MILITARY HEALTH 

SYSTEM 

Sustained Senior 

Leadership Needed to Fully 

Develop Plans for 

Achieving Cost Savings 

Statement of Brenda S. Farrell, Director,

Defense Capabilities and Management

Testimony 

Before the Subcommittee on Military 

Personnel, Committee on Armed 

Services, House of Representatives

For Release on Delivery 

Expected at 2:00 p.m EST

Wednesday, February 26, 2014

GAO-14-396T

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-396T, a testimony 

before the Subcommittee on Military 

Personnel, Committee on Armed Services, 

House of Representatives

February 26, 2014

MILITARY HEALTH SYSTEM

Sustained Senior Leadership Needed to Fully Develop 

Plans for Achieving Cost Savings 

Why GAO Did This Study

DOD’s MHS costs almost $50 billion 

annually and is expected to grow to 

$70 billion by 2028. The MHS 

governance structure has been the 

subject of many studies, some 

recommending major changes. In

2006, DOD considered potential 

governance structure changes but left 

its existing structure in place, 

approving instead a shared-services 

directorate to consolidate common 

MHS functions (e.g., shared 

information-technology services) that

ultimately was never developed. In 

2012, DOD announced the creation of 

the DHA by October 1, 2013, with

seven main goals: (1) consolidate 

functions (shared services) common to 

DOD, (2) deliver more-integrated 

health care in areas with more than 

one military service, (3) establish 

more-standardized processes, (4) 

more-closely align financial incentives 

with health and readiness outcomes, 

(5) match other resources with 

missions, (6) deliver more primary care 

and other health services, and (7) 

better coordinate care over time and 

across treatment settings. Section 731 

of the National Defense Authorization

Act for Fiscal Year 2013 required DOD 

to provide three submissions in March, 

June, and September 2013, detailing 

its plan to reform the MHS. 

This testimony addresses the 

additional actions that would increase 

transparency and enhance 

accountability of DOD’s reform plans. 

It is based primarily on (1) GAO’s 

November 2013 report which assessed 

DOD’s first two submissions of its 

reform plans to Congress and (2) 

selected updates. For the updates, 

GAO analyzed DOD’s third reform plan 

and interviewed a DOD representative. 

What GAO Found

Department of Defense (DOD) senior leadership has demonstrated a 

commitment to oversee implementation of its military health system’s (MHS)

reform and has taken a number of actions to enhance the reform efforts. For 

example, in March 2013, DOD chartered the MHS Governance Transition 

Organization to provide oversight, management, and support for the 

implementation. This entity is chartered to exist until October 2015, when the 

Defense Health Agency (DHA) is expected to reach full operating capability. 

Formation of this entity addresses an issue GAO reported on in April 2012—that 

DOD did not form such a team to oversee its 2006 MHS reform effort. 

GAO’s November 2013 report identified several areas in DOD’s implementation 

plan where sustained senior leadership attention is needed to help ensure the 

reform achieves its goals including: 

• Undetermined staffing requirements: DOD did not have the data to 

determine how the creation of the DHA will affect the total number of MHS 

headquarters staff because it had not conducted an accurate baseline 

assessment of current staffing levels. Notwithstanding, using data that 

service officials later believed were inaccurate, in 2011, DOD identified 

anticipated annual personnel savings of $46.5 million as part of the rationale 

for creating the DHA.

• Unclear cost estimates: DOD’s cost savings estimates were missing key 

details such as the source of the savings. DOD aggregated the separate 

functions of its shared services, which obscures the size and cost of planned 

efficiencies for each function. A business case analysis requires detailed 

information to convince customers and stakeholders that the selected 

business process is the appropriate means for achieving performance. In 

addition, business-case analyses should demonstrate the sensitivity of the 

outcome to changes in assumptions. However, DOD did not assess the risk 

that implementation costs could increase.

• Incomplete performance measures: DOD did not develop explanations for 

how each measure relates to the goals of the reform effort, did not define the 

specific measure to be developed; did not provide a baseline assessment of 

the current performance that is to be measured; and, most importantly, did 

not identify quantifiable targets for assessing progress. In its third 

submission, DOD provided some additional information, but did not provide 

fully developed performance measures for any of its seven reform goals. 

DOD concurred with all of GAO’s recommendations, including: (1) develop a 

baseline assessment of the number of personnel currently working within the 

MHS headquarters and an estimate for the DHA at full operating capability; (2) 

develop a more thorough explanation of the potential sources of cost savings 

from DOD’s implementation of shared services; and (3) develop performance 

measures that are clear, quantifiable, objective, and include a baseline 

assessment of current performance. In February 2014, a DOD representative 

said that DOD has taken action to address the recommendations, but it has not 

completed implementation. GAO continues to believe that it is imperative for 

DOD to complete these actions so decision makers will have complete 

information to gauge reform progress.

View GAO-14-396T. For more information, 

contact Brenda S. Farrell at (202) 512-3604 or 

farrellb@gao.gov. 
 

Page 1 GAO-14-396T

Chairman Wilson, Ranking Member Davis, and Members of the 

Subcommittee:

Thank you for the opportunity to be here today to discuss whether the 

Defense Health Agency (DHA) is positioned to achieve the goals of the 

Department of Defense’s (DOD) efforts to reform the military health 

system (MHS). DOD plans to spend almost $50 billion on the MHS in 

fiscal year 2014. This number has grown from approximately $20 billion in 

fiscal year 2000, and is projected by the Congressional Budget Office to 

continue to grow to $70 billion in 2028. In an effort to create a more 

integrated and cost effective MHS, in March 2012, the Deputy Secretary 

of Defense directed the establishment of a Defense Health Agency, which 

officially began operations on October 1, 2013. Throughout the 

implementation of the DHA, senior DOD leadership, including the Deputy

Secretary of Defense, the Assistant Secretary of Defense (Health Affairs), 

and the service Surgeons General have demonstrated a commitment to 

oversee implementation for reform of the MHS. However, we have 

identified several areas where sustained senior leadership, including 

additional information, is needed to help ensure the reform achieves its 

goals, including greater cost effectiveness. 

My statement today summarizes key findings from our November 2013 

report1

The National Defense Authorization Act for Fiscal Year 2013 required 

DOD to submit its plans for implementing its reform effort in three 

submissions—the first in March 2013, the second in June 2013, and the 

third in September 2013—and mandated that we review DOD’s first two 

submissions.

which assessed DOD’s implementation plans for reform of the 

MHS and includes selected updates. Specifically, it addresses: (1) the 

staffing requirements of the DHA; (2) the sources of the cost savings that 

DOD estimates will be realized from its shared-services goal, and the 

importance of monitoring and more fully developing the associated 

implementation costs; (3) milestones to assess progress in implementing 

all seven goals of the reform efforts; and (4) performance measures to 

evaluate achievement of the reform’s goals. 

2

 

1

GAO, Defense Health Care Reform: Additional Implementation Details Would Increase 

Transparency of DOD’s Plans and Enhance Accountability

We examined the March and June 2013 submissions as 

GAO-14-49 (Washington, 

D.C.: Nov.6, 2013). 

2

National Defense Authorization Act for Fiscal Year 2013, Pub. L. No. 112-239, § 731 

(2013). 
 

Page 2 GAO-14-396T

well as an August 2013 supplemental report to Congress of DOD’s plan 

to implement the reform effort and reported the results in November 2013. 

For that report, we compared DOD’s submissions for reforming the MHS 

governance structure with the statutory requirements and key 

management practices contained in GAO’s Business Process 

Reengineering Assessment Guide and other relevant GAO work.3 In the 

course of our work, we interviewed officials from the Office of the 

Assistant Secretary of Defense for Health Affairs, MHS Transition Office, 

and the military Surgeons General. For the purposes of this testimony, in 

February 2014, we subsequently examined DOD’s third and final reform 

plan, which was submitted to Congress in November 2013, and 

discussed the status of our November 2013 report recommendations with 

an official within the Office of the Secretary of Defense (Health Affairs) 

who represented the department. The work upon which this statement is 

based was conducted in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We 

believe that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives. Additional details 

about the scope and methodology can be found in our November 2013 

report, and a list of related products appears at the end of my statement.

Since 1949, the governance structure of the MHS has been the subject of 

numerous studies conducted by DOD internal and external boards, 

commissions, task forces, and GAO, and several of those studies have 

led to recommendations for a major organizational realignment. After 

studying several options for reorganizing the defense organizations that 

constitute the MHS, in 2006 the Deputy Secretary of Defense approved 

multiple initiatives including a shared services directorate to integrate the

services these organizations provide, such as information technology,

and make the MHS more cost-effective. DOD implemented those 

initiatives to varying extents; however, the directorate was never formed 

and the overarching governance structure of the MHS did not change. 

Further, Congress expressed concern that DOD had not yet developed a 

 

3

GAO, Business Process Reengineering Assessment Guide, GAO/AIMD-10.1.15

(Washington, D.C.: May 1997); Streamlining Government: Questions to Consider When 

Evaluating Proposals to Consolidate Physical Infrastructure and Management Functions, 

GAO-12-542 (Washington, D.C.: May 23, 2012); GAO. Defense Health Care: Applying 

Key Management Practices Should Help Achieve Efficiencies within the Military Health 

System GAO-12-224 (Washington, D.C.: Apr. 12, 2012). 

Background
 

Page 3 GAO-14-396T

comprehensive plan to enhance quality, efficiencies, and savings in the 

MHS. DOD’s senior leadership established a task force in 2011 to review 

various options for changing the governance structure of the system. This 

task force reported the results of its review to the congressional defense 

committees in March 2012 and, in October 2013, implemented its 

recommended course of action by establishing the DHA. According to 

DOD, with the creation of the DHA, the military services’ respective 

Surgeons General will continue to oversee medical forces and the 

operation of health care systems, including their military hospitals, and 

the DHA will support the services in executing their respective medical 

missions. 

DOD created the DHA with the intent of creating a more cost-effective 

and integrated MHS. This reform effort comprises seven overarching 

goals: 

• consolidate functions (shared services) common to DOD; 

• deliver more-integrated health care in areas with more than one 

military service;

• establish more-standardized processes; 

• more-closely align financial incentives with health and readiness 

outcomes;

• match other resources with missions;

• deliver more primary care and other health services; and 

• better coordinate care over time and across treatment settings.

The Deputy Secretary of Defense directed the formation of a team to 

develop an implementation plan for the governance changes. As a result, 

in March 2013, the Assistant Secretary of Defense for Health Affairs 

chartered the MHS Governance Transition Organization to provide 

oversight, management, and support for the implementation of MHS 

governance reforms. The formation of this MHS Governance Transition 

Organization addresses an issue we previously reported on—that DOD 
 

Page 4 GAO-14-396T

had not formed an overarching team to manage the implementation of the 

2006 attempt to improve the department’s medical governance structure.4

As we reported in November 2013, DOD has not conducted an accurate

baseline assessment of the headquarters personnel currently working in 

the MHS—that is, personnel working at each military service’s 

headquarters and at the Office of the Secretary of Defense. In addition, 

DOD has not determined the number of personnel required for the DHA 

when it is fully operational in 2015, as currently planned. Our previous 

work5 highlighted the need for federal agencies to have valid, reliable 

data and to be aware of the size of their workforce, its deployment across 

the organization, and the knowledge, skills, and abilities needed for the 

agency to accomplish its mission.6

In its September 2011 analysis of options to reform the MHS, DOD 

identified anticipated personnel savings as part of the rationale for the 

reform effort and estimated a resulting estimated annual personnel cost 

savings of $46.5 million. The Deputy Secretary of Defense based the 

decision to establish the DHA, in part, on this estimate of personnel 

savings. In contrast, we reported in November 2013 that DOD officials 

told us that there would be no net increase in personnel numbers across 

the MHS headquarters as a result of the creation of the DHA. Further, we 

reported that, according to DOD officials, military service officials believed 

that DOD’s previous baseline assessment that was reflected in the $46.5

million cost savings estimate did not accurately reflect the current number 

of headquarters personnel working in the MHS.

A baseline assessment of the number 

of current headquarters personnel is a crucial first step for developing an 

estimate of the number of personnel that will be required once DHA is 

fully operational.

7

We also reported in November 2013 that, according to DOD officials, the 

number of military, civilian, and contractor positions required when the 

 

4 GAO-12-224. 

5 GAO/AIMD-10.1.15. 

6

GAO, A Model of Strategic Human Capital Management, GAO-02-373SP (Washington, 

D.C.: March 2002).

7

GAO-14-49. 

DOD Does Not

Have an Accurate

Baseline Assessment 

of Current Staffing to 

Determine Potential 

Savings and Future 

Staffing Needs of

the DHA
 

Page 5 GAO-14-396T

DHA is fully operational in 2015 could be significantly higher for certain 

headquarters functions than the estimates for the number of positions 

required at the time of the DHA’s establishment in October 2013. For 

example, we reported that according to a senior official responsible for 

information technology in the MHS, the number of staff required to 

provide information-technology services when DHA began initial 

operations in October 2013 was estimated at about 400 military and 

civilian positions; however, that estimate could increase to about 3,500 

military and civilian positions and about 5,000 contractor equivalent 

positions once the DHA becomes fully operational in 2015. We concluded 

that DOD was unable to determine whether the establishment of the DHA 

would result in an increase or decrease in the number of headquarters 

personnel because the department had not completed an accurate

baseline assessment of the number of headquarters personnel working in 

the MHS across the services and the Office of the Secretary of Defense.

In our November 2013 report, we recommended that DOD develop a 

baseline assessment of the current number of military, civilian, and 

contractor personnel currently working within the MHS headquarters and 

an estimate for the DHA at full operating capability, including estimates of 

changes in contractor full-time equivalents.8

 

8

DOD concurred with our 

recommendation. In our November 2013 report, we noted that DOD 

officials told us that they planned to conduct a baseline assessment of 

headquarters staffing levels and submit a revised estimate of its staffing 

needs in the department’s third and final implementation plan submission. 

In the final submission which we reviewed for this statement, DOD did not 

include a baseline assessment of the number of personnel currently 

working in the MHS headquarters across the services and the Office of 

the Secretary of Defense, nor did it include an estimate of the staffing 

needs once the DHA is fully operational in 2015. Instead, DOD reported 

that the DHA would include 1,941 military and civilian personnel as of its 

initial operating capability on October 1, 2013. Additionally, the plan’s 

estimate of staffing in October 2013 does not account for any contractor 

positions currently associated with the MHS’s headquarters functions. As 

the DHA moves toward full operating capability, accurate baseline staffing 

data is critical for senior leadership to make informed decisions about the 

resources required to manage the MHS. Such data have become even 

more critical since the Deputy Secretary of Defense announced a 

GAO-14-49. 
 

Page 6 GAO-14-396T

20 percent reduction in DOD management headquarters spending over 

5 fiscal years beginning in fiscal year 2014.

DOD has not provided discrete cost savings estimates for the various 

functions it has identified as part of its 10 shared service projects it is 

planning as part of the MHS reform. In addition, DOD has not clarified its 

plan to monitor implementation costs. According to GAO’s Business 

Process Reengineering Assessment Guide, an initial business case is a 

high-level document aimed at convincing customers and stakeholders 

that reengineering the selected business process is the appropriate 

means for achieving performance and cost-savings goals.9

In November 2013, we reported

The Guide 

identifies that as the reengineering process matures, the business case 

should include detailed qualitative and quantitative analysis in support of 

selecting and implementing the new process that includes a statement 

regarding benefits, costs, and risks. In addition, business-case analyses 

should demonstrate the sensitivity of the outcome to changes in 

assumptions, with a focus on the dominant benefit and cost elements and 

the areas of greatest uncertainty. In the context of major businessprocess reengineering efforts, such as DOD’s shared services, 

implementation costs can be the dominant cost element and the area of 

greatest uncertainty.

10 that DOD officials stated that while 

some efficiencies in the reform effort might be achieved by reducing 

headquarters staffing levels, DOD expected that the greatest cost savings 

would be realized through a more integrated approach to the MHS, 

standardization, and the implementation of shared services, such as such 

as information technology, medical logistics, and contracting. In our 

September 2012 report11

 

9

on DOD’s analysis of options for governance of 

the MHS, we recommended that DOD perform a business-case analysis 

to demonstrate the extent to which sharing services would result in cost 

savings. In its second and third implementation plan submissions for the 

DHA, DOD identified the functions it would consolidate and the 

anticipated aggregate savings and implementation costs. However, 

GAO/AIMD-10.1.15. 

10GAO-14-49. 

11GAO, Defense Health Care: Additional Analysis of Costs and Benefits of Potential 

Governance Structures Is Needed, GAO-12-911 (Washington, D.C.: Sept. 26, 2012). 

DOD Has Not 

Clarified the Sources 

of Cost Savings and 

Its Plan to Monitor 

Implementation Costs
 

Page 7 GAO-14-396T

DOD’s submissions did not include detailed quantitative analysis 

regarding the sources of its cost-savings estimates or provide a basis for 

or an explanation of key assumptions and rationales used in estimating 

such savings. For example, DOD identified the consolidation of medical 

logistics functions and a resulting aggregated cost-savings range of 

between $132 million and $353 million from fiscal years 2014 through 

2019. However, the plan did not explain which function within this area 

(e.g., equipment or housekeeping) would be the larger source of those 

savings. Similarly, DOD’s second implementation plan submission 

identified that DOD plans to achieve savings in administration of its health 

care plan for servicemembers, TRICARE, by closing walk-in help centers 

and transitioning to a phone-based system. Further, it plans to achieve 

savings through better coordination of TRICARE benefit payments with 

other health insurers. However, as in the case of the consolidation of 

medical logistics functions, DOD did not identify separate cost-savings 

estimates for each planned effort (e.g., transitioning to a phone-based 

system) and instead presented the estimated cost savings as an 

aggregated amount of between $503 million and $787 million.

DOD’s second implementation plan submission included risk-adjusted 

estimates of net cost savings for shared services based on uncertainty 

regarding these projects’ effectiveness and that are presented as a range, 

with a 10 percent to 100 percent chance of achieving the maximum 

estimated savings for each shared service. However, while DOD 

assessed the risk of its reforms failing to achieve their maximum potential 

cost savings, it did not similarly assess the risk that estimated 

implementation costs may increase and affect net savings. As noted 

above, our prior work emphasizes that business-case analyses should 

demonstrate the sensitivity of the outcome to changes in assumptions, 

with a focus on the dominant benefit and cost elements and the areas of 

greatest uncertainty. DOD’s analysis did not assess the risk that 

estimated implementation costs may increase. In instances where 

estimated implementation costs increase, overall savings may be 

negatively affected.

DOD’s past experience with large-scale projects demonstrates its 

difficulties in controlling rising implementation costs. For example, in 

October 2010, we previously found that after obligating approximately 

$2 billion over the 13-year life of its initiative to acquire an electronic 

health record system, as of September 2010 DOD had delivered various 

capabilities for outpatient care and dental care documentation, but scaled 

back other capabilities it had originally planned to deliver, such as 

replacement of legacy systems and inpatient-care management. In 
 

Page 8 GAO-14-396T

addition, users continued to experience significant problems with the 

performance (speed, usability, and availability) of the portions of the 

system that have been deployed.12

In our November 2013 report, we recommended that DOD develop a 

more thorough explanation of the potential sources of cost savings from 

the implementation of its shared-services projects and monitor the cost of 

the implementation process, and DOD concurred with our 

recommendations.

According to DOD’s estimates, 

collectively, the 10 shared services to be implemented as part of the MHS 

reform effort require an investment in information-technology capabilities 

of about $273 million between fiscal years 2014 and 2019. Given DOD’s 

past experience in this area, rising implementation costs are an area of 

specific concern.

13 However, DOD’s third implementation plan 

submission did not provide additional information concerning the potential 

sources of cost savings, nor did it clarify its plan to monitor 

implementation costs. In February 2014, a DOD representative told us 

that DOD has developed a process for leadership to monitor 

implementation costs, and we plan to review DOD’s process to determine 

if it addresses our recommendation. As DOD implements its shared 

services, greater clarity with regard to the sources of cost savings is also 

needed to allow senior leaders to monitor progress in achieving cost 

savings.

DOD has developed some milestones and activities associated with each 

of its reform goals, including identifying steps to reach each reform goal’s 

initial operating capability. However, DOD did not consistently identify 

milestones between initial operating capability and final operating 

capability, nor did it include steps to achieve all seven reform goals. 

Practices of successful performance management show that interim 

milestones can be used to show progress towards implementing efforts or 

to make adjustments when necessary.14

 

12 GAO, Information Technology: Opportunities Exist to Improve Management of DOD’s 

Electronic Health Record Initiative, 

Specifically, we found that 

GAO-11-50, (Washington, D.C.: Oct. 6, 2010). 

13GAO-14-49. 

14GAO, Agency Performance Plans: Examples of Practices That Can Improve Usefulness 

to Decisionmakers, GAO/GGD/AIMD-99-69 (Washington, D.C.: Feb. 26, 1999) and 

Executive Guide: Effectively Implementing the Government Performance and Results Act, 

GAO/GGD-96-118 (Washington, D.C.: June 1996). 

DOD Does Not Have 

Interim Milestones 

For All Reform Goals
 

Page 9 GAO-14-396T

developing and using specific milestones and timelines to guide and 

gauge progress toward achieving an agency’s desired results informs 

management of the rate of progress toward achieving goals and whether 

adjustments need to be made in order to maintain progress within given 

time frames.

DOD’s March 2013 submission was required to include a detailed 

schedule for carrying out the reform of the governance of the MHS, 

including a schedule for meeting the goals of the reform. However, in that 

submission, DOD provided a schedule of activities leading up to its first 

major milestone—initial operating capability of October 1, 2013. This 

schedule of activities did not provide information related to activities 

beyond this first major milestone, and it did not present milestones for 

achieving each of the supporting seven goals of the reform. In that March 

2013 submission, DOD also did not include some key features of effective 

schedules identified in our prior work, such as interim milestones or 

related timelines for all of the activities supporting the reform. Specifically, 

the submission did not contain any interim actions or milestones between 

October 1, 2013 and October 1, 2015—the planned final operating 

capability date. Furthermore, the schedule provided in the submission 

does not clearly establish how each of the supporting seven goals of the 

reform will be met.

Subsequent to DOD’s March 2013 submission, the House Report 

accompanying a bill for the National Defense Authorization Act for Fiscal 

Year 2014 directed the Secretary of Defense to provide the House Armed 

Services Committee with, among other things, a detailed schedule for 

managing the reform effort. In response, DOD submitted a supplemental 

report on August 16, 2013, that included estimated interim milestones for 

the achievement of three of the reform goals that it had not initially 

provided in either of its earlier submissions.

In our November 2013 report, we recommended that DOD develop a 

comprehensive timeline that includes interim milestones for all reform 

goals that could be used to show implementation progress, and DOD 

concurred with our recommendation.15

 

15

DOD’s third implementation plan 

submission contained additional timeline activities for its reform goal 

concerning the implementation of shared services, with milestones 

GAO-14-49. 
 

Page 10 GAO-14-396T

leading up to each shared services’ initial operating capability. However, 

DOD has not consistently identified milestones for all activities between 

initial operating capability and final operating capability for each of the 

goals of its reform. While senior leaders now have more interim 

milestones by which to track the implementation of the DHA, they 

continue to lack milestones subsequent to initial operating capability in a 

number of areas. Unless DOD develops interim milestones for its reform 

timelines, it may not be able to adequately monitor its progress toward 

achieving its goals by October 2015.

DOD did not include critical details in the performance measures it 

developed to assess progress in achieving the seven goals of the reform 

effort. Specifically, DOD did not develop explanations for how each 

measure relates to the goals of the reform effort; did not define the 

specific measure to be developed; did not provide a baseline assessment 

of the current performance that is to be measured; and, most importantly, 

did not identify quantifiable targets for assessing the progress of each 

reform goal. 

We have previously concluded that federal agencies engaging in large 

projects, including the consolidation of management functions, can use 

performance measures to determine how well they are achieving their 

goals and identify areas for improvement, if needed.16

In November 2013, we reported that in its June submission of its 

implementation plan, DOD had listed 87 performance measures to 

assess progress in achieving the seven objectives of the reform effort,

Additionally, we 

have found that by tracking and developing a performance baseline for all 

measures, agencies can better evaluate progress made and determine 

whether goals are being achieved. Identifying and reporting deviations 

from the baseline as a program proceeds provides valuable information 

for these decision makers as they identify areas of risk and diagnose their 

causes.

17

 

16

but that those measures did not exhibit important attributes of successful 

GAO-12-542. 

17GAO-14-49. As noted in our report, some performance measures were used to assess 

multiple objectives. 

DOD Does Not Have 

Fully Developed 

Performance 

Measures That

Could Be Used to 

Assess Progress in 

Establishing the DHA
 

Page 11 GAO-14-396T

performance measures that we had established in our prior work.18

We also reported that decision makers would not be able to determine the 

objectivity of DOD’s measures because there is no information 

accompanying the measures that indicates specifically what is to be 

observed, in which population or conditions, and in what time frame. For 

example, one of the measures is “savings achieved versus savings 

projected.” This measure does not indicate specifically how savings will 

be measured, and does not indicate what time frame will be used to 

compare what savings were projected versus what were actually 

achieved.

Specifically, we found that DOD provided only the measures’ names, with 

no accompanying explanation for how each measure relates to the goals 

of the reform effort, definition of the specific measure to be developed, or 

quantifiable, numerical target for performance, nor had DOD provided a 

baseline assessment of the current performance to be measured. For 

example, DOD listed “Emergency Room Utilization Rate” as a 

performance measure, but did not explain how that measure relates to 

the objective of consolidating delivery of health care in areas with more 

than one military service. Further, we found that DOD did not provide an 

explanation of what each measure will evaluate, which could be used to 

determine the extent to which each measure provides new information 

beyond that provided by other measures. For example, two of the 

measures listed under the objective to deliver more-comprehensive 

primary care and integrated health services using advanced patientcentered medical homes are “satisfaction with provider communications” 

and “satisfaction with health care.” As presented in DOD’s June 

submission of its implementation plan, it is unclear whether there is any 

overlap between these measures, because the aspects of satisfaction are 

not clarified by any accompanying explanation or definition.

In our November 2013 report, we recommended that DOD provide more 

detailed information on its performance measures—specifically, that DOD 

develop and present to Congress measures that are clear, quantifiable, 

 

18GAO, Tax Administration: IRS Needs to Further Refine Its Tax Filing Season 

Performance Measures, GAO-03-143 (Washington, D.C.: Nov. 22, 2002); GPRA 

Performance Reports, GAO/GGD-96-66R (Washington, D.C.: Feb. 14, 1996); Missile 

Defense: Opportunity to Refocus on Strengthening Acquisition Management, GAO-13-432

(Washington, D.C.: Apr. 26, 2013); Performance Measurement and Evaluation: Definitions 

and Relationships, GAO-11-646SP (Washington, D.C.: May 2011); and 

GAO/GGD/AIMD-99-69. 
 

Page 12 GAO-14-396T

objective, and include a baseline assessment of current performance.19

As of DOD’s final submission, much of the information to be included in 

these two tables was still to be determined. As a result, many of the 

entries in the tables represented placeholders for information, rather than 

actual baselines or performance targets. Further, DOD did not include this 

additional information for any of the performance measures listed under 

its other five reform goals. In this third submission, DOD noted that it was 

in the process of developing measures and respective performance 

targets to be published in its 2014 strategic plan for the MHS, which it 

expected to issue in December 2013. In February 2014, a DOD 

representative told us that the strategic plan is now expected to be 

released in May 2014. Fully developed performance measures are key to 

senior leaders’ ability to assess if DOD’s reform effort is achieving its 

goals or if corrective action is required.

In 

the third submission of its implementation plan, DOD provided some 

additional information, such as baselines and performance targets, for the 

performance measures under two of its seven reform goals. In this 

submission, DOD included tables with expanded information for the 

performance measures for its goals related to (1) delivering morecomprehensive primary care and integrated health services using 

advanced patient-centered medical homes, and (2) coordinating care 

over time and across treatment settings to improve outcomes in the 

management of chronic illness, particularly for patients with complex 

medical and social problems. For these objectives, DOD listed the 

measures’ names, and, where available, estimates of current and target 

performance. For those measures without a definition or baseline, DOD 

provided a date by when the measures would be defined and when the 

baseline performance level would be established. 

In summary, DOD’s reform efforts represent positive steps to improve the 

efficiency of the governance of the MHS, and these reforms have 

progressed much further than previous attempts to improve the 

governance structure. As we noted in previous reports, the successful 

implementation of the DHA will require committed senior leadership to 

sustain the momentum created by the current reform effort. This 

leadership, in turn, will help to provide oversight and accountability for the 

improvement process. However, senior leaders need appropriate 

 

19GAO-14-49. 
 

Page 13 GAO-14-396T

information to make decisions and guide the reform. The first step to 

determine what is needed for the implementation of the DHA is a baseline 

assessment of current MHS staffing, followed by an estimate of DHA 

staffing at full operating capability. In addition, a detailed quantitative 

analysis regarding the sources of cost savings and a plan to monitor 

implementation costs would provide greater clarity to DOD’s sharedservice consolidation projects. Moreover, the development of 

comprehensive milestones for all of the reform goals would allow decision 

makers to track the progress of DOD’s reform efforts toward achieving its 

goals. Finally, the completion of a set of fully developed performance 

measures across all seven of DOD’s stated goals for the DHA would 

ensure that DOD’s senior leaders and other decision makers have the 

necessary information to assess DOD’s progress in creating a more costeffective and integrated MHS.

Chairman Wilson, Ranking Member Davis, and Members of the 

Subcommittee, this concludes my prepared statement. I would be 

pleased to respond to any questions that you may have at this time.

For further information about this statement, please contact 

Brenda S. Farrell at (202) 512-3604 or farrellb@gao.gov. Contact points 

for our Offices of Congressional Relations and Public Affairs may be 

found on the last page of this statement. Individuals who made key 

contributions to this testimony are Lori Atkinson, Assistant Director; 

Beckie Beale; Jeff Heit; Mae Jones; and Adam Smith.

GAO Contact

and Staff 

Acknowledgments
Related GAO Products

Page 1 GAO-14-396T

Defense Health Care Reform: Additional Implementation Details Would 

Increase Transparency of DOD’s Plans and Enhance Accountability. 

GAO-14-49. Washington, D.C.: November 6, 2013.

Defense Health Care: Additional Analysis of Costs and Benefits of 

Potential Governance Structures Is Needed. GAO-12-911. Washington, 

D.C.: September 26, 2012.

Defense Health Care: Applying Key Management Practices Should Help 

Achieve Efficiencies within the Military Health System. GAO-12-224. 

Washington, D.C.: April 12, 2012.

Opportunities to Reduce Potential Duplication in Government Programs, 

Save Tax Dollars, and Enhance Revenue. 

GAO-11-318SP. Washington, D.C.: March 1, 2011.

Military Personnel: DOD Addressing Challenges in Iraq and Afghanistan 

but Opportunities Exist to Enhance the Planning Process for Army 

Medical Personnel Requirements. GAO-11-163. Washington, D.C.: 

February 10, 2011.

Military Personnel: Enhanced Collaboration and Process Improvements 

Needed for Determining Military Treatment Facility Medical Personnel 

Requirements. GAO-10-696. Washington, D.C.: July 29, 2010.

Defense Health Care: DOD Needs to Address the Expected Benefits, 

Costs, and Risks for Its Newly Approved Medical Command Structure. 

GAO-08-122. Washington, D.C.: October 12, 2007. 

Defense Health Care: Tri-Service Strategy Needed to Justify Medical 

Resources for Readiness and Peacetime Care. GAO/HEHS-00-10. 

Washington, D.C.: November 3, 1999.

Related GAO Products

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