

United States Senate

The Department of Defense’s (DOD) military health system (MHS), costing

about $16 billion annually, offers care to 8.2 million military and civilian

beneficiaries. The system has a dual role of medically supporting wartime

deployments—its readiness mission1

—while caring for active duty

members, retirees, and their families in peacetime. The Army, Navy, and

Air Force provide most of the system’s care through their own medical

centers, hospitals, and clinics, totaling about 580 treatment facilities

worldwide. Regional networks of civilian providers supply the remaining

care. MHS has undergone major demographic changes and, today, serves

more retirees than active duty beneficiaries and their respective families.

Also, mirroring overall military end-strength decreases during this decade,

military treatment facilities (MTF) have been closed or downsized, their

budgets constrained, and medical practices shifted toward an emphasis on

managed care. Such conditions have focused attention on the prospective

need for MTFs, the coordination of peacetime care among them, and

alternative care delivery approaches.

Among the areas affected by the changes is the national capital area (NCA),

in and around Washington, D.C. There, the three services offer care to

about 400,000 beneficiaries in 26 MTFs, including 3 medical centers.

Concerned about potential service overlaps and whether increased

efficiencies are possible, the Congress, in the 1998 Defense Authorization

1

MHS readiness needs are generally derived by projecting the active duty medical personnel and

equipment required to support major wartime conflicts.

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Act mandated that we review the need for and coordination of care among

NCA MTFs. This review is the second of two GAO reviews mandated by the

act. In the first review, we examined the Navy’s and Army’s attempts in

1997 to downsize and close certain graduate medical education

programs—the primary source of military physicians. In the resulting

April 1998 report, we found that DOD and the two services lacked mutually

acceptable criteria and methods for targeting the graduate medical

education programs. DOD agreed with our recommendation to develop the

needed guidance and is now doing so.2

As agreed with your offices, this review’s objectives are to (1) evaluate the

need for NCA MTFs and DOD’s strategy for assessing such needs, (2) identify

any obstacles hindering DOD’s ability to make coherent needs assessments,

and (3) determine whether current care coordination among NCA MTFs

could be improved. We also agreed that, because NCA MTFs are integral

parts of the overall MHS, we would assess recent DOD initiatives to make

MHS management improvements. We conducted our work between

March 1998 and September 1999 in accordance with generally accepted

government auditing standards. For details on our methodology, see

appendix I.

Results in Brief Despite successful DOD and service efforts to improve MHS management,

DOD still lacks a comprehensive tri-service strategy for determining and

allocating medical resources among MTFs. Consequently, neither we nor

DOD can fully address the need for, or appropriate size of, NCA MTFs or MTFs

elsewhere in MHS. In the current health care environment, each service has

its own needs determination and resource allocation approach. Generally,

each allocates resources based on prior year budgets, facility size,

location, historical workload, and readiness and political considerations. A

tri-service strategy applied systemwide would enable DOD to assess the

need for each MTF by taking into account the resources needed for both

readiness and peacetime care available at all NCA MTFs. Also, resources

available in the local civilian community need to be considered. Such a

strategy would also provide a systematic basis for justifying budget

requests. DOD has recently begun to address this fundamental deficiency.

A key obstacle to developing a tri-service strategy is the military services’

long-standing independence. Historically, the services have had enough

resources to maintain separate health care systems, with capabilities

2

Collaboration and Criteria Needed for Sizing Graduate Medical Education (GAO/HEHS-98-121,

Apr. 29, 1998).

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overlapping during peacetime. As a result, over the years, formal

interservice management efforts have been limited and, today, remain

difficult to achieve. A second obstacle is that DOD and the services have

not determined the cost of MHS’ evolving readiness mission or the cost of

its peacetime care. Without knowing such costs, DOD is hampered in

justifying MHS’ size and defending the need for individual MTFs.

Exacerbating this has been the emerging peacetime care emphasis during

this decade—projected to continue in the next—which competes for

resources with MHS’ basic readiness mission. Today, for example, retirees

outnumber active duty beneficiaries and their respective families. Studies

during the period have identified deficiencies in medical personnel

readiness. As a result, questions recur about whether MHS is too large; what

the potential extent of service overlap and inefficiencies are among MTFs

and if all are needed; whether more attractive alternatives to MTF care are

available; and whether military providers are being placed and trained

properly to manage readiness effectively.

Regarding current service coordination within NCA, we found that MTFs

have entered into numerous, varying agreements to share resources, such

as one MTF sending specialty providers to other MTFs on a monthly basis.

While the agreements appear beneficial, they are mostly ad hoc and results

are not well documented. Such agreements are vulnerable to changes in

MTF budgeting approaches and other factors that can affect the MTFs’

willingness to coordinate their efforts. A recent DOD effort to further

consolidate NCA MTF services by merging NCA medical centers met with

major disagreements about what care should be provided and where. As a

result, the effort was put on hold and the centers continue to operate

independently.

During this decade, DOD and the services’ Surgeons General have

undertaken improvement initiatives, including implementing DOD’s

managed care program, TRICARE; reducing the number of medical

personnel; consolidating graduate medical education programs;

establishing partnerships with the Department of Veterans Affairs;

reducing hospital stays; restructuring hospitals into more efficient clinics;

and revising budget processes to more closely link funding to

cost-effective health care. Recently, DOD began new initiatives. Among

these, the most critical in our and DOD’s view is to develop a tri-service

strategy that takes into account current and projected beneficiary

populations, focuses on MHS’ basic wartime and peacetime care missions,

and optimally seeks to realign MTF staffing and resource allocations. This

action is needed to justify MHS’ basic resource needs in a continually

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changing health care environment. Also, the realignment should help to

maximize enrollment and provide more effective care to enrolled

beneficiaries as a result of savings and the avoidance of unnecessary costs.

Progress on this initiative must be made before most of the others can

proceed.

The tri-service team assembled to develop the new MHS strategy faces a

daunting challenge, given the task’s complexity and the services’ history of

independence. For this reason, we believe DOD and the services need to

continue dedicating high-level management attention to ensure the project

succeeds. To enhance congressional oversight of this critical endeavor, we

also believe DOD needs to periodically report to the cognizant

congressional committees as the project progresses.

Background MHS costs about $16 billion annually and offers care to a beneficiary

population of about 8.2 million active duty personnel3

 and their

dependents, and military retirees and their dependents and survivors. By

law, MHS has a dual role of supporting wartime and other deployments and

providing peacetime care. For peacetime care, the services provide similar

medical services worldwide to both military and civilian beneficiaries.

However, the services differ in their medical support requirements for

deployments. For example, the Army medically supports ground combat,

the Navy supports the Naval Fleet and the Marine Corps on shipboard and

land, and the Air Force is the primary means for air evacuation of wartime

casualties.

MHS’ readiness mission determines the minimum numbers of active duty

medical personnel required by each service. Each service’s readiness

mission has two key components. The first component is the personnel4

and equipment needed to support two major regional conflicts. If, for

example, major conflicts developed in two parts of the world and the

United States entered the conflicts, sufficient medical resources would be

needed to care for an estimated number of U.S. casualties. Such resources

would be needed where the conflict was occurring and where casualties

were evacuated to, such as remote bases or stateside. Today’s readiness

mission, which continues to evolve, calls for a smaller, more mobile

medical force then during the Cold War. The second component is the

3

Includes members of the Coast Guard and the Commissioned Corps of the National Oceanic and

Atmospheric Administration and of the Public Health Service, who are eligible for care in the military

health system.

4

This includes reliance on medical forces activated from the reserves.

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routine daily support for active duty personnel not in combat and their

dependents assigned outside the United States and to certain remote U.S.

locations. Both readiness mission components rely on a U.S. rotational

base that allows medical personnel to rotate to and from assignments.

Because assignments abroad are commonly only for 12 to 24 months, a

continuous replacement flow is needed. Also, added medical personnel in

training are needed to provide for attrition. Medical personnel are also

available to help provide peacetime care. And, while MTFs are not required

to provide peacetime care for non-active-duty beneficiaries, such care can

provide readiness training for military providers.

As shown in figure 1, active duty personnel comprise a small

percentage—19 percent—of the 8.2 million beneficiaries, and they have

first priority for MTF care. Active duty dependents represent almost

30 percent of the eligible population. Retirees and their dependents and

survivors are just over 50 percent of the beneficiary population.

Figure 1: Eligible Beneficiaries

Note: Due to rounding, pie slices do not add to 100.

Source: Defense Health Program, Fiscal Year 2000/2001 Biennial Budget Estimates (Feb. 1999).

About three-fourths or $12 billion of MHS’ costs are incurred by about 580

MTFs—15 medical centers, 76 hospitals, 374 medical clinics, and about 115

dental clinics. Medical centers are large critical care facilities that provide

a broad range of inpatient and outpatient health care, serve as referral

centers with specialized and consultative support, and provide graduate

medical education. Hospitals provide inpatient and outpatient treatment

with diagnostic and therapeutic services, such as preventive medicine.

Clinics are smaller medical facilities offering primary care, mostly on an

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outpatient basis. Most MTFs are on military installations—in or near urban

areas or remotely located—to support active duty personnel.5

 Some MTFs,

mostly clinics, are located off installations in urban areas to more

conveniently serve local retiree and other beneficiaries. And medical

centers may be located off installations, where beneficiary populations

can provide sufficient patient workload volume and mix. MTFs are similar

to civilian medical centers, hospitals, and clinics, although military

providers receive special training for readiness.

The remaining one-fourth, or about $3.5 billion, of the system’s cost is for

care delivered through civilian support contracts under DOD’s TRICARE

program. TRICARE, introduced in 1994, is DOD’s managed care approach to

controlling costs and improving access and quality of care. Since

March 1995, the civilian contracts have been implemented on a sequential

regional basis across the nation. The contract that included NCA was

implemented last—in June 1998.

TRICARE encompasses MTF care as well as civilian contracted care.

TRICARE offers beneficiaries three health care options: Prime, Standard,

and Extra. TRICARE Prime is the managed care approach that requires

beneficiaries to enroll, does not require copayments for care, and offers

them top priority for MTF care. Active duty personnel are automatically

enrolled in Prime. DOD and the services consider Prime their best option

for controlling costs and improving care access and quality. Beneficiaries

may also elect the Standard and Extra care options, which are

fee-for-service approaches not requiring beneficiary enrollment.

The Assistant Secretary of Defense for Health Affairs establishes MHS

policy and coordinates TRICARE, including administering the support

contracts. Further, Health Affairs plans and budgets for health care

operations and maintenance.6

 Each service has its own medical

department, headed by a Surgeon General, which operates its MTFs and

recruits and funds its military medical personnel. Table 1 shows the

number of MTFs by service and facility type, excluding clinics that provide

5

For example, many of the medical personnel needed to support the 82nd Airborne Division at Fort

Bragg, North Carolina, provide services at Womack Army Medical Center, also located at Fort Bragg.

6

DOD medical program funds are provided through a single Defense Health Program (DHP)

appropriations account. This account provides funds for operations and maintenance, procurement,

research, and development, but it excludes funds for active and reserve personnel (funded through the

services) or for military construction (funded through a separate account). The Assistant Secretary of

Defense for Health Affairs directs the distribution of the funds to the services, which allocate the funds

to their facilities.

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only dental care. MTF physicians and medical support7 include active duty

personnel (about 75 percent of all provider and support personnel) and

civilians. Appendix II provides a profile of the NCA MTFs.

Table 1: Worldwide MTFs by Service

and Facility Type, as of May 1999 Medical

centers Hospitals Clinics Total

Army 7 21 178 206

Navy 3 22 148 173

Air Force 5 33 48 86

Total 15 76 374 465

Note: Facilities that provide only dental care are not included.

Source: DOD and each service’s Office of the Surgeon General.

Reflecting the one-third decrease in active duty forces during the past 10

years, MHS has steadily declined, with military medical personnel declining

15 percent and one-third of the MTFs closing. These conditions, along with

constrained MTF budgets, have raised concerns about the continued need

for all medical facilities and assets and how peacetime care can best be

optimized.

As an integral part of MHS, NCA has 26 MTFs in a radius of about 60 miles

around Washington, D.C. (See fig. 2.) Three of these MTFs are medical

centers—Walter Reed Army Medical Center in Washington, D.C.; National

Naval Medical Center in Bethesda, Maryland; and the Air Force’s Malcolm

Grow Medical Center at Andrews Air Force Base in Maryland. The Army

and Navy each have 12 MTFs, while the Air Force has only its medical

center and 1 clinic.

7

DOD medical personnel include physicians, dentists, nurses, administrators, medical technicians,

veterinarians, and corpsmen.

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Figure 2: MTFs in the National Capital Area

Source: Health Affairs, TRICARE Region 1 Lead Agent, and various MTF officials.

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NCA includes about 5 percent of MHS’ beneficiaries and, in fiscal year 1998,

incurred about 5 percent or $778 million of MHS’ total costs. In 1998, the

three medical centers accounted for 75 percent of the NCA MTFs’

costs—including 95 percent of inpatient and 65 percent of outpatient

costs. From 1995 to 1998, NCA inpatient admissions declined 44 percent

and related costs declined 23 percent. Outpatient visits have also declined

by 14 percent, but related costs have risen 22 percent, reflecting

nationwide trends toward providing more costly care, including surgery,

on an outpatient basis.

Walter Reed, located in Washington, D.C., near the Maryland border,

began operating in 1909. It has branch clinics at the Pentagon and in the

District at Fort McNair. The Army also has a community hospital at Fort

Belvoir, Virginia, with four branch clinics in Virginia and a clinic at Fort

Meade, Maryland, which also has three branch clinics in Maryland. The

Naval Medical Center in Bethesda opened in 1942 about 5 miles north of

Walter Reed. Bethesda has eight branch clinics in Washington, D.C.;

Maryland; and Virginia. Separately, the Navy has two clinics in

Maryland—at Annapolis and at Patuxent River—and one clinic in

Quantico, Virginia. Malcolm Grow Medical Center opened in 1958 at

Andrews Air Force Base in Maryland. The Air Force also has a clinic at

Bolling Air Force Base in Washington, D.C. (See app. II for more details on

NCA MTFs.)

The Need for and

Appropriate Size of

NCA and Other MTFs

Are Not Now

Determinable

It is not possible to fully address the need for or appropriate size of NCA

MTFs or MTFs elsewhere in MHS because DOD and the services lack an overall

strategy for determining and allocating medical resources among MTFs.

While efforts to coordinate care among services have occurred, DOD and

the services have not systematically collaborated in seeking the most

cost-effective placement and use of all medical resources. This is so even

though MTFs in close proximity, such as the NCA MTFs, have overlapping

care capabilities and treat any beneficiary regardless of service affiliation.

The need for an overall strategy was reaffirmed recently when DOD

suspended an effort to merge NCA medical centers and medical centers in

San Antonio, Texas, for lack of clarity of the medical centers’ missions.

Service officials told us that each service has its own distinct approach for

determining and allocating MTF resources and generally does not take into

account the other services’ resources when making such decisions.

Moreover, the services use different organizational structures to plan for

and manage their NCA MTFs. While NCA MTFs are integral parts of the larger

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MHS, they are primarily concerned with the day-to-day delivery of

peacetime care. NCA MTF officials told us, for example, that they focus their

attention on such matters as budgets, rising pharmacy costs, beneficiary

satisfaction, facility maintenance, medical and support personnel staffing

levels, and the day-to-day running of a hospital or outpatient clinic. In

addressing the need for their facilities, they largely refer to present and

historical patient care workloads and the various care specialties their

facilities provide. And, while officials generally cite readiness as their

primary mission, beyond the numbers of military providers, none readily

identified which health care activities and costs were needed to support

readiness requirements. In this regard, the most recent major study of NCA

MTF needs and operations and others like it prepared during the early

1990s have largely focused on peacetime care.8

In delivering services, we found that the NCA MTFs are interdependent. MTF

service areas overlap, so the hospitals and clinics can serve the same

patients. Thus, patients in an Army MTF may be Air Force or Navy active

duty members, dependents, or retirees. Likewise, some MTF providers and

support staff may come from another service through a cooperative

agreement between the facilities. For example, providers from DeWitt

Army Community Hospital at Fort Belvoir provide outpatient prenatal care

at a Navy clinic at nearby Quantico and deliver babies at the Army

hospital.

Further, many of the smaller NCA MTFs, which are branch clinics of the

larger MTFs, also serve as referral sources for specialty care provided in

any of the area’s medical centers, which also serve populations outside the

area. For example, both Bethesda and Walter Reed treat patients from

around the world in specialty care such as open heart surgery and

neurosurgery. Thus, NCA MTFs influence each others’ workloads, and

individual MTF need is not necessarily determined only by NCA care

requirements.

Recently, the TRICARE managed care support contract that covers 13

northeastern states—including Maryland, Virginia, and Washington,

D.C.—was implemented, introducing added care options for NCA

beneficiaries. Many will be able to access both the MTF and the

contractor’s civilian care network. The TRICARE contractor becomes a

fifth major player—along with the Army, Navy, Air Force, and DOD’s Office

of the Assistant Secretary for Health Affairs—in the management and

8

TRICARE Region 1 Integration of Specialty Services Study Final Report (Healthcare Studies, Vector

Research, Inc., Oct. 10, 1995).

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delivery of NCA military health care. Thus, the contractor plays a

supportive role with MTFs in helping to maintain military readiness and

providing peacetime care. But this further complicates the process of

determining the need for individual NCA MTFs and MTFs elsewhere and

further underscores the need for DOD and the services to collaboratively

determine each MTF’s role in and share of the area’s health care delivery.

During our review, DOD sought to merge NCA medical centers and medical

centers in San Antonio. The attempts were suspended, however, when DOD

concluded the medical centers’ missions needed to be clarified before

their peacetime care workloads could be analyzed for possible

consolidation. To illustrate, the Air Force objected to the proposed

elimination of certain services at Malcolm Grow that had limited patient

workloads. Officials at Malcolm Grow argued that personnel providing the

services were essential to its wartime tasks. Such arguments were coupled

with the services’ traditional objections to substantially altering their

medical centers’ structures and operations. As a result, the efforts were

put on hold and the centers continue to operate as before. Until DOD and

the services develop a comprehensive overall approach for justifying each

MTF’s size and resources, neither we nor DOD can assess NCA MTFs’ needs.

Obstacles Impede

Developing a

Tri-Service Medical

Resource Strategy

Currently, the Army, Navy, and Air Force have separate methods, rather

than an overall tri-service strategy, for determining needs and allocating

resources to MTFs. And the services define workload, such as patient visits,

differently, which limits DOD’s ability to measure performance across the

services. Several obstacles have allowed such conditions and deterred

development of a tri-service approach, including the services’

long-standing independence and DOD and the services’ not yet having

identified readiness costs so that their systems’ peacetime components

can be cost-effectively managed. Exacerbating these obstacles is the

emerging emphasis during this decade on peacetime care, which competes

with MHS’ evolving readiness mission. As a result, concerns continue about

the system’s size and potential MTF care overlaps and inefficiencies. Also at

issue are whether potentially more attractive MTF care alternatives are

available and whether military providers are being effectively placed and

trained so that readiness is managed effectively.

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Each Service Has Its Own

Approach to Determining

Needs and Allocating

Resources

Currently, each service uses its own model for estimating the number of

medical personnel needed to support its wartime missions, and each

resisted DOD’s efforts to apply a common model for determining minimum

medical readiness requirement numbers. The services have agreed,

however, to use a common approach when DOD’s reengineering initiative,

discussed in detail later, is implemented. The common model is referred to

as the DOD sizing model. (See app. III for descriptions of the services’

models.)

Each service also has its own method for allocating resources to its

MTFs—that is, deciding where, how many, and what type of military

providers, support staff, and related funds should be distributed to each

MTF. To make such decisions, each service generally relies on historical

staffing and workload levels, facility size, and readiness and political

considerations. Also, each uses different models to support its decisions.

At the same time, the services’ separate methods for projecting and

validating MTF resource needs are and have been in a continual state of

change, and their reliability remains at issue. The Army, for example, in its

latest MTF needs modeling effort,9

 reported that a year of mostly on-site

MTF work is required to validate performance data from at least eight or

nine sources, including MHS-wide cost and workload data systems. The

Army also reported that its other ongoing resource allocation modeling

exercises, while generally useful, were inadequate for specifically

addressing facility and staffing needs. The Air Force’s latest allocation

model version similarly raised reliability issues. At Malcolm Grow, for

example, officials argued that the model severely understated pediatric

workload and, if followed, would have resulted in fewer personnel than

needed to provide care.

Accurate, comparable MTF workload data are needed for performance

measurement, cost-effectiveness assessments, and alternative care

delivery evaluations. Such data include numbers and cost of outpatient

clinical visits, inpatient admissions, and average length of stay. But each

service defines workload differently, and as basic an element as a clinic

visit is not counted the same. Also, the cost and workload data captured in

DOD’s information systems is neither accurately reported nor recorded.10

Thus, cost and performance comparisons across MTFs are generally

unreliable. For example, we reported this year that the results of the

Medicare subvention demonstration—which is to demonstrate in six

9

Regional Uniform Benefit model (see app. III for a description of the model).

10Medicare Subvention Demonstration: DOD Data Limitations May Require Adjustments and Raise

Broader Concerns (GAO/HEHS-99-39, May 28, 1999).

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selected locations the cost and other effects of serving Medicare-eligible

military retirees as MTF enrollees—would be affected by cost data

inaccuracies in DOD’s systems.

While differing in their modeling and resource allocation efforts, the

services also respond differently to reductions in active duty MTF medical

staffing and disagree on readiness needs. The Army, for example,

apportions reductions among MTFs based on related reductions in the

active duty forces each MTF supports. The Air Force generally shares the

losses among MTFs but favors facilities that appear most productive. In the

same vein, in 1993, a tri-service attempt to develop MTF provider workload

standards was abandoned for lack of support and agreement among the

services’ participants. And such service differences in MTF needs

assessment have also been apparent in DOD-wide attempts to agree on

medical readiness needs. DOD and service officials told us that the

minimum numbers of active duty MTF physicians needed to treat active

duty forces has been a major disagreement area.

Moreover, because of their independent approaches, DOD and the services

have not collaborated in seeking the most overall cost-effective

arrangement of medical resources. For example, the three large NCA

medical centers—Walter Reed, Bethesda, and Malcolm Grow—are in close

proximity and have overlapping service areas. But the centers are assigned

their resources by the Army, Navy, and Air Force, respectively,

independent of the other hospitals. As a result, these facilities provide

duplicative services and, in some cases, lack sufficient workload.

Long-Standing Service

Independence Makes

Coordinated Strategy

Development Difficult

We and many others have reported that DOD has had difficulty modernizing

its health system because of traditional rivalries among the services and

their diverse organizational structures and duties. The lines of authority

and accountability among hospital commanders, the service Surgeons

General, and the Assistant Secretary of Defense for Health Affairs are

complicated and sometimes at odds. MHS funding, for example, is

controlled by different entities: The Assistant Secretary controls funding

for operations, and each service controls funding for its military personnel

who operate the system. The services generally have had, until recent

years, enough resources to maintain independent health care systems with

overlapping peacetime care capabilities. Thus, over the years, while some

collaborative efforts were made, the services generally have not found it

necessary to engage in formal interservice management efforts, even in

today’s tight budget times.

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Past studies have suggested changes to the organization of military

medicine, including merging the services’ medical departments into a

single health agency,11 but the services have resisted such efforts. Each

service believed it had unique medical needs and activities12 and thus

fought to maintain its own health system. Yet, some analysts have argued

that, in wartime, the U.S. military fights and provides medical care under

the authority of unified commands, not as individual services. The Navy,

for example, handles sea, land, and air functions so that one system could

perform all functions. These debates continue, while the services’ NCA MTFs

have sought to make informal care arrangements with one another for

increased efficiencies, care access, and care quality. These activities are a

sign that peacetime care delivery, for the most part, takes the same form

regardless of service. However, a strategy for formally coordinating

resource planning and distribution among the services while recognizing

the uniqueness of their wartime missions has yet to be achieved.

Changing Readiness Needs

and Costs Impair Justifying

the Number and Size of

MTFs

During the 1990s, following the end of the Cold War, the level of medical

resources—and their costs—needed to ensure readiness has been widely

debated. With the Soviet Union’s dissolution and the emergence of

regional threats, DOD’s wartime medical needs changed markedly. In 1994,

a DOD study, known as the “733 study,” estimated that DOD had twice the

military physicians it needed for wartime. The services disagreed with the

733 study and individually estimated that higher numbers of physicians

were needed to meet their readiness missions. More recently, efforts

begun in 1995 to update the 733 study have also met with resistance and

disagreements, and the study’s long overdue final report was not signed

until May 1999–3 years after it was due. DOD pointed out, however, that

rather than its numerical results, the study’s analytical approach to

determining medical requirements is to be considered its most important

outcome.

In 1995, the Congressional Budget Office reported that MHS could decrease

its physical capacity by 50 percent.13 While medical resource reductions

ensued, DOD and the services have yet to agree on what resources are

needed for readiness versus peacetime care. In fact, a base closure and

11The Feasibility of Uniting the Medical Services of the Various Branches of the Armed Forces Into a

Single Corps, Congressional Research Service (Washington, D.C., Aug. 1993).

12Defense Health Care: Implementing Coordinated Care—A Status Report (GAO/HRD-92-10, Oct. 3,

1992).

13Restructuring Military Medical Care (Congressional Budget Office, July 1995).

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realignment study14 concluded that no military medical downsizing effort,

no matter how well designed, would accomplish meaningful, appropriate

reductions until DOD and the services agreed on MHS’ readiness needs and

how best to meet them.

Without clear distinctions between medical readiness and peacetime care

needs and costs, DOD and the Surgeons General are hampered in trying to

justify the number and size of their MTFs. For example, MHS budget

requests over the last 3 years have been insufficient to cover their costs,

requiring DOD to request supplemental appropriations to the cognizant

congressional subcommittee’s dissatisfaction. To develop the basis they

need, DOD and the services together have to define, assign cost to, and

agree on what specific elements comprise medical readiness—namely,

deployments; what activities, including training, prepare military providers

for deployment; and what activities enable the rotation and sustainment of

deployed active duty medical personnel. Not having done this, DOD and the

services continue operating their health systems not knowing what

percentage of their total costs are for readiness needs and what

percentage are for nonreadiness, peacetime care. Another consequence is

that DOD has little basis for deciding whether or not to make or buy its

peacetime care services or otherwise to make informed management

decisions about such care.

MHS’ Emerging Peacetime

Care Emphasis Competes

With Readiness Mission

MHS’ primary mission—and the justification for having active duty medical

providers—is wartime medical readiness. But in the past 20 years, driven

by budget pressures and a growing retiree population’s demands, DOD has

increasingly focused on providing peacetime care. Throughout the 1980s,

MHS costs significantly escalated, fueled by large cost overruns in the

Civilian Health and Medical Program of the Uniformed Services

(CHAMPUS).15 Between 1980 and 1990, DOD’s health care budget grew by

almost 225 percent, and the largest single program growth—about

350 percent—occurred in CHAMPUS. Meanwhile, DOD’s non-active-duty

population continued to increase. During the 1990s, MHS budgets generally

leveled off, while the numbers of retirees and their dependents grew to

14In July 1995, the Defense Base Closure and Realignment Commission submitted a report to the

president recommending certain military bases for closure or realignment. The report also

recommended that DOD pursue MTF consolidation and restructuring, including the use of civilian

sector resources where it was cost-effective and maximizing the remaining military resources across

service lines.

15Before TRICARE was fully implemented, DOD operated CHAMPUS, an insurance-like program that

paid for a portion of the care military families and retirees under age 65 received from private sector

health care providers.

Page 15 GAO/HEHS-00-10 Justifying Military Medical Resources
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more than half of the total beneficiary population. This trend, developing

over the past 40 years, is projected to continue. (See fig. 3.)

Figure 3: Actual and Projected Active and Non-Active-Duty Beneficiaries and Their Respective Dependents for Selected

Years

aAvailable data do not categorize retirees and their dependents as under or over age 65.

Source: Office of the Assistant Secretary for Health Affairs.

Page 16 GAO/HEHS-00-10 Justifying Military Medical Resources
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In 1994, the Congressional Research Service reported that the growing

portion of DOD’s budget for civilian medical care had become a concern.

Also, we and others reported that, while DOD was aggressively pursuing its

peacetime care duties, training for medical readiness received less

attention.

Also at issue is whether military care providers have the training and skills

needed for war. After the Gulf War, we16 and DOD’s Inspector General17

questioned DOD’s ability to meet wartime medical needs. Among other

things, we found large numbers of medical personnel were not deployable

due to their unacceptable physical conditions, lack of required skills,

mismatched medical specialties, and a pervasive lack of wartime readiness

training. Since then, the services have worked to correct these problems,

but concerns persist. For example, the Air Force and Navy are now

shifting requirements and providers needed for wartime deployments from

their smaller MTFs to larger facilities to help ensure adequate training. But

each service generally makes these decisions independent of the others, so

that the physicians may be placed in the same proximities where patient

workloads may be insufficient to train all the physicians.

Recent legislation continues the peacetime care emphasis. For example,

the Balanced Budget Act of 1997 authorized a Medicare subvention

demonstration, which extends TRICARE benefits to those aged 65 and

over. Also, the fiscal year 1999 Defense Authorization Act mandated a

pharmacy demonstration that gives those 65 and over increased access to

the pharmacy benefit through mail order and retail pharmacies. The

Federal Employees Health Benefits Program (FEHBP) demonstration,

which was also authorized by the 1999 act, provides another MTF care

alternative for those 65 and over by offering health care coverage that

federal civilian employees have. Finally, the 1999 act also called for a

demonstration of the effects of providing another TRICARE benefit

supplement for senior retirees. Managing such alternative care

demonstrations while seeking to eliminate MTF service overlaps and

16Medical Readiness: Efforts Are Under Way for DOD Training in Civilian Trauma Centers

(GAO/NSIAD-98-75, Apr. 1, 1998), Chemical and Biological Defense: Emphasis Remains Insufficient to

Resolve Continuing Problems (GAO/NSIAD-96-103, Mar. 29, 1996), Operation Desert Storm: Problems

With Air Force Medical Readiness (GAO/NSIAD-94-58, Dec. 30, 1993), Operation Desert Storm:

Improvements Required in the Navy’s Wartime Medical Program (GAO/NSIAD-93-189, July 28, 1993),

Medical Readiness Training: Limited Participation by Army Medical Personnel (GAO/NSIAD-93-205,

June 30, 1993), and Operation Desert Storm: Full Army Medical Capability Not Achieved

(GAO/NSIAD-92-175, Aug. 18, 1992).

17Medical Mobilization Planning and Execution (Inspector General, DOD, Report No. 93-INS-13, Sept.

30, 1993).

Page 17 GAO/HEHS-00-10 Justifying Military Medical Resources
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inefficiencies make DOD’s need for a comprehensive tri-service resource

management strategy all the more urgent.

Numerous NCA

Coordination

Agreements Seem

Beneficial, but an

Overall Strategy Is

Needed

Driven by tight budgets and rising costs, NCA MTFs have entered into

numerous agreements to share resources since 1995.18 These agreements

cover a wide range of services, both within and across military

departments, and illustrate the need for and potential benefits of MTF

resource sharing in areas such as NCA. However, the agreements focus on

improving the MTFs’ everyday peacetime care delivery rather than being

built into an overall strategic plan founded on MHS’ readiness needs and

optimal use of each MTF’s resources.

Thus, while NCA MTFs have many coordination agreements, it is unclear

how well each facility’s agreements support its particular health system

role. Also, the agreements’ largely informal nature make them vulnerable

to proposed MTF budgeting changes and to MTF commanders’ rotation, both

of which can affect MTFs’ willingness to share resources. Such conditions

for NCA care coordination provide little assurance that optimal results are

being achieved and argue, in our view, for an overall resource planning

and allocation strategy. Such a strategy would provide for the major

coordination activities needed to support each MTF’s dual mission.

NCA MTFs Have Entered

Into Numerous

Agreements Aimed at

Enhancing Peacetime Care

Since 1995, NCA MTFs have entered into numerous agreements to share

personnel, facility space, and equipment to enhance care delivery. Such

agreements demonstrate that MTF commanders recognize the need and

have taken the initiative to look beyond their own facilities to best provide

medical care. Most agreements are handled directly by and among the NCA

MTF commanders.19 MTF commanders told us that the service agreements

have largely been driven by rising care costs and recent level budgets. (See

fig. 4.)

18About 150 agreements were in effect among NCA MTFs at the time of our review. Almost all involved

one or more of the three medical centers. Agreements ranged in scope and duration from continuing

divisions of specialty care among the medical centers to small exchanges of personnel to cover

short-term MTF shortages.

19An NCA Federal Health Council informally oversees coordination among NCA MTFs. The Council

consists of the three medical center commanders and the Uniform Services University of the Health

Sciences and, recently, the Department of Veterans Affairs Medical Center in Washington, D.C. The

council, through its work groups, continues to identify and assess opportunities to coordinate military

medical care delivery.

Page 18 GAO/HEHS-00-10 Justifying Military Medical Resources
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Figure 4: National Capital Area MTF

Budgets

Source: Operations and maintenance budget data from NCA MTFs.

The NCA MTF budget total increased only 5 percent between 1995 and 1998

(in dollars not adjusted for inflation). Conversely, the cost of providing

care has risen significantly. The NCA cost per inpatient admission has

increased from $6,224 in 1995 to $8,648 in 1998—a 39-percent increase.

The NCA cost per outpatient visit has increased from $126 in 1995 to $177 in

1998—a 41-percent increase.

The following illustrate the variety of current NCA coordination agreements

with respect to genesis, purpose, size, and complexity. Due to the varying

availability of information about them, the examples are not presented for

comparative purposes nor did we attempt to judge their individual or

collective costs and benefits.

• Exemplifying care coordination within the same service, in 1998, Walter

Reed and Kimbrough Army Ambulatory Care Clinic at Fort Meade

arranged to have Walter Reed provide surgeons to Fort Meade for

outpatient surgeries in areas such as orthopedics and ear, nose, and

throat. Fort Meade provides the surgical space, support staff, and supplies.

During fiscal year 1998, Walter Reed’s surgeons performed over 1,000

outpatient surgeries at Fort Meade, with patients coming from Walter

Reed, each service, and across the area. Benefits cited included reducing

Walter Reed’s surgical backlogs and improving training for surgeons,

anesthesia nurses, and support staffs.

Page 19 GAO/HEHS-00-10 Justifying Military Medical Resources
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• Illustrating care coordination between two different service MTFs, in 1995,

Fort Belvoir’s DeWitt Army hospital agreed to provide obstetric services at

Quantico, a Navy clinic about 23 miles away, and deliver the babies at Fort

Belvoir. The Army hospital sends an obstetrician or nurse practitioner to

Quantico about twice a week for routine outpatient obstetrical visits.

Officials told us that, so far, about 120 deliveries have been done at Fort

Belvoir. They estimated savings of $128,000, comparing the MTF costs with

alternative civilian care the services would have otherwise had to

reimburse. Also, Fort Belvoir officials cited the added convenience for

beneficiaries of receiving routine obstetrical care at their local MTF.

• Illustrating an agreement that crosses the three services, in 1998, the NCA

MTFs leased a common type of communication pager from a single vendor

for their medical staffs. MTF officials estimated savings at over $66,000 a

year. Other benefits cited were equipment uniformity and reliability, a

consolidated directory of pager users, and ease of contact among

physicians, particularly those serving patients in more than one MTF.

• Representing an extensive tri-service care arrangement, in 1995, the three

NCA military medical centers agreed to divide the provision of inpatient

mental health care. Walter Reed now provides all the adult psychiatric

care, Bethesda provides all the adolescent psychiatric care, and Malcolm

Grow provides all the substance abuse services in the area. An exception

to normal coordination agreements, this arrangement was supported by a

cost analysis because of the considerable MTF costs associated with mental

health care. The arrangement involves no exchange of funds but does

include exchange of personnel, with doctors and nurses of one service

working in the other services’ hospitals. The major benefits expected are

better cost control and mental health care quality.

• One set of interservice agreements was not locally initiated. In response to

DOD directives since 1994 that unnecessary, duplicative graduate medical

education programs in the same area should be consolidated, Walter Reed

and Bethesda agreed to integrate nearly a dozen such programs. And the

centers continue reviewing the feasibility of combining more of their

programs. One integrated program, inpatient neurology, for example, is

now administered by Walter Reed, is jointly staffed, and has nine Army

and six Navy trainees. The Army and Navy have made other attempts to

significantly downsize their programs, including 1997 Navy efforts to

eliminate some of its NCA graduate medical education programs and the

Army’s attempt to do so at William Beaumont Army Medical Center in El

Paso, Texas. But, the efforts were thwarted by lack of DOD and service

agreement on criteria for deciding which programs to target.

Page 20 GAO/HEHS-00-10 Justifying Military Medical Resources
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MTF Coordination Could

Be Improved by Being

Built Into Systemwide

Planning

The current NCA service coordination agreements have certain general

characteristics. While appearing to improve care access and quality at

particular facilities, the agreements are not part of any overall plan for

military care delivery in NCA. And, with few exceptions, they were entered

into without formal cost analyses and generally are voluntary and

nonbinding. Also, the agreements commonly do not entail fund transfers

among the services or MTFs, although MTF officials told us that their goal

was that no MTF would be financially disadvantaged by the agreements.

Another characteristic is that readiness requirements were not driving

forces in entering into the agreements. Rather, MTF officials told us that,

while they informally considered the agreements’ effects on readiness,

perceived dollar savings and improving peacetime care delivery were the

main reasons for sharing their resources. Officials told us that achieving

the agreements depended heavily on the initiative of senior NCA medical

officers. And, except for the merger of NCA graduate medical education

programs, DOD and the services’ surgeons general have not had substantial

influence on the NCA coordination agreements.

The current NCA agreements may be made financially unattractive by

pending MTF budgeting changes and may or may not withstand a

requirement that they be more consistently and formally justified. NCA MTF

officials told us that under a proposed budgeting

approach—enrollment-based capitation20—MTFs would be funded based

largely on their enrolled populations. The officials told us that if the

approach was adopted without allowing for the current no-cost service

exchanges among facilities, MTFs would be deterred from entering care

coordination agreements unless they are reimbursed. For example, the

Naval Medical Center at Bethesda routinely sends physicians to other

Naval clinics at no cost to treat beneficiaries not enrolled at Bethesda.

Bethesda officials told us that, under enrollment-based capitation, they

would be hesitant to continue such agreements unless reimbursed for the

physicians’ costs. Also, officials told us that the administrative burden of

pricing and recording medical care given and received under the

agreements could seriously affect any agreement’s viability. As a result,

agreements would be abandoned or never started, and individual MTFs

would have the care gaps and overlaps that the current agreements

attempt to address. Thus, to facilitate voluntary MTF participation, most

agreements have been kept informal and nonbinding. But such conditions

20Under enrollment-based capitation, an MTF’s per enrollee funding rates would be based on the MTF’s

estimated care costs. And, if an MTF’s enrollee is referred to and receives care at another MTF, the

home MTF would reimburse the provider MTF at the provider’s service rates. This may create

disincentives for commanders of smaller NCA clinics, such as Annapolis and Quantico, to refer their

enrollees for needed care at the larger, more costly NCA MTFs, like Bethesda.

Page 21 GAO/HEHS-00-10 Justifying Military Medical Resources
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do not ensure that optimal results are being achieved, may not be

supportive of the system’s basic mission, and argue for an overall

tri-service strategy for determining needs and allocating resources.

Therefore, while the NCA MTF coordination agreements are numerous and

appear beneficial, we believe the key strategic question is, how well do

they individually and collectively support each MTF’s health system role?

And, further, which of the current and what additional MTF coordination is

needed to support MHS’ readiness and peacetime mission? But DOD and the

services do not have a systemwide strategic plan that positions them to

identify such NCA MTF coordination needs and provide for the most

effective arrangements. Such a strategy, for example, might specifically

recognize the need to coordinate costly mental health services, while

providing parameters within which MTF commanders could exercise

discretion in arranging smaller, more temporary resource exchanges.

DOD and the Services

Have Begun

Addressing Problems,

but Success Requires

Their Total

Commitment

During the past decade, DOD experienced many of the same challenges that

confronted U.S. health care generally—increasing costs, uneven care

access, and disparate benefit and cost-sharing packages for similar

categories of beneficiaries. In response, DOD and the services’ Surgeons

General initiated, with congressional authority, a series of demonstration

programs across the country to explore ways to more cost-effectively

manage and deliver care to military beneficiaries. These demonstration

programs provided many valuable lessons, which DOD has applied to its

health care system.

In 1994, such experiences led DOD to introduce a nationwide managed care

program called TRICARE to improve beneficiary access to high-quality

care while controlling MHS’ costs. Also, DOD and the Surgeons General

improved military care management by consolidating graduate medical

education programs; establishing partnerships with the Department of

Veterans Affairs; reducing hospital stays; restructuring hospitals into

smaller, more efficient clinics; revising MTF budget processes to more

closely link funding to cost-effective health care; and a host of other

improvements.

DOD and the Surgeons General recognize that their medical system

continues to evolve and its appropriate size and relative costs and

effectiveness will continue to undergo intense scrutiny. As a result, in

1998, DOD began 29 separate initiatives to modernize MHS management.

(See app. IV.) The initiatives were prompted by increasing concerns about

Page 22 GAO/HEHS-00-10 Justifying Military Medical Resources
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whether DOD and the services had the right medical resources in the right

places to meet readiness needs and to optimize peacetime health care.

Other concerns included rising system costs, recent tight MTF budgets, and

growing competition from such potential care alternatives as FEHBP. DOD’s

initiatives range from improving medical technician training to resizing

and consolidating medical centers. As DOD pursued these efforts, one

initiative emerged as the central focus for the others. This initiative is

DOD’s and the services’ development of an overall medical resource

strategy to provide for readiness needs and optimize care delivery.

DOD officials told us they view the initiative as critical to MHS’ future. They

also told us the effort has so far received DOD and service collaboration

and commitment. But the officials told us that many obstacles exist,

including maintaining tri-service—both medical and line—support, and

getting buy-in from key external stakeholders such as cognizant

congressional committees.

System Improvement

Initiatives Address

Tri-Service Issues

The 29 initiatives begun in 1998 address tri-service issues, such as

centralized purchasing, pharmacy management, outsourcing functions,

improved information systems, and graduate medical education

development. Regarding centralized purchasing, for example, DOD is

seeking to standardize medical and surgical supplies, while achieving

economies of scale through joint purchasing. DOD’s initiatives to address

pharmacy management problems—which we reported on in 199821

—include linking existing pharmacy databases to facilitate reviews of drug

use, cost, and safety and to standardize drug formularies across the

various military pharmacies.

Another initiative looks at the advantages and feasibility of buying medical

training services, such as for pharmacy and radiology technicians, from

the private sector. Such training is now provided within MHS. The initiative

to improve information systems seeks to enhance and integrate military

health data systems and to consolidate their administration. The graduate

medical education initiative is attempting to develop a departmentwide

policy for targeting such programs for consolidation, downsizing, and

closure, which responds to recommendations we made in a 1998 report.

21Defense Health Care: A Fully Integrated Pharmacy System Would Improve Beneficiary Services and

Cost-Effectiveness (GAO/HEHS-98-176, June 12, 1998).

Page 23 GAO/HEHS-00-10 Justifying Military Medical Resources
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Focus on Tri-Service

Strategy Is Emerging

Soon after DOD and the services began these efforts, they found that a

more fundamental strategy was needed to more completely address basic

system problems and decide how large the military medical system should

be, including where resources should be placed and used to best support

readiness and provide peacetime care. Thus, in November 1998, DOD

established a tri-service team of senior officers22 to develop such a

strategy. Among the team’s goals are to devise an approach to determine

each MTF’s correct size, identify excesses and shortages of medical

personnel by specialty, and determine the right MTF provider mixes. DOD

officials agree with us that, until this is done, it is not possible to judge the

need for nor relative efficiency of MTFs in their health system. Because the

analytical tools needed to make these key decisions were not available,

the team identified the following eight areas as crucial to the strategy’s

development.

• Develop a tri-service approach for determining medical personnel

readiness requirements and for distributing them among MTFs.

Determining medical readiness requirements has been the subject of

heated controversy and study since the end of the Cold War. This year,

however, the three services agreed to tie their baseline staffing to an

existing DOD sizing model. When fully implemented, the model is expected

to determine minimum wartime service staffing levels. Based on such

staffing levels, and using common tri-service guidelines, each service will

design its own staffing distribution model to fit its mission, facility

capabilities, and the needs of beneficiaries served by those facilities.

• Cost out MTF-readiness-related services so that both readiness and

nonreadiness costs can be defined and defended. Never done before, this

essential step would enable DOD and the services to identify which of their

care system costs can be subjected to “make versus buy” decisions. This

task is complicated by the services’ differing definitions of readiness and

how indirect MTF costs, such as facility maintenance, should be

apportioned between the dual missions. Of course, the resultant cost of

DOD medical readiness is highly sensitive to how expansive or narrow a

definition of readiness activities is finally used. That is, if the readiness

definition is broader, more MTF costs can be justified and fewer peacetime

costs would be subject to make versus buy decisions.

• Use civilian best practices to develop provider (primary and specialty

care) to beneficiary workload ratios. This task’s purpose is to standardize

resource distribution among MTFs and to help ensure that sufficient

population and workload exist at each MTF to use and properly train

military providers for readiness and cost-effective care. A private care

22The team also includes Health Affairs and TRICARE Management Activity representatives.

Page 24 GAO/HEHS-00-10 Justifying Military Medical Resources
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ratio, for example, is about 2,000 beneficiaries per primary care provider.

According to DOD officials, adjusting for readiness training, a military

provider would serve from 1,300 to 1,900 beneficiaries. Another goal for

this exercise is to minimize MTF underuse. DOD officials told us that such

workload standards will help identify unused MTF capacity and enable MTFs

to recapture beneficiaries now using civilian support contractors and less

expensively care for them.

• Establish uniform workload reporting. Decisions on where providers

should be placed and what MTF care alternatives should be considered

require accurate, consistent, comparable data on MTF and the support

contractors’ workload, costs, and performance. But MTF cost and workload

data problems have been pervasive, and DOD continues to struggle with its

data system inaccuracies. As we and others have reported, the root cause

has been DOD’s and the services’ lack of oversight and incentives to ensure

the data’s accuracy, timeliness, and completeness. In response to our

recent report on its Medicare subvention demonstration, however, DOD has

acted to improve its data and otherwise committed itself to overhauling its

data systems.23

• Implement an enrollment-based capitation budget approach for MTFs. This

proposed approach represents a significant change from the MTFs’

historical budget approaches, which largely based each year’s budget on

the prior year’s budget and workload. Capitated budgeting for MTFs would

pay them a fixed amount for enrolled beneficiaries, with certain other

allowances. The aim is to focus MTFs on providing care primarily to its

enrolled population and to urge MTF commanders to manage within these

budgets.

• After identifying an MTF’s readiness-based resource needs, determine what

added resources would make it as efficient and cost-effective as possible.

This task recognizes that an MTF’s readiness-based medical needs normally

have to be supplemented with other care capabilities to enable the facility

to optimally function as a full care facility. The question is whether such

added care should be provided in the MTF by a military or civilian provider,

or bought from the private sector.

• Use utilization management and clinical practice guidelines to optimize

health outcomes across the health system. A major shift in military care

philosophy, this approach would change the system’s current emphasis on

intervention following disease or injury to preventive services aimed at

improving and maintaining the beneficiary population’s health. Another

goal is to maximize clinical productivity, treatment consistency, and care

quality. DOD officials told us that the critical step in making the

philosophical shift is to maximize MTF beneficiary enrollment so the

23GAO/HEHS-99-39, May 28, 1999.

Page 25 GAO/HEHS-00-10 Justifying Military Medical Resources
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services can truly manage their health care. Currently, MTFs also provide

space-available care, which tends to be episodic and leaves beneficiaries

with alternatives to enrolling in managed care. Recently, we reported that

the lack of a universal enrollment requirement had other adverse effects

significantly limiting DOD’s ability to predict MHS costs and effectively plan

and manage its health care system.24 Also, in 1998, we testified that

maximum enrollment was needed to take full advantage of cost-effective

managed care principles and practices.25

• Identify measures needed to assess progress toward system health goals.

Currently, numerous performance indicators are in use for gauging MTFs’

and contractors’ performance, such as hospital stay lengths, appointment

delays, and number of outpatient visits. The goal is to identify measures

that will enable the services to comparatively assess progress toward

system goals. Also, a key outcome is to identify and use measures that

mirror civilian performance and quality indicators to facilitate cross-sector

comparisons of quality of care.

The completion of these tasks should help the services properly size each

of their MTFs. The idea is that the process would begin with the

determination of each service’s readiness requirements. Next, decisions

would be made about how to distribute providers among the MTFs. Such

decisions would consider each MTF’s readiness role, the beneficiary

population to be served, and the availability of other MTF and civilian

services. With this information in hand, each MTF’s readiness-based

resources would be projected using adjusted civilian best practice norms.

Because such resources alone are usually too limited in numbers, mix, and

support to amount to an effective peacetime care system, other

staff—both active duty and civilians—would be added. Once the best MTF

profile has been developed, its empirical care levels would be assessed to

identify whether unused capacity may exist. An overall goal is to fill this

unused capacity by recapturing beneficiaries currently served by

TRICARE contractors.

The tri-service team’s goal is to complete its overall planning effort by

April 2000 to be ready for resource planning and budgeting for the year

2002. However, the team faces daunting tasks, not the least of which are

defining readiness and its costs; sustaining DOD and the services’

commitment to the effort; obtaining buy-in from line command and other

key stakeholders, including cognizant congressional committees and

24Defense Health Program: Reporting of Funding Adjustments Would Assist Congressional Oversight

(GAO/HEHS-99-79, Apr. 29, 1999).

25Defense Health Care: Operational Difficulties and System Uncertainties Pose Continuing Challenges

for TRICARE (GAO/T-HEHS-98-100, Feb. 26, 1998).

Page 26 GAO/HEHS-00-10 Justifying Military Medical Resources
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members; obtaining accurate cost and workload data; and achieving the

shift from medical intervention to preventive health care.

Conclusions DOD is operating a $16-billion-a-year health care system, the bulk of which

is provided through MTFs. But DOD has not identified how much it spends

for wartime medical readiness—its primary mission. Meanwhile, the

beneficiary population has changed significantly, and retirees now

outnumber active duty beneficiaries and their respective

beneficiaries—and the trend is continuing. Moreover, MHS’ growing

day-to-day medical focus is on its other mission, peacetime care delivery.

A pivotal system deficiency is that DOD and the services lack a

comprehensive strategy for ensuring that the right resources are budgeted

for and located in the right places to meet readiness needs and

cost-effectively provide peacetime care. The problems have persisted due

to service independence and mission differences and because, historically,

the services have had enough resources to maintain separate overlapping

systems.

Absent a comprehensive strategy for determining and allocating resources

across the services’ MTFs, neither we nor DOD can adequately judge the

need for NCA MTFs or their appropriate size. Likewise, while NCA service

coordination agreements among MTFs appear beneficial and show good

faith efforts to improve care and reduce costs, the agreements are ad hoc

and not governed by a systemwide strategy that would help guide such

decisions and maximize outcomes. Meanwhile, MTFs are challenged to be

cost-effective care providers by a growing peacetime workload coupled

with rising costs, fewer military medical personnel, and competition from

alternative care sources such as FEHBP.

DOD and the services have recently recognized that the time has come for

such a strategy—one that clearly defines readiness costs and justifies

peacetime care based on make versus buy analyses—and have taken

actions aimed at developing it. Among a series of DOD system improvement

initiatives begun this year is one now aimed at identifying medical

resource needs and developing an approach for distributing resources

among MTFs, identifying readiness costs, determining peacetime care

needs that MTFs can most cost-effectively meet, and shifting care emphasis

from medical intervention to prevention. As we have reported and testified

in the past, DOD also needs to enroll as many beneficiaries as possible at

MTFs to be better able to predict MHS costs and truly manage beneficiary

Page 27 GAO/HEHS-00-10 Justifying Military Medical Resources
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health care. In short, maximizing enrollment is critical to the tri-service

strategy.

We support the thrust of DOD’s initiative believing that such a resource

strategy would position it and the services to make informed, prudent

decisions about MTF resource needs. But major obstacles exist, such as the

difficulty in defining and obtaining consensus on readiness needs and

costs, and sustaining DOD and tri-service commitment over the long term.

Thus, we believe DOD and the services need to dedicate top-level

management attention to ensuring the project’s successful completion.

And, to enhance congressional oversight of this critical endeavor, DOD

needs to periodically report on the project’s progress.

Recommendations To ensure, among other matters, that the defense medical system is

properly sized, that inefficiencies and overlaps among MTFs are eliminated,

and that readiness is effectively managed, we recommend that the

Secretary of Defense direct the Assistant Secretary of Defense for Health

Affairs and the services’ Surgeons General to

• complete the development and implementation of a comprehensive

tri-service medical resource planning and allocation strategy that clearly

defines the cost of readiness and justifies nonreadiness peacetime care

based principally on cost-effectiveness analyses;

• emphasize MTF beneficiary enrollment as a key element of the tri-service

strategy, and make every effort to enroll as many current MTF users as

possible so that the services and MTFs can truly manage health care;

• ensure that the overall strategy identifies and provides for significant care

coordination opportunities such as in the NCA;

• work with the line commanders and key stakeholders such as cognizant

congressional committees and key members, advocacy groups, and others

to obtain support for the implementation of the strategy; and

• periodically report progress toward developing and implementing the

strategy to cognizant House and Senate committees.

Developing and implementing the tri-service medical resource strategy

may require actions by and coordination with other DOD Assistant

Secretaries; therefore, as appropriate, the Secretary should direct the

affected Assistant Secretaries’ support and participation.

Page 28 GAO/HEHS-00-10 Justifying Military Medical Resources
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Agency Comments

and Our Evaluation

In its written comments on a draft of this report, DOD agreed with the

report and each of our recommendations. It also agreed that the tri-service

team assembled to develop and coordinate implementation of the resource

planning and allocation strategy faces a formidable challenge. Hence, DOD

stated that the Department’s senior leadership is now and will continue

providing oversight and support for the project and that the project plan

was provided to the Senate and House Appropriations Committees on

September 23, 1999—during this draft report’s comment period. DOD plans

to brief the cognizant congressional oversight committees, seek their

buy-in and support, and keep them apprised of the project’s progress.

DOD’s comments are reprinted as appendix V.

We are sending copies of this report to the Honorable William S. Cohen,

Secretary of Defense, and will make copies available to others upon

request.

Please contact me at (202) 512-7101 or Dan Brier, Assistant Director, at

(202) 512-6803 if you or your staff have any questions concerning this

report. Other GAO staff who made contributions to this report are Elkins

Cox, Allan Richardson, Cheryl Brand, and Cherie Starck.

Stephen P. Backhus

Director, Veterans’ Affairs and

 Military Health Care Issues

Page 29 GAO/HEHS-00-10 Justifying Military Medical Resources
Contents

Letter 1

Appendix I 

Scope and

Methodology

32

Appendix II 

Profile of MTFs in the

National Capital Area

34

Organization of NCA MTFs 34

Selected NCA MTF Data 37

Appendix III 

Service Models

38

Appendix IV 

DOD’s 29

Reengineering,

Consolidation, and

Optimization

Initiatives

41

Appendix V 

Comments From the

Department of

Defense

46

Tables Table 1: Worldwide MTFs by Service and Facility Type, as of

May 1999

7

Table II.1: NCA MTFs’ Number of Beds, Budget, Personnel, and

Outpatient Workload, 1998

37

Figures Figure 1: Eligible Beneficiaries 5

Figure 2: MTFs in the National Capital Area 8

Page 30 GAO/HEHS-00-10 Justifying Military Medical Resources
Contents

Figure 3: Actual and Projected Active and Non-Active-Duty

Beneficiaries and Their Respective Dependents for Selected

Years

16

Figure 4: National Capital Area MTF Budgets 19

Abbreviations

CHAMPUS Civilian Health And Medical Program of the Uniformed

Services

DHP Defense Health Program

DOD Department of Defense

FEHBP Federal Employees Health Benefits Program

MHS military health system

MTF military treatment facility

NCA national capital area

Page 31 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix I 

Scope and Methodology

To assess the need for NCA MTFs and the coordination of health care among

MTFs, we examined the roles and activities of those MTFs and their related

guidance and support from DOD and service command levels. We

interviewed officials and analyzed records at each of those levels to assess

the information and processes officials use for determining MTF resource

needs and coordinating resource use. The scope of our work necessarily

extended beyond the national capital area to include issues affecting MHS

as a whole, with its dual mission of maintaining wartime readiness and

providing peacetime care, because NCA MTFs are integral parts of that

system and its dual mission. However, this review focuses on MHS within

the United States and does not include those MTFs located overseas.

Beginning our work among the 26 NCA MTFs, we conducted interviews and

analyses at the 3 military medical centers—representing 75 percent of NCA

MTF costs—and at 8 other MTFs, including all of the larger ones and a

selection of smaller branch clinics. There, we discussed and analyzed

information on how and to what extent MTF resource requirements are

defined, measured, and justified, taking into account the MTFs’ dual

missions. We also analyzed beneficiary population, workload, and cost

data associated with NCA MTFs compared to national totals to generally

assess the level of services provided to NCA beneficiaries. Through

discussions with MTF officials, and focusing on a selection of NCA MTF

coordination agreements, we examined the nature, purpose,

achievements, and future expectations of care coordination activities

among MTFs.

We did not attempt to verify or compare costs and benefits among the NCA

MTF coordination agreements because of the limited and widely varying

data on those agreements. We contacted civilian NCA health care provider

organizations along with health care consultants to obtain comparable

information on how civilian health care facilities coordinate local health

care services.

Because each of the military services has its own methods for determining

health care needs and allocating resources among its MTFs, we reviewed

those processes at the services’ regional and Surgeon General levels.

There we discussed and obtained data on the services’ modeling tools and

other guidance and analytical processes affecting MTF resource allocation

decisions and coordination of care among MTFs. That included considering

how the services’ independent approaches differed in design and effects

on their MTFs. We then followed up on the application of such independent

tools to find how they affect selected NCA MTFs in terms of supporting

Page 32 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix I 

Scope and Methodology

readiness and providing peacetime care and to identify any problems in

their applications.

We assessed the current and potential effects of TRICARE implementation

on MTF needs and coordination in the national capital area and elsewhere,

based on the experiences and expectations of the MTFs we visited, the

expected role as viewed by the TRICARE lead agent and DOD, and our

current and prior TRICARE work. We also relied on current and prior

work and our reports and those by others in assessing the role, needs, and

performance of MHS.

Finally, we considered the purposes and potential effects of a broad

approach, begun by DOD and the services during our review, to improve

MHS management. Of the approach’s 29 initiatives, we focused on the one

that appears to be key—the development of a tri-service medical resource

planning and distribution plan intended to optimize use of MTF resources.

Through a series of discussions and review of the plan with the team

leading that effort and with others, we considered the initiative’s potential

to address the problems we found in the services’ approaches to MTF needs

assessment and care coordination in the national capital area and

elsewhere.

Page 33 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix II 

Profile of MTFs in the National Capital Area

Organization of NCA

MTFs

The services use separate structures to plan and manage their NCA MTFs.

For example, the Army’s 12 NCA MTFs are centrally managed as part of the

Walter Reed Health Care System. This system is also part of a single

regional command that covers 21 states and the District of Columbia. In

contrast, only some of the Navy’s 12 NCA MTFs are directed by the Naval

Medical Center in Bethesda, Maryland; the other clinics report to a Navy

Health Support Office in Norfolk, Virginia. The Air Force’s one NCA

medical center and its one NCA clinic separately report to different major

commands. Along with operating independently, each service’s complex

command structure can limit the extent to which resource use is

coordinated among the service’s facilities. For example, the Air Force

medical center has sought control of the clinic to reduce duplicative

administrative costs and staffing. But the clinic reports to the Office of the

Air Force Surgeon General, who has retained the current structure.

Army NCA MTFs All Army NCA MTFs come under the Walter Reed Health Care System and

consist of the medical center, a community hospital, a clinic with

same-day surgery capability, and their respective clinics. Walter Reed

Medical Center is a 350-bed tertiary care facility located in a residential

area of the District of Columbia, near the Maryland border. The center,

which began admitting patients in 1909, provides primary health care

services and about 50 specialty and subspecialty services. Walter Reed is

also a worldwide referral center and has research and medical training

programs. Walter Reed’s wartime mission is being a designated casualty

receiving center for injured military personnel. Further, over one-third of

its military personnel are designated to deploy during war. Walter Reed

has branch clinics at the Pentagon in Virginia and Fort McNair in

Washington, D.C. These outlying facilities offer the beneficiary convenient

access to routine and urgent primary health care services with referral to

Walter Reed for specialty care. These facilities treat beneficiaries in MHS

who might otherwise seek care in the civilian sector.

DeWitt Army Community Hospital, located in Fort Belvoir, Virginia, is the

only NCA inpatient military facility in northern Virginia. It is a 68-bed

hospital with an intensive care unit, medical/surgical wards, labor and

delivery and mother/baby wards, pharmacies, and a 24-hour emergency

room. DeWitt provides a number of specialty services and has a family

medicine residency training program. DeWitt hospital and its clinics

provide the primary medical support for several major Army commands

and crosses service lines by providing obstetric and orthopedic services to

Marines and their family members at the Quantico, Virginia, naval clinic.

Page 34 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix II 

Profile of MTFs in the National Capital Area

DeWitt’s clinics are at Fort Meyer and A.P. Hill, Virginia. A.P. Hill, the

southernmost NCA MTF, provides care to reservists on active duty and the

cadre of active duty running the reserve training facility there. DeWitt also

has clinics in Fairfax and Woodbridge, Virginia, where there are

concentrations of dependent and retiree beneficiary populations.

Kimbrough Ambulatory Care Center at Fort Meade, Maryland, provides

primary care as well as a wide range of same-day surgery. Specialty

services include general surgery; orthopedics; vascular surgery; urology;

ophthalmology; gynecology; and ear, nose, and throat. The clinic performs

approximately 2,000 ambulatory surgeries each year using assigned

providers and staff from Walter Reed and the Naval Medical Center in

Bethesda. Kimbrough’s clinics at Aberdeen Proving Ground, Edgewood,

and Fort Detrick, Maryland, offer primary care services. Kimbrough cares

for personnel assigned to the National Security Agency and the Defense

Information School. Fort Detrick supports the U.S. Army Medical

Research and Development Command. Aberdeen and Edgewood support a

variety of Advanced Individual Training programs conducted by the U.S.

Army Ordnance Corps.

Navy NCA MTFs The National Naval Medical Center at Bethesda, Maryland; its branch

clinics; and separate clinics at Annapolis and Patuxent River, Maryland,

and Quantico, Virginia, comprise the Navy NCA MTFs. Bethesda has 239

beds and provides primary health care services but is known for its

specialty and subspecialty services, such as mother and infant care and

breast care. Bethesda is a worldwide referral center, providing services for

16 different specialties, as well as conducting medical training programs

and research. Bethesda’s readiness mission includes staffing the USN

Comfort, a hospital ship, as well as contributing staff to Navy and Marine

ships, bases, and hospitals in the United States and overseas.

Bethesda has eight branch clinics located throughout Washington, D.C.;

Maryland; and Virginia that support Navy active duty commands. The

outlying facilities offer beneficiaries convenient access to primary health

care services with referral to Bethesda for specialty care. The clinics treat

beneficiaries in MHS who might otherwise seek care from civilian

providers.

The Indian Head, Maryland, and Arlington Annex and Dahlgren, Virginia,

clinics provide outpatient primary care, occupational medicine, preventive

medicine, and industrial hygiene services to all eligible DOD beneficiaries.

Page 35 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix II 

Profile of MTFs in the National Capital Area

The Washington Navy Yard clinic and Naval Air Facility, Washington,

clinic at Andrews Air Force Base provide outpatient primary care,

occupational medicine, preventive medicine, and industrial hygiene

services to active duty personnel along with occupational medicine

services for civil service personnel. Naval Air Facility provides physical

exams for most Navy and Marine Corps personnel in Washington, D.C.,

and medical support and training to reserve personnel. The Carderock,

Virginia, clinic and the clinic at the Naval Research Laboratory in

Washington, D.C., provide occupational medicine and industrial hygiene

services to active duty and civil service personnel. The Naval Security

Station, Maryland, clinic provides sick call services to active duty

personnel located at the Naval Security Station.

The Naval Medical Clinic in Annapolis provides primary care for all

beneficiaries but mostly focuses care on the 4,000 midshipmen at the

Naval Academy. The Naval Medical Clinic in Quantico provides primary

care for all beneficiaries and care for trainees at the Marine Officer School.

The Naval Medical Clinic in Patuxent River provides primary care for a

mix of active duty, dependent, and retiree beneficiaries.

Air Force NCA MTFs There are only two Air Force NCA MTFs: Malcolm Grow Medical Center and

Bolling clinic, each reporting to separate commands. Malcolm Grow, the

89th Medical Group, is a 70-bed tertiary center located at Andrews Air

Force Base, Maryland. The center reports to the Air Mobility Command in

Scott Air Force Base, Illinois, and provides primary health care services

but is known for more than 30 specialty and subspecialty clinics. It is also

has a family practice residency program. During wartime, Malcolm Grow

is the entry port for all patients air evacuated from overseas locations in

Europe. The 89th Medical Group also provides physiological training,

which consists of intense altitude chamber training to familiarize

personnel with the physiological effects of flying.

Bolling clinic, the 11th Medical Group, is located at Bolling Air Force Base

in Washington, D.C., and provides primary medical and dental care to

eligible DOD beneficiaries, which includes Defense Intelligence Agency,

Naval Research Laboratory, and Bellevue Navy Housing staff. It reports to

the Air Force Surgeon General’s office. Flight surgeons also provide

medical support to the offices of the Secretary of Defense and the

Chairman of the Joint Chiefs of Staff.

Page 36 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix II 

Profile of MTFs in the National Capital Area

Selected NCA MTF

Data

Table II.1 lists the NCA MTFs, the number of hospital beds, their 1998 DHP

operations and maintenance (O&M) budget, their 1998 personnel numbers,

and workload data.

Table II.1: NCA MTFs’ Number of Beds, Budget, Personnel, and Outpatient Workload, 1998

Personnel

MTF Number of beds

DHP O&M

budget Military Civilian Contract Total

Outpatient

visits

Army

Walter Reed 350 $147,839,900 1,804 1,185 155 3,144 645,975

DeWitt 68 59,945,000 340 399 104 843 611,019

Kimbrough Outpatient only 46,349,000 273 423 32 728 321,691

Navy

Bethesda 239 146,847,000 2,599 926 215 3,740 555,059

Annapolis Outpatient only 6,455,000 122 36 14 172 89,257

Patuxent River Outpatient only 7,361,000 152 67 5 224 73,109

Quantico Outpatient only 8,451,000 194 51 16 261 89,569

Air Force

Malcolm Grow 70 33,213,000 1,314 264 • 1,578 394,477

Bolling Outpatient only 5,390,000 189 28 1 218 52,644

Note: Walter Reed figures include Pentagon clinic and Fort McNair; DeWitt includes clinics at

Fairfax, Fort Myer, A.P. Hill, and Woodbridge; Kimbrough includes clinics at Aberdeen,

Edgewood, and Fort Detrick; Bethesda includes branch clinics at Dahlgren, Indian Head,

Arlington Annex, Washington Navy Yard, Naval Air Facility, Carderock, Naval Research Lab, and

Security Station.

Page 37 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix III 

Service Models

Historically, the Army, Navy, and Air Force—because of their

independence, diverse organizational structures, and general lack of

coordination—have developed their own approaches for identifying,

allocating, and validating MTF requirements. The approaches include an

array of technical, mathematical-based models. The brief descriptions

below indicate the variety and changing nature of models used; they are

not comprehensive, comparative assessments.

Army Models For wartime requirements, the Army, unlike the Navy and Air Force,

begins with its Total Army Analysis model to determine the number and

type of support units, including medical, needed to support the Army’s

combat forces in wartime and other contingencies. In addition to the two

near-simultaneous major regional conflicts, the model also includes

requirements for post-hostility requirements—such as treating civilians

and refugees—operations other than war, homeland defense, and

domestic disaster relief. Building on the baseline obtained from the model,

the Army uses its Total Army Medical Department Personnel Structure

model to determine additional military medical personnel needed for

rotation and training.

Recently, the Army’s North Atlantic Regional Medical Command began

comparing medical personnel levels among MTFs within the command to

correct imbalances caused by changes in the medical environment.

Changes that affect the size of MTFs include TRICARE implementation,

shift from inpatient to outpatient care, base closure and realignments,

downsizing of the active duty force, increased deployments, decreased

budgets, and increased costs of providing health care. Thus, the North

Atlantic Regional Medical Command developed the Regional Uniform

Benefit model, which compares and validates medical personnel

allocation. The objectives of the model are to distribute resources to meet

population needs, benchmark productivity and performance, optimize

contract dollars, and develop “what if” analyses before implementing a

change in services or a facility. For example, at an MTF outside the national

capital area, the model identified excess resources, which resulted in a

decrease of about 120 staff, a decrease in its budget by $5.5 million, and

the elimination of a plan to build a new surgical suite. The model has been

completed at most NCA MTFs except at Walter Reed. The model has been

briefed to other Army offices and may be expanded beyond the North

Atlantic Regional Command. Army officials told us that the Automated

Staffing Assessment model and other models, while useful, had been

inadequate in addressing total facility and personnel needs.

Page 38 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix III 

Service Models

Navy Models The Navy uses its Total Health Care Support Readiness Requirements to

project its active duty medical force readiness requirements. The Navy

readiness mission is to support all Navy and Marine Corps operational

missions, including wartime and day-to-day operations. This includes

mobilizing hospital ships—USN Mercy on the West Coast and the USN

Comfort on the East Coast—supporting Navy Fleet and Marine Corps

operations ashore and afloat and numerous Fleet hospitals, as well as

maintaining military treatment facilities outside the United States. Its

day-to-day operational support mission allows Navy medical personnel to

rotate between the United States, ships at sea, and overseas assignments.

Also included is training of medical personnel.

The Navy uses a number of models to determine wartime requirements,

allocate military medical personnel among MTFs, and validate MTF

manpower requirements. The Total Health Care Support Readiness

Requirements model defines readiness requirements as the minimum

number of military medical personnel required to support and sustain its

readiness mission. This model is the basis for DOD’s overall sizing model.

The Navy uses its allocation model called the CONUS Healthcare

Readiness Infrastructure Sizing model to allocate military medical

personnel among its MTFs in the United States. The model attempts to

validate the number of military personnel needed by the MTF to staff its

assigned wartime tasks. All military personnel in excess of wartime

requirements assigned to the MTF are considered to be part of the Navy

peacetime healthcare mission. Finally, the Navy uses its efficiency reviews

to further validate the number and type of personnel needed at an MTF to

provide the peacetime health care benefit using workload, number of

personnel, and workload standards. An efficiency review determines how

an MTF’s military and civilian staffing compares with applicable standards.

Air Force Models The Air Force projects its requirements for military medical personnel

using DOD’s overall sizing model. This model identifies the number of

military medical personnel needed to support the Air Force’s mission of

supplying air-transportable hospitals, contingency hospitals, and critical

care air transport teams. In addition, the Air Force has decided that

military medical personnel should provide primary care services to active

duty personnel and active duty family members at all bases. According to

Air Force officials, this has resulted in an additional requirement of about

200 military medical personnel.

Page 39 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix III 

Service Models

The Air Force Surgeon General and the major commands, such as the Air

Mobility Command, that fund and control the various MTFs, distribute the

wartime taskings and allocate associated military medical personnel

needed among MTFs based on major command wartime requirements and

on which MTFs can best support those requirements. The Air Force tries to

concentrate many of the wartime taskings at large MTFs that have the

beneficiary population—high volume of workload—to support military

provider readiness training. The Air Force also uses its Strategic

Resourcing Portfolio, an economic manpower sizing model, as a tool to

help determine where it may be economical and feasible to allocate

military medical personnel.

Currently, the Strategic Resourcing Portfolio projects the numbers and

mix of personnel needed at an MTF based on the demographics of the

beneficiary population, historical workload,26 and the cost of providing

health care services. The model also reflects the number of military

medical personnel assigned to meet the MTF’s wartime taskings. The health

care services provided by the military personnel in excess of this number

and by civilian personnel are part of the peacetime mission. However, the

latest edition of this model raised reliability issues, as we reported.

26In the future, when TRICARE is fully implemented, it will be based on the enrolled population.

Page 40 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix IV 

DOD’s 29 Reengineering, Consolidation, and

Optimization Initiatives

Prompted by concerns about whether it could meet readiness needs, as

well as optimize peacetime health care, DOD began 29 separate initiatives

to modernize MHS management in 1998. DOD’s 29 reengineering,

consolidation, and optimization initiatives and their objectives are listed

below.

Pharmacy national mail order program: Redirect patients from using

Standard CHAMPUS pharmacies to retail network pharmacies.

Pharmacy automation and formulary management.

Pharmacy distribution and pricing agreements.

System/facility optimization:

• Improve care management consistent with recognized science-based best

clinical practice.

• Improve practice patterns.

• Implement evidence-based medicine and prevention.

• Reduce inappropriate variance from and speed adoption of

clinical/administration best practice.

• Implement utilization management system for all of TRICARE.

• Recapture most local area care to MTFs where cost beneficial.

• Optimize enrollee-to-provider ratio (for example, 1,500 enrollees per

physician).

• Right size hospitals and clinics.

• Right size each MTF’s primary and specialty care providers.

• Improve care management of high-intensity illnesses.

• Increase number and speed adoption of clinical guidelines for

high-intensity, high-cost illnesses.

• Develop patient safety initiative with the Department of Veterans Affairs

and other agencies.

• Implement MHS quality initiatives, and develop quality initiatives with

Department of Health and Human Services, Department of Veterans

Affairs, and Office of Personnel Management.

• Reengineer clinic infrastructure to support modern ambulatory care.

• Reengineer clinical and administrative processes to meet access and

satisfaction standards.

• Increase percentage of users who are enrolled.

• Increase nonphysician support in clinical settings.

• Shift nonemergent and nonurgent care in the emergency rooms to other

ambulatory care settings.

Page 41 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix IV 

DOD’s 29 Reengineering, Consolidation, and

Optimization Initiatives

• Retain flexibility in MHS to respond to future internal and external factors.

• Determine MHS readiness requirements for nonphysicians as well as for

physicians and move to that number, unless a make versus buy analysis

indicates additional in-house MTF staffing is advantageous.

Consolidate medical information management/information technology

activities within DHP:

• Consolidate administration into a single activity.

• Move to more “paperless” processing.

• Improve the integration and connectivity of multiple systems to support

user needs.

• Improve information systems, such as Composite Health Care System II,

Government-Computerized Patient Record, and pharmacy management.

Reduce/flatten/lean infrastructure: Eliminate duplicate management

activities/functions at intermediate commands in the three military

departments and TRICARE regional lead agents.

Reduce cross-service duplications:

• Consolidate preventive medicine.

• Consolidate environmental health.

• Consolidate blood donor labs.

Consolidate the number of medical centers.

Merge overlapping NCA medical centers and San Antonio medical centers.

Reengineer aeromedical evacuation (program analysis and evaluation).

Reengineer Air Force Institute of Pathology.

Managed care support contract:

• Reduce TRICARE managed care support contract administrative costs.

• Reduce/consolidate number of change orders for managed care support

contracts.

• Extend contracts when advantageous to government and beneficiaries.

Managed Care Support 3.0 contract: Implement new managed care support

contract structure/process.

Page 42 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix IV 

DOD’s 29 Reengineering, Consolidation, and

Optimization Initiatives

Contract policy/payment change.

Military construction projects: Refer or reduce certain military

construction projects (Air Force Institute of Pathology, classroom project

at Army Medical Center and School, Center for Health Promotion and

Preventative Medicine).

Accelerate military personnel reductions (Air Force).

Consolidate graduate medical education administration and development

of Department graduate medical education policy.

Purchasing/acquisition activities for all medical supplies used in MTFs

(excluding fielded medical units and deployable medical systems):

• Regionalize.

• Implement universal product numbers, joint purchasing, standardization

for medical and surgical supplies.

Nationalize or regionalize maintenance and repair contracts for medical

equipment used in medical and dental treatment facilities and in medical

training activities.

Outsourcing of advanced medical technical training for areas such as

laboratory, radiology, electrocardiograph, and pharmacy technologists, as

well as all other outsourcing initiatives related to quadrennial Defense

reviews.

Consolidate medical facility acquisition and life-cycle management

activities into a single-facility life-cycle management organization.

Beneficiary support:

• Emphasize themes: “Taking care of our own,” “Protecting our forces’

health,” “Customer first.”

• Support and improve patient self-care and reduce overutilization of care.

• Improve communication through increased use of Internet and other

information tools.

• Implement report cards and other performance assessment tools.

• Implement consumer councils in all MTFs.

• Strengthen grievance resolution procedures.

• Expand customer satisfaction assessment to all of TRICARE.

Page 43 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix IV 

DOD’s 29 Reengineering, Consolidation, and

Optimization Initiatives

TRICARE benefit policy:

• Simplify, rationalize, and make more uniform the TRICARE benefit

(include pharmacy).

• Carry out successful TRICARE Senior demonstration.

• Carry out successful DOD demonstration (MacDill).

• Obtain authorization for TRICARE Senior (Medicare reimbursement)

nationwide.

TRICARE staff training and education:

• Increase training in “good” managed care for MTF staff.

• Move trauma training into the private sector wherever it makes economic

or readiness sense.

• Use Internet and other advanced distributive learning tools.

Improve assessment, purchase, and use of medical technology.

Outsourcing quadrennial Defense reviews: Outsource functions better

done by the private sector.

Reengineer, improve prevention:

• Focus on and shift resources to outcome-based, evidence-based

prevention.

• Implement “putting prevention into practice.”

• Push reduction in high-priority areas—tobacco use, alcohol abuse,

injuries.

• Increased immunization rates.

• Increase line support of troop fitness and wellness.

• Improve infectious disease prevention, surveillance, and response.

Improve resourcing:

• Adjust payments to Uniform Services Treatment Facilities.

• Move to capitation funding more quickly.

• Reduce double payments by Medicare and DOD.

• Increase third-party collection rates.

Page 44 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix IV 

DOD’s 29 Reengineering, Consolidation, and

Optimization Initiatives

Improve MHS management:

• Manage MHS by performance at all levels.

• Design/refine/implement performance measures—outcomes, cost, access,

quality.

• Further develop/reinforce partnership among Health Affairs and the

services.

• Strengthen leadership at all levels of MHS.

• Make smart make versus buy decisions throughout MHS.

• Develop/implement strategic communications with customers, public, DOD,

and the Congress.

• Develop stronger market analysis and marketing efforts.

• Refine budget preparation to improve collaboration and earlier

determination of MHS priorities.

• Strengthen fraud and abuse reduction efforts with Inspector General.

Page 45 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix V 

Comments From the Department of Defense

Page 46 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix V 

Comments From the Department of Defense

Now on p. 29.

Now on p. 29.

Now on p. 29.

Page 47 GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix V 

Comments From the Department of Defense

Now on p. 29.

Now on p. 29.

Now on p. 30.

(101615) Page 48 GAO/HEHS-00-10 Justifying Military Medical Resources
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