United States General Accounting Office

GAO Report to the Chairman, Subcommittee

on VA, HUD, and Independent Agencies,

Committee on Appropriations,

U.S. Senate

July 1996 VA HEALTH CARE

Opportunities for

Service Delivery

Efficiencies Within

Existing Resources

G O A

years

1921 - 1996

GAO/HEHS-96-121

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-271637 

July 25, 1996

The Honorable Christopher S. (Kit) Bond

Chairman, Subcommittee on VA, HUD,

 and Independent Agencies

Committee on Appropriations

United States Senate

Dear Mr. Chairman:

The Department of Veterans Affairs (VA) operates one of the nation’s

largest health care systems with 173 hospitals, 376 outpatient clinics, 136

nursing homes, and 39 domiciliaries. With a fiscal year 1995 appropriation

of $16.2 billion and budget requests of about $17 billion for fiscal years

1996 and 1997, VA’s system faces increasing pressures to contain or reduce

spending as part of governmentwide efforts to balance the budget.1

This report responds to your request for information on ways VA could

operate more efficiently, reducing the resources needed to meet the health

care needs of veterans in what is commonly referred to as the mandatory

care category. Specifically, it addresses (1) VA’s forecasts of future

resource needs, (2) opportunities to operate VA’s system more efficiently,

(3) differences between VA and the private sector in efficiency incentives,

and (4) recent VA efforts to reorganize its health care system and create

efficiency incentives.

Scope and

Methodology

During the past several years, we have visited over 75 VA hospitals and

outpatient clinics to assess operating policies, procedures, and practices.

These efforts have resulted in a wide range of recommended actions to

improve the efficiency and effectiveness of the VA system. Some of these

actions involve ways to restructure existing delivery processes to lower

costs; others identify ways to recover more of the costs of health care

provided to veterans and others. This report is based primarily on the

results of these efforts as well as studies by the Veterans Health

Administration (VHA), VA’s Office of Inspector General (IG), and others. We

initially presented the results of this work in testimony before your

Subcommittee on March 8, 1996.2

1

VA received a medical care appropriation of about $16.6 billion for fiscal year 1996.

2

VA Health Care: Opportunities to Increase Efficiency and Reduce Resource Needs

(GAO/T-HEHS-96-99, Mar. 8, 1996).

Page 1 GAO/HEHS-96-121 VA Health Care Resource Needs
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Results in Brief VA’s health care system should be able to significantly contribute to deficit

reduction in the next 7 years. First, the system may not need to expend the

level of resources that VA had previously estimated to meet the health care

needs of veterans in the mandatory care category. These resources were

overstated because (1) VA did not adequately reflect the declining demand

for VA hospital care in estimating its resource needs and (2) much of the

care VA provides is discretionary (that is, VA is required to provide the

services only to the extent that space and resources permit). Second, VA

could reduce operating costs by billions of dollars in the next 7 years by

completing actions on a wide range of efficiency improvements. Actions

are already under way or planned on many of the improvements.

The success of these efforts, however, depends on the extent to which VA

and its health care facilities are held accountable for how they spend

appropriated funds. Unlike private health care providers, VA’s system bears

few of the risks associated with inefficient operating practices and, as

such, has scant economic incentive to reduce costs. VA managers

frequently blame inefficiencies on the law, but this appears to us to be

unfair. Historically, VA’s central office provided few incentives for facilities

to improve efficiency. The central office put little pressure on facilities to

treat patients in the most cost-effective manner and shifted few resources

among facilities to promote efficiency. At the facility level, however, VA

managers often can find ways to operate more efficiently when they need

resources to implement new services or expand existing ones.

Recent changes at VA are starting to create efficiency incentives that have

long existed in the private sector. For example, VA’s reorganization of its

health care facilities into 22 Veterans Integrated Service Networks (VISN)

includes several elements that show promise for providing the

management framework needed to realize the system’s full savings

potential. First, VA plans to hold network directors accountable for VISNs’

performance by using, among other things, cost-effectiveness goals and

measures that establish accountability for operating efficiently to contain

or reduce costs. Second, the Under Secretary for Health (1) distributed

criteria to guide VISN directors in developing efficiency initiatives capable

of yielding large savings and (2) gave VISN and facility directors authority to

realign medical centers to achieve efficiencies. Finally, VHA’s plans to

develop a capitation funding process could provide greater efficiency

incentives, provided data problems are resolved.

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Background The VA health care system was established in 1930, primarily to provide for

the rehabilitation and continuing care of veterans injured during wartime

service. VA developed its health care system as a direct delivery system in

which the government owned and operated its own health care facilities. It

grew into the nation’s largest direct delivery system.

Veterans’ health care benefits include medically necessary hospital and

nursing home care and some outpatient care. Certain veterans, however,

have a higher priority for receiving care and are eligible for a wider range

of services. Such veterans are generally referred to as Category A, or

mandatory care category, veterans.

More specifically, VA must provide hospital care, and, if space and

resources are available, may provide nursing home care to certain

veterans with injuries related to their service or whose incomes are below

specified levels. These mandatory care veterans include those who

• have service-connected disabilities,

• were discharged from the military for disabilities that were incurred or

aggravated in the line of duty,

• are former prisoners of war,

• were exposed to certain toxic substances or ionizing radiation,

• served during the Mexican Border Period or World War I,

• receive disability compensation,

• receive nonservice-connected disability pension benefits, and

• have incomes below the means test threshold (as of January 1995, $20,469

for a single veteran or $24,565 for a veteran with one dependent, plus

$1,368 for each additional dependent).

For veterans with higher incomes who do not qualify under these

conditions—called discretionary care category veterans—VA may provide

hospital care if space and resources are available. These veterans,

however, must pay a part of the cost of the care they receive.

VA also provides three basic levels of outpatient care benefits:

• comprehensive care, which includes all services needed to treat any

medical condition;

• service-connected care, which is limited to treating conditions related to a

service-connected disability; and

Page 3 GAO/HEHS-96-121 VA Health Care Resource Needs
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• hospital-related care, which provides only the outpatient services needed

to (1) prepare for a hospital admission, (2) obviate the need for a hospital

admission, or (3) complete treatment begun during a hospital stay.

Separate mandatory and discretionary care categories apply to outpatient

care. Only veterans with service-connected disabilities rated at 50 percent

or higher (about 465,000 veterans) are in the mandatory care category for

comprehensive outpatient care. All veterans with service-connected

disabilities are in the mandatory care category for treatments related to

their disabilities; they are also eligible for hospital-related care of

nonservice-connected conditions, but, with the exception of veterans with

disabilities rated at 30 or 40 percent, they are in the discretionary care

category. Most veterans with no service-connected disabilities are eligible

only for hospital-related outpatient care and, with few exceptions, are in

the discretionary care category.

From its roots as a system to treat war injuries, VA health care has

increasingly shifted toward a system focused on treating low-income

veterans with medical conditions unrelated to military service. In fiscal

year 1995, only about 12 percent of the patients treated in VA hospitals

received treatment for service-connected disabilities. By contrast, about

59 percent of the patients treated had no service-connected disabilities.

About 28 percent of VA hospital patients had service-connected disabilities

but were treated for conditions not related to those disabilities. (See 

fig. 1.)

Page 4 GAO/HEHS-96-121 VA Health Care Resource Needs
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Figure 1: VA Hospital Users by

Purpose of Treatment, FY 1995 Percent of Discharges

0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Treated for SC Condition

SC, Treated for NSC Condition

NSC With Pension

NSC Without Pension

Nonveteran

Type of Care

12.1

28.3

10.4

48.6

0.6

Notes: Data are based on the fiscal year 1995 VA patient treatment file.

SC = service connected; NSC = nonservice connected.

Between fiscal years 1980 and 1995, VA facilities underwent some

fundamental changes in workload. The days of hospital care provided fell

from 26 million in 1980 to 14.7 million in 1995, the number of outpatient

visits increased from 15.8 million to 26.5 million, and the average number

of veterans receiving nursing home care in VA-owned facilities increased

from 7,933 to 13,569. (See fig. 2.)

Page 5 GAO/HEHS-96-121 VA Health Care Resource Needs
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Figure 2: Changes in VA Facilities’

Workload, FY 1980-95 Days/Visits (in Millions)

0

5

10

15

20

25

30

1980 1985 1990 1995

Fiscal Year

Hospital Days

Outpatient Visits

Nursing Home Days

During this same time period, VA’s medical care budget authority grew

from about $5.8 billion to $16.2 billion. (See fig. 3.)

Page 6 GAO/HEHS-96-121 VA Health Care Resource Needs
B-271637 

Figure 3: VA Medical Care Budget Authority, FY 1980-95

Dollars (Billions)

0

5.0

10.0

15.0

20.0

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

Fiscal Year

Administration Request

Final Budget Authority

Note: Numbers have not been adjusted for inflation.

For fiscal year 1996, VA sought medical care budget authority of about

$17.0 billion, an increase of $747 million over its fiscal year 1995 authority.

VA expects its facilities to provide (1) about 14.1 million days of hospital

care, (2) nursing home care to an average of 14,885 patients, and (3) about

25.3 million outpatient visits. VA is also seeking budget authority of about

$17.0 billion for fiscal year 1997.

On July 29, 1995, the Congress adopted a budget resolution providing VA

medical care budget authority of $16.2 billion annually for 7 years (fiscal

years 1996-2002). The budget resolution would essentially freeze VA

spending at the fiscal year 1995 level.

VA estimated that such a freeze would result in a cumulative shortfall of

almost $24 billion in the funds it would need to maintain current services

Page 7 GAO/HEHS-96-121 VA Health Care Resource Needs
B-271637 

to the veteran population through 2002.3 As used by VA, current services

encompass maintaining the currently funded workload, including services

to veterans in both the mandatory and discretionary care categories and

services to nonveterans.

Resources Needed to

Meet Needs of

Veterans in Mandatory

Care Category Are

Overstated

The resources VA facilities will need in the next 7 to 10 years to provide

hospital and certain outpatient care to veterans in the mandatory care

categories for hospital and outpatient care are overstated for the following

reasons:

• VA did not adequately consider the impact of the declining veteran

population on future demand for inpatient hospital care.

• A significant portion of VA resources is used to provide services to

veterans in the discretionary care category who are eligible for care only

to the extent that space and resources are available.

• Considerable resources are spent on services not covered under veterans’

VA benefits.

• Medical centers tend to overstate their workloads and therefore their

resource needs.

• VA included resources for facility and program activations in estimating the

resources it would need to maintain current services even though such

activations would expand current services.4

• Services provided to nonveterans through sharing agreements are

included in VA’s justifications of future resource needs even though the

provision of services through sharing agreements is to be limited to sales

of excess capacity.

Declining Veteran

Population Will Reduce

Future Resource Needs

In estimating the resources it will need to maintain current services over

the next 7 fiscal years, VA assumed that the number of hospital patients it

treats will remain constant. The number of hospital patients VA treats,

however, actually dropped by 56 percent over the past 25 years and should

continue to decline. In addition, because of the declining demand for

inpatient care in the past 25 years, the number of operating beds in the VA

health care system declined by about 50 percent between 1969 and 1994.

3

In September 1995, we reported that VA overestimated the potential budget shortfall because it

assumed that (1) the VA facility workload would increase in fiscal year 1996 and that it would be

sustained during the entire 7-year period; (2) limited savings would be achieved through improvements

in the efficiency with which services are provided by VA facilities; and (3) costs, workload, and staffing

would steadily increase due to opening or expanding facilities. (Medical Care Budget Alternatives

(GAO/HEHS-95-247R, Sept. 12, 1995.)

4

Activations include opening new facilities and expanding existing facilities and programs through

modernization and new construction.

Page 8 GAO/HEHS-96-121 VA Health Care Resource Needs
B-271637 

About 50,000 VA hospital beds were closed or converted to other uses. The

decline in psychiatric beds was most pronounced: from about 50,000 beds

in 1969 to 17,300 beds in 1994. (See fig. 4.)

Figure 4: Operating Beds in VA

Hospitals, FY 1969-94 Operating Beds (in Thousands)

0

10

20

30

40

50

60

70

80

90

100

110

1969 1974 1979 1984 1989 1994

Fiscal Year

Total

Medical

Surgical

Psychiatric

Further declines in operating beds are likely in the next 7 to 10 years as

the veteran population continues to decline. If veterans continue to use VA

hospital care at the same rate that they did in 1994—that is, if VA continues

services at current levels—days of care provided in VA hospitals should

decline from 15.4 million in 1994 to about 13.7 million by 2010. (See fig. 5.)

Page 9 GAO/HEHS-96-121 VA Health Care Resource Needs
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Our projections are adjusted to reflect older veterans’ higher usage of

hospital care.5

Figure 5: Projected Age-Adjusted Days

of VA Hospital Care, 1994-2010 Days (in Thousands)

13500

14000

14500

15000

15500

1994

(Actual)

1996 1998 2000 2002 2004 2006 2008 2010

Year

15434 15414 15387

15272

15114

14878

14568

14186

13743

Source: Based on VA annual reports, fiscal years 1980-94, and VA projections of the veteran

population by age through 2010.

Much VA Care Is

Discretionary

VA has underestimated the extent to which its health care resources are

spent on services for veterans in the discretionary care categories.

Specifically, about 15 percent of the veterans with no service-connected

disabilities who use VA medical centers have incomes that place them in

the discretionary care category (that is, care may be provided to the extent

that space and resources permit) for both inpatient and outpatient care by

inpatient eligibility standards. In addition, VA incorrectly reported

outpatient workload using inpatient eligibility categories, overestimating

the amount of outpatient care subject to the availability of space and

5

The declining veteran population will lead to significant declines in VA acute hospitalization even

though the acute care needs of surviving veterans may increase. The veteran population is estimated to

decline from about 26.3 million in 1995 to just over 20 million in 2010. Although the health care needs

of veterans increase as they age, the overall decline in the number of veterans will more than offset the

increase and should further reduce the number of days of VA hospital care. In addition, many veterans

reduce their use of the VA system when they become eligible for Medicare.

Page 10 GAO/HEHS-96-121 VA Health Care Resource Needs
B-271637 

resources. VA does not, however, differentiate between services provided

to veterans in the mandatory and discretionary care categories in justifying

its budget request. As a result, the Congress has little basis for determining

which portion of VA’s discretionary workload to fund.

A portion of VA’s workload involves treating higher income veterans with

no service-connected disabilities. In fiscal year 1991, about 10.7 percent of

the 555,000 veterans receiving hospital care in VA facilities were veterans

with no service-connected disabilities with incomes of $20,000 or more.6

Of those using VA medical centers in 1991 for both inpatient and outpatient

care, about 11 percent (91,520) of the single veterans with no

service-connected disabilities (832,000) and 57 percent (227,430) of the

married veterans with no service-connected disabilities (399,000) had

incomes of $20,000 or more. Among married veterans with no

service-connected disabilities who used VA medical centers, 15 percent

(59,850) had incomes of $40,000 or more.7

In March 1992, VA’s IG estimated, on the basis of work at one typical VA

outpatient clinic, that about half of the patients and about one-third of the

visits veterans made to VA outpatient clinics should have been categorized

as discretionary rather than mandatory care. This occurred because VA

was reporting its outpatient workload using inpatient eligibility categories.

While VA must provide needed hospital treatment to the 9 million to

11 million veterans in the mandatory care category, over 90 percent of

those veterans are in the discretionary care category for outpatient care

for services other than those related to treating a service-connected

disability.

Extensive Resources Spent

on Noncovered Services

The VA IG further reported that about 56 percent of discretionary care

outpatient visits provided services that were not covered under the

veterans’ VA benefits. Most veterans’ outpatient benefits are limited to

hospital-related care. An estimated $321 million to $831 million of the

approximately $3.7 billion VA spent on outpatient care in fiscal year 1992

6

VA Health Care: A Profile of Veterans Using VA Medical Centers in 1991 (GAO/HEHS-94-113FS,

Mar. 29, 1994).

7

In 1991, veterans without dependents were in the mandatory care category for inpatient hospital care

and hospital-related outpatient care if they had incomes below $18,171; the income threshold

increased by $3,634 for one dependent and $1,213 for each additional dependent.

Page 11 GAO/HEHS-96-121 VA Health Care Resource Needs
B-271637 

may have been for treatments provided to veterans in the discretionary

care category that were not covered under VA health care benefits.8

Medical Centers Tend to

Overstate Workload

VA medical centers frequently overstate the number of inpatients and

outpatients treated and therefore the centers’ resource needs. VA has long

had a problem with veterans failing to keep scheduled appointments. Once

an outpatient visit is scheduled, however, medical center staff enter it into

VA’s computerized records, and it is counted as an actual visit unless staff

delete the record.

VA’s IG identified problems in the reporting of both inpatient care and

outpatient visits at several medical centers. For example, the IG found that

9 percent of the visits at the Milwaukee VA medical center and 7 percent of

the visits at the Murfreesboro medical center were not countable in the

workload because the appointments were not kept.9

 Similarly, a 1994 VA IG

report found that actual surgical workload at the Sepulveda VA medical

center was 37 percent lower than reported.10

According to VHA, it acted in October 1992 to eliminate false workload

credits. Facilities must now physically “check in” each patient to receive

workload credit.

A September 1995 VA IG report, however, found that VA outpatient

workload data are still overstated. In a nationwide review, the IG found

that one out of three reported visits represented overreporting of

workload data. Specifically,

• 6 percent of the reported visits either did not or appeared not to have

occurred,

• 15 percent of the reported visits represented one or more clinic stops that

either did not or appeared not to have occurred, and

• 14 percent of reported visits had inconsistencies in reporting of clinic

stops.

8

Audit of the Outpatient Provisions of Public Law 100-322, Report No. 2AB-A02-059, VA Office of

Inspector General (Washington, D.C.: Mar. 31, 1992).

9

Audit of Clement J. Zablocki VA Medical Center, Milwaukee, Wisconsin, Report No. 2R4-F03-112, VA

Office of Inspector General (Washington, D.C.: Mar. 25, 1992) and Audit of Alvin C. York VA Medical

Center, Murfreesboro, Tennessee, Report No. 2R3-F03-029, VA Office of Inspector General

(Washington, D.C.: Dec. 16, 1991).

10Special Inquiry of Veterans Health Administration Medical Centers Sepulveda and West Los Angeles,

California, Report No. 4R4-A01-111, VA Office of Inspector General (Washington, D.C.: Sept. 21, 1994).

Page 12 GAO/HEHS-96-121 VA Health Care Resource Needs
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Resource Needs for

Activations Appear

Overstated

The resources VA believes it needs to maintain current services include

resources to support new workload generated through activation of

programs and facilities. Almost 25 percent of the budget shortfall VA

estimated to occur in the next 7 fiscal years under the congressional

budget resolution would result from the lack of funds for facility

activations and planned workload expansions. Delaying or stopping

activations is, however, a difficult political decision, particularly for those

projects already under way.

In its analysis of the resources needed to maintain current services in the

next 7 fiscal years, VA assumed that it will continue to incur additional

costs, add staff, and attract new users through facility activations. For

example, VA’s estimate that it will need $20.9 billion in the year 2000 to

maintain current services includes increases of over $993 million and

10,000 full-time equivalent (FTE) employees for activations. In other words,

the inclusion of activation costs overstates the resources VA will need in

the year 2000 to maintain current services by almost $1 billion.

In addition, the funds VA seeks for activations may be overstated because

the activations planning process is not integrated with the resource

planning and management (RPM) system workload forecasting process. VA

sought about $108 million and 1,509 FTEs in its fiscal year 1996 budget

submission to support a projected increase in the number of veterans

seeking care. These estimates, based on workload forecasts developed

through RPM, reflect historical trend data that could include workload

increases resulting from prior years’ facility and program activations. In

other words, the resources requested for workload increases projected

using RPM likely include resources for some of the estimated workload to

be generated through fiscal year 1996 activations. VA sought an additional

$208 million for facility activations on the basis of the separate activations

planning process. VA officials agree that some double counting may have

occurred because of the separate planning processes but believe that the

duplication is minimal.

In commenting on a draft of this report, VHA said that it modified budgeting

for activations requirements in 1997. The medical care request no longer

includes “line item” requests for the activation of specific projects. The

networks will activate projects from within the level of resources provided

in their total 1997 medical care budget allocations.

Page 13 GAO/HEHS-96-121 VA Health Care Resource Needs
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VA Includes Sharing

Agreement Workload in

Budget Justification

VA counts services provided to nonveterans through sharing agreements

with military and private-sector hospitals and clinics in justifying the

resources needed during the next fiscal year. In other words, VA essentially

builds in excess resources to sell to the Department of Defense (DOD) and

the private sector. VA also bills, and is allowed to retain, the costs of

services provided through sharing agreements.

Health resources sharing, which involves the buying, selling, or bartering

of health care services, benefits both parties in the agreement and helps

contain health care costs by better utilizing medical resources. For

example, a hospital’s buying an infrequently used diagnostic test from

another hospital is often cheaper than buying the needed equipment and

providing the service directly. Similarly, a hospital that uses an expensive

piece of equipment only 4 hours a day but has staff to operate the

equipment for 8 hours can generate additional revenues by selling its

excess capacity to other providers.

To use federal agencies’ resources to maximum capacity and avoid

unnecessary duplication and overlap of activities, VA is authorized to sell

excess health care services to DOD. In addition, VA can share specialized

medical resources with nonfederal hospitals, clinics, and medical schools.

VA may sell medical resources to DOD and the private sector only if the sale

does not adversely affect health care services to veterans. As an incentive

to share excess health care resources, VA facilities providing services

through sharing agreements may recover and retain the cost of the

services from DOD or private-sector facilities.

In fiscal year 1995, VA sold about $25.3 million in specialized medical

resources to private-sector hospitals and about $33.0 million in health care

services to the military health care system. Although VA facilities received

separate reimbursement for the workload generated through these sharing

agreements, the workload was nevertheless included in VA’s justification of

its budget request.

In commenting on a draft of this report, VHA said that VA provided care to

about 45,000 unique sharing agreement patients in 1994. VHA said that even

though its base workload counts do include sharing, the levels are small

and its inclusion of sharing makes no material difference in VA’s workload

presentations. VHA said that no appropriated funds are requested for the

sharing workload because it is supported by reimbursements from DOD

and other sharing partners.

Page 14 GAO/HEHS-96-121 VA Health Care Resource Needs
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VHA also said that RPM excludes data for sharing patients in developing

changes in both unique patients and cost per unique patient. The actual

patient counts for the last year are straightlined in all RPM projections.

VA’s Resource Needs

Should Be Further

Reduced Through

Increased Efficiency

In VA’s assessment of the possible budget shortfall it would face if its

budget were frozen at fiscal year 1995 levels for 7 years, VA assumed

that—beyond the unspecified savings of $335 million expected to occur in

fiscal year 1996—no changes would occur in the efficiency with which it

delivers health care services. VA should be able to further reduce its

resource needs by billions of dollars over the 7-year period through

improved efficiency and resource enhancements.

In the past 5 to 10 years, VA’s IG, VHA, the Vice President’s National

Performance Review, we, and others have identified many opportunities to

• use lower cost methods to deliver veterans’ health care services,

• consolidate underused or duplicate processes to increase efficiency,

• reduce nonacute admissions and days of care in VA hospitals,

• close underused VA hospitals, and

• enhance VA revenues from services sold to nonveterans and care provided

to veterans.

VA has actions planned or under way to take advantage of many of these

opportunities. Such actions should reduce VA’s resource needs in the next

7 to 10 years by several billion dollars.

Use Lower Cost Methods

for Delivering Health Care

Services

Following are among the many opportunities to achieve savings through

changes in the way VA delivers health care services to veterans, allowing VA

facilities to provide services of equal or higher quality at a lower cost.

• Providing 90-day rather than 30-day supplies of low-cost maintenance

prescriptions enabled VA pharmacies to save about $45 million in fiscal

year 1995. The savings resulted because VA pharmacies handled over

15 million fewer prescriptions. Although VA encouraged its medical centers

to implement multimonth dispensing in response to our January 1992

report, not all potential savings have occurred because medical centers

have been slow to adopt multimonth dispensing.11

11VA Health Care: Modernizing VA’s Mail-Service Pharmacies Should Save Millions of Dollars

(GAO/HRD-92-30, Jan. 22, 1992).

Page 15 GAO/HEHS-96-121 VA Health Care Resource Needs
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• Purchasing services from community providers when they can provide the

care at a lower cost could also produce savings. VA has encouraged its

medical centers to establish “access points” to improve accessibility for

veterans and encourage the shift to primary care. Access points can be

established as VA-operated outpatient clinics as well as through

contractual or sharing agreements. To date, only a few medical centers

have established such access points, but many others are developing

plans. Early indications are that access points established through

contracts with community providers can often provide services at lower

cost than VA outpatient clinics. The ultimate effect of access points on

overall VA spending depends, however, on such issues as the extent to

which the access points attract new users and to which current users

increase their use of VA services in response to improved accessibility.

• VA should save over $225 million in 7 years by adopting Medicare fee

schedules. VA’s IG compared the amount paid by VA under its fee-basis

program with Medicare fee schedules and found that VA paid more than

the Medicare rate in over half of the cases reviewed. VA plans to adopt

Medicare fee schedules for both its outpatient fee-basis payments and for

payment of inpatient physician and ancillary services at non-VA

hospitals.12,13 VA expects to begin using Medicare fee schedules by

July 1996.

• By establishing primary care teams, VA hospitals should be able to reduce

veterans’ inappropriate use of more costly specialty clinics and achieve

significant savings in staff costs. As we reported in October 1993, VA

hospitals allow many veterans to receive general medical care in specialty

care clinics after their conditions are stabilized. Transferring such veterans

to primary care clinics in a timely manner would allow lower cost primary

care staff to meet their medical needs rather than higher cost specialists.14

• By purchasing specialized medical care services, such as

positron-emission tomography scans and lithotripsy, from community

providers rather than buying expensive, but seldom used, equipment, VA

could reduce its cost of providing such services while it improves

accessibility of such care for veterans. For example, although the

Albuquerque VA medical center treated only 24 veterans for kidney stone

removal in fiscal years 1990 through 1992, the hospital purchased a

lithotripter, equipment that breaks up kidney stones so that they can be

12Audit of Fee-Basis Payments for Inpatient Medical Care, Report No. 5R3-A05-108, VA Office of

Inspector General (Washington, D.C.: Sept. 29, 1995).

13Audit of Fee-Basis Payments for Outpatient Medical Care, Report No. 5R3-A02-063, VA Office of

Inspector General (Washington, D.C.: May 25, 1995).

14VA Health Care: Restructuring Ambulatory Care System Would Improve Services to Veterans

(GAO/HRD-94-4, Oct. 15, 1993).

Page 16 GAO/HEHS-96-121 VA Health Care Resource Needs
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eliminated without surgery, at a cost of almost $1.2 million. During its first

year of operation, 34 veterans received treatment. A private provider in the

same city offered lithotripsy services for $2,920 a procedure. Thus, the

hospital could have met the 34 veterans’ needs at a cost of about $100,000

compared with its expenditure of $1.2 million plus operating costs.

Although the hospital sold lithotripsy services to more nonveterans than it

provided to veterans, the hospital has used the equipment at less than

one-fifth of its normal operating capacity.15

• VA also expects to save costs by establishing a national drug formulary.

Historically, each VA facility has established its own formulary—that is, a

list of medications approved for use for treating patients. VA noted that

establishing a national formulary should increase standardization,

decrease inventory costs, heighten efficiency, and lower pharmaceutical

costs through enhanced competition. VA has not estimated the possible

savings, but it could save $100 million if using the national formulary could

reduce the cost of purchasing medications by 10 percent. In commenting

on a draft of this report, VHA said that $100 million probably overstates the

possible savings. Savings realized through volume-committed contracting

would, in VHA’s opinion, be offset by the costs of new therapies. (See VHA’s

comment 17 in app. II.) VHA also identified several additional actions it has

taken to improve the management of pharmaceuticals over the last 6

years. These include establishing a pharmacy benefit management

function to reduce overall health care costs through appropriate use of

pharmaceuticals. (See VHA’s comment 19 in app. II.)

• VA expects to save $168 million in 6 years by phasing out and closing its

supply depots and establishing a just-in-time delivery system for medical

care supplies and drugs as recommended by the Vice President’s National

Performance Review. The depots were closed at the end of fiscal year

1994, and contracts for just-in-time delivery of drugs are in place. Actions

to award just-in-time contracts for medical supplies and subsistence items

are expected to be completed by July 1996.

Consolidate Underused or

Duplicate Processes

Following are examples of several nationwide initiatives that VA has under

way to integrate, consolidate, or merge duplicate or underused services.

Such actions should save additional costs over the next 7 years.

• By creating several bulk processing facilities to fill mail order

prescriptions, VA will reduce its handling costs by two-thirds, saving about

$26 million in fiscal year 1996. As we reported in January 1992, VA was

15VA Health Care: Albuquerque Medical Center Not Recovering Full Costs of Lithotripsy Services

(GAO/HEHS-95-19, Dec. 28, 1994).

Page 17 GAO/HEHS-96-121 VA Health Care Resource Needs
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mailing prescriptions to veterans from over 200 locations, resulting in

uneconomically small workloads and labor-intensive processes. As of

March 1996, VA had four operating bulk processing facilities using newly

designed automated equipment and processes; another three facilities

were not yet operational. Prescription workload is being transferred

systematically from VA hospitals to the new bulk processing centers.16

When fully operational, these facilities could save about $74 million a year.

• By consolidating 14 laundry facilities over a 3-year period, VA expects to

achieve one-time equipment and renovation savings of about $38 million

as well as recurring savings of about $600,000 per year. Under a

management improvement initiative, VA identified facilities for integration

that were scheduled for or had requested funding for new equipment or

renovation. Five of the 14 consolidations were completed in 1995; the

remaining 9 are scheduled to be completed in the next 2 years.

• An internal VA Management Improvement Task Force predicted in 1994

that VA could save up to $73 million in recurring personnel costs by

integrating management of VA facilities. Among other things, the task force

recommended that the administrative and clinical management of 60

facilities be integrated into 29 partnerships. The task force expected that

these facility integrations could reduce service and staffing duplication,

integrate clinical programs, achieve economies of scale, and free

resources to invest in new services. As of March 1996, about one-third of

the recommended integrations had been approved. VA allows the facilities,

however, to reinvest the savings into providing more clinical programs.

Examples of reinvestment include buying equipment, building expansions

or renovations, opening access points, and increasing specialty and

subspecialty clinics. Our ongoing work for this Subcommittee will assess

the extent to which these and other management improvement initiatives

recommended by the task force have been implemented and are saving

measurable costs.

Reduce Nonacute

Admissions and Days of

Care

Establishing preadmission certification procedures for admissions and

days of care similar to those used by private health insurers could save VA

hundreds of millions of dollars by reducing nonacute admissions and days

of care in VA hospitals.

VA hospitals too often serve patients whose care could be more efficiently

provided in alternative settings, such as outpatient clinics or nursing

homes. In 1985, we reported that about 43 percent of the days of care that

VA medical and surgical patients spent in the VA hospitals reviewed could

16GAO/HRD-92-30, Jan. 22, 1992.

Page 18 GAO/HEHS-96-121 VA Health Care Resource Needs
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have been avoided.17 Since then, several studies by VA researchers and the

IG have found similar inefficiencies.

For example, a 1991 VA-funded study of admissions to VA acute medical

and surgical bed sections estimated that 43 percent (±3 percent) of

admissions were nonacute. Nonacute admissions to the 50 randomly

selected VA hospitals studied ranged from 25 to 72 percent. The study

suggested several reasons for the higher rate of nonacute admissions to VA

hospitals than to private-sector hospitals, including the following:

• VA facilities do not have financial incentives to make the transition to

outpatient care;

• the VA system, unlike private-sector health care, does not have formal

mechanisms to control nonacute admissions, such as mandatory

preadmission review; and

• the VA system, unlike private-sector health care, has a significantly

expanded social mission that may influence the use of resources for

patients.18

A 1993 study by VA researchers reported similar findings. At the 24 VA

hospitals studied, 47 percent of admissions and 45 percent of days of care

in acute medical wards were nonacute; 64 percent of admissions and

34 percent of days of care in surgical wards were nonacute. Reasons cited

for nonacute admissions and days of care included nonavailability of

outpatient care, conservative physician practices, delays in discharge

planning, and social factors. Although the study cited VA eligibility as

contributing to some inappropriate admissions and days of care, the study

recommended only minor changes in VA eligibility provisions. Rather, it

suggested that VA establish a systemwide utilization review program. VA,

however, has neither established an internal utilization review program

nor contracted for external reviews focusing on medical necessity.19

By contrast, all fee-for-service health plans participating in the Federal

Employees Health Benefits Program are required to operate a

preadmission certification program to help limit nonacute admissions and

days of care.

17Better Patient Management Practices Could Reduce Length of Stay in VA Hospitals (GAO/HRD-85-92,

Aug. 8, 1985).

18For example, VA facilities may admit patients who travel long distances for care or keep veterans in

the hospital longer than medically necessary because the veterans lack a social support system to

assist them after discharge.

19VA established a systemwide utilization review program in October 1993. The program, however,

focuses primarily on quality of care reviews.

Page 19 GAO/HEHS-96-121 VA Health Care Resource Needs
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In commenting on a draft of this report, VA’s Under Secretary for Health

said that VA is currently assessing the use of preadmission reviews

systemwide as a way to encourage the most cost-effective, therapeutically

appropriate care setting. He said that several facilities have adopted some

form of preadmission review already and their programs are being

reviewed.

The Under Secretary also said that VHA is implementing a performance

measurement and monitoring system that contains several measures for

which all network directors and other leaders will be held accountable.

Several of these measures, such as the percentage of surgeries done on an

ambulatory basis at each facility and implementation of network-based

utilization review policies and programs, will, he said, move the VA system

toward efficient allocation and utilization of resources.

Close or Convert

Underused Hospitals

If the actions discussed so far are taken to reduce the number of nonacute

admissions and days of care provided by VA hospitals, the demand for care

in some hospitals could fall to the point where keeping such hospitals

open is no longer economically feasible. VA has taken over 50,000 beds out

of service in the past 25 years but has not closed any hospitals because of

declining utilization.20

Although closing wards clearly saves money by reducing staffing costs, the

cost per patient treated rises because the fixed costs of facility operation

are disbursed to fewer patients. At some point, closing a hospital and

providing care either through another VA hospital or through contracts

with community hospitals may become less costly. Closing hospitals and

contracting for care, however, entail some risk. Allowing veterans to get

free hospital care in community hospitals closer to their homes could

result in increased demand for VA-supported hospital care, offsetting any

savings achieved through contracting.

The feasibility of closing underused hospitals was demonstrated when VA

recently closed the Sepulveda VA medical center, which was damaged in an

earthquake, and transferred the workload to the West Los Angeles medical

center. VA’s IG found that the reported numbers of inpatients treated at

both Sepulveda and West Los Angeles had declined significantly over the

prior 4-year period and that the declining workload may have been even

greater than VA reported because the facilities’ workload reports were

20Two VA hospitals, in Martinez and Sepulveda, California, were closed because of structural

problems. VA plans to replace the former hospital but not the latter.

Page 20 GAO/HEHS-96-121 VA Health Care Resource Needs
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overstated. VA does not plan to rebuild the Sepulveda hospital but plans to

establish an expanded outpatient clinic at the site.

The IG concluded that West Los Angeles had sufficient resources to care

for the hospital needs of veterans formerly using the Sepulveda hospital.

Savings from the closure have been limited, however, because Sepulveda

staff were temporarily reassigned to the West Los Angeles medical center.

The only other hospital VA has closed in the last 25 years is the Martinez VA

medical center. Like Sepulveda, it was closed because of seismic

deficiencies, and its workload was transferred to other VA medical centers.

Although VA did not rebuild Sepulveda, it plans to build a replacement

hospital for Martinez as a joint venture with the Air Force at Travis Air

Force Base. Funds for the construction, however, have not been

appropriated.

Actions to Enhance

Revenues

In addition to actions to improve operational efficiency, VA should

generate millions in additional revenues by (1) setting more appropriate

prices for services sold to private-sector providers and (2) determining

whether to require veterans to contribute to the cost of their care.

By establishing appropriate prices for services sold to nonveterans

through sharing agreements, VA can generate revenues used to serve

veterans. In response to our December 1994 report on recovering the full

costs of lithotripsy services at the Albuquerque VA medical center, VA

recently encouraged its facilities to ensure that they price services

provided to nonveterans to fully recover all costs and to include a profit

when appropriate.21 For example, the Albuquerque medical center

increased its price for basic lithotripsy services to nonveterans by over

125 percent. The new price could generate over $300,000 a year in

additional revenues for the hospital.

By verifying veterans’ reported income, VA expects to generate about

$46 million in copayment revenues between January 1, 1996, and June 30,

1997. In a September 1992 report, we found that VA had not taken

advantage of the opportunity to verify veterans’ incomes through the use

of tax records. Through our own review of tax records, we identified over

21GAO/HEHS-95-19, Dec. 28, 1994.

Page 21 GAO/HEHS-96-121 VA Health Care Resource Needs
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100,000 veterans who may have owed copayments. In 1994, VA began

routinely using such data to determine veterans’ copayment status.22

Lack of Incentives

Can Hinder Further

System Efficiencies

Although costs can and are being saved, the VA health care system lacks

overall incentives to further increase efficiency. Unlike private-sector

hospitals and providers, VA facilities and providers bear little financial risk

if they provide (1) medically inappropriate care or (2) services not covered

under a veteran’s VA benefits. Unlike in the private health care system in

which the insurance company bears most of the risk, in VA’s system, the

veteran, not VA, bears most of the financial risk for health benefits.

However, when VA facilities have an incentive, such as the desire to fund

new programs, they appear to be able to identify opportunities to save

costs through efficiency improvements.

VA Facilities Bear Little

Risk From Providing

Inappropriate Care

Private insurers increasingly require their policyholders to obtain prior

authorization from an independent utilization review firm before the

insurers will accept liability for hospital care. Frequently, this

authorization also limits the number of days of care the insurer will cover

without further authorization of the medical necessity of continued

hospitalization. Because compliance with these requirements directly

affects their revenues, private-sector hospitals pay close attention to them.

Similarly, the Medicare program has, since 1982, paid hospitals a fixed fee

based on a patient’s diagnosis. The fixed fee is based on the national

average cost of treating the patient’s condition. If the hospital provides the

care for less than the Medicare payment, it makes a profit. But if the

hospital keeps the patient too long, is inefficient, or provides unnecessary

treatments, then it will lose money. This creates a strong incentive in the

private sector to discharge Medicare patients as soon as possible.

These financial incentives to increase efficiency and provide care in the

most cost-effective setting are largely absent in the VA system. Even in

those cases in which a private health insurer’s preadmission certification

requirement applies, the hospital’s revenues are not affected by failure to

obtain such certification. A VA hospital that admits a patient who does not

need a hospital level of care incurs no penalty. In fact, facility directors

often indicated to us that VA’s methods of allocating resources to its

medical centers favored inpatient care.

22VA Health Care: Verifying Veterans’ Reported Income Could Generate Millions in Copayment

Revenues (GAO/HRD-92-159, Sept. 15, 1992).

Page 22 GAO/HEHS-96-121 VA Health Care Resource Needs
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VA’s current RPM system is attempting to remove the incentive to provide

care in a hospital rather than an outpatient clinic and create incentives to

provide care in the most cost-effective setting. As used during the last two

budget cycles, however, the system has done little to create such

incentives. Because VA chose to shift few funds between the highest and

lowest cost facilities, facility efficiency incentives were minimal. For fiscal

year 1995, VA reallocated $20 million from 32 high-cost to 27 low-cost

facilities. VA officials told us that they plan to use RPM to reallocate more

money in fiscal year 1996 and to provide VISN directors a “risk pool” of

contingency funds to help facilities unable to work within their budgets. It

is yet unclear how VISN directors plan on using these funds.

Finally, unlike private-sector health care providers, VA has no external

preadmission screening program or other utilization review program to

provide incentives to ensure that only patients who need a hospital level of

care are admitted and that patients are discharged as soon as medically

possible. VA gives private-sector hospitals providing care to veterans under

its contract hospitalization program incentives to limit patients’ lengths of

stay by basing reimbursement on Medicare prospective payment rates. VA

does not, however, give its own hospitals the same incentives by basing

their payments on the Medicare rates.

Veteran, Rather Than VA,

Bears Financial Risk

Unlike under private health insurance and Medicare, in the VA system, the

veteran is at risk of being denied care, rather than VA being at risk of losing

funds, if a VA facility runs out of resources. Because it bears little risk, the

VA system lacks a strong incentive to operate efficiently.

A private insurer or managed care plan guarantees payment for covered

services in exchange for a fixed premium. The insurer or managed care

plan thus has a strong financial incentive to ensure that only medically

necessary care is provided in the most cost-effective setting. Otherwise,

the insurer may suffer a financial loss.

Unlike private health providers, however, the VA system does not

guarantee the availability of covered services. As a result, the ability of

veterans to get covered services depends on resource availability. If a VA

facility is inefficient and the resources allocated to the facility are not

sufficient to meet anticipated workload, the VA facility is allowed to deny

(that is, ration) services to eligible veterans. In 1993, we reported that 118

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VA medical centers reported rationing some types of care to eligible

veterans when the centers lacked enough resources.23

VA Facilities Find

Efficiencies When They

Need Funds for New

Programs

The ability of facilities to find ways to become more efficient when they

want to fund a new program, such as establishing an access point clinic,

indicates that when they are given an incentive to become more efficient,

they do so.

For example, VA’s Under Secretary for Health encouraged hospitals to take

all steps within their means to improve the geographic accessibility of VA

care. But he told the hospitals that they would have to use their own

resources to do this. Over half of VA’s hospitals quickly developed plans to

establish so-called access points. For example, the Amarillo VA medical

center identified ways to save over $850,000 to pay for the establishment

of access points:

• The medical center saved an estimated $250,000 a year by consolidating

inpatient medical wards and reducing the number of surgical beds it

staffed. Because of these consolidations, the center eliminated nine

nursing positions, saving salaries and related benefits. Officials said that

the consolidations coincided with declining workloads, attributable to

lower admissions and lengths of stay, and as such would not affect the

availability or quality of care the center provides.

• The medical center expects to save up to $150,000 by reviewing patients’

use of prescription medications. These reviews have led to a reduction in

medications provided, saving the cost of procuring, storing, and

dispensing the drugs.

• It expects to reduce future pharmacy costs by $250,000 by trying to change

patients’ lifestyles to reduce their cholesterol. Center officials estimate

that this has reduced the use of lipid-lowering drugs by half. The medical

center established health education classes, which teach correct eating

and exercise techniques. Before this, physicians had routinely prescribed

lipid-reducing drugs to lower cholesterol levels. Officials are planning to

establish similar health clinics for patients with high blood pressure and

other common conditions that may be effectively treated without

prescription drugs.

• The medical center expects to save $200,000 or more by using a managed

care contract to purchase radiation therapy services. Radiation therapy

involves a series of treatments, which the center has historically paid for

23VA Health Care: Variabilities in Outpatient Care Eligibility and Rationing Decisions

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

Page 24 GAO/HEHS-96-121 VA Health Care Resource Needs
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on a fee-for-service basis. The hospital recently signed a contract with a

private-sector hospital to provide each series of radiation treatments at a

capitated rate based on Medicare’s reimbursement schedule. Officials are

currently negotiating similar contracts for other medical services.

Establishment of

Service Networks

Should Lead to

Increased Emphasis

on Efficiency

In 1995, the Under Secretary for Health proposed criteria for potential

service realignment that would facilitate the types of changes needed to

achieve efficiency comparable with private-sector hospitals and clinics.

For example, he encouraged VHA directors to identify opportunities to

• buy services from the private sector at lower costs,

• consolidate duplicate services, and

• reduce their fixed and variable costs of services directly provided to

veterans.

VA’s assessment of its resource needs over the next 7 to 10 years did not

include any projected savings from the increased efficiencies that should

result from establishing VISNs, which assess needs on a network rather

than facility basis, improving facility planning. This will allow hospitals

serving veterans in the same geographic area to pool their resources and

reduce duplication.

A planned move to capitation funding should create incentives for

facilities to provide care in the most cost-effective setting. However, VA has

much to do before it can set appropriate capitation rates. For example,

while VA’s RPM data show a wide variation in operating costs among

facilities VA considers comparable, VA has done little to determine the

reasons for these variations. Without such an understanding, no assurance

exists that capitation rates can be set at the level that promotes the most

efficient operation.

Understanding facility or VISN cost variations necessitates improving the

information VA has on its hospitals’ operating costs. Although the

automated Decision Support System (DSS) that VA is implementing has

potential to be an effective management tool for improving the quality and

cost-effectiveness of VHA operations, VA has not developed a way to verify

the accuracy of the cost and utilization data going into DSS. Some of the

data provided to DSS from other VA information systems are incomplete

and inaccurate, limiting VA’s ability to rely on DSS-generated information to

Page 25 GAO/HEHS-96-121 VA Health Care Resource Needs
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make sound business decisions.24 VA has recognized the need for accurate

cost and utilization data for DSS and has a special project team developing

ways to improve the system’s input data.

Conclusions Given VA’s overstatement of future resource needs, the system does not

need to spend as many resources as previously expected. Moreover,

because the possible magnitude of future efficiency savings was not

factored into VA’s assessments of future resource needs, VA’s system may

have more discretionary resources available than expected. This suggests

that an operating goal of $16.2 billion a year may be achievable. In any

event, it seems likely that the impact of such funding levels would not, by

necessity, result in the budget shortfalls that VA estimated.

Although actions to improve VA’s efficiency are planned or under way that

could yield enough savings to enable VA to contribute billions of dollars

toward deficit reduction in the next 7 years without affecting current

services, VA provides little information to the Congress on those savings

and how they are reinvested. Essentially, VA reinvests these savings in new

programs and expanded services without giving the Congress the chance

to use all or a part of the savings to apply to the deficit.

Billions of dollars could be saved by establishing an independent external

preadmission certification program similar to those used by most private

health insurers. Similarly, by creating financial incentives for VA medical

centers to discharge patients as soon as their medical conditions allow, VA

could significantly reduce unnecessary days of hospital care.

Although VA has changes under way that should help create financial

incentives to provide care in the most cost-efficient setting, it will take

time for the new VISN directors to achieve significant savings. The directors

have been in their positions for only a few months so it is too early to tell

how successful they will be in increasing efficiency. It is important that VA

complete its implementation of clear mechanisms and useful management

data by which to hold VISN directors accountable for workload, efficiency,

and other performance targets. Without such mechanisms and improved

data, the VISN structure holds some risk for further decentralizing VHA

authority and responsibility for achieving efficiencies.

24VA Health Care Delivery: Top Management and Leadership Critical to Success of Decision Support

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

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Recommendations We recommend that the Secretary of Veterans Affairs do the following:

• Establish an independent, external preadmission certification program for

VA hospitals.

• Provide the Congress, through future budget submissions, data on the

extent to which VA services were provided to veterans in the mandatory

and discretionary care categories for both inpatient and outpatient care.

• Include in future budget submissions (1) information on costs saved

through improved efficiency and (2) plans to either reinvest savings in new

services or programs or use the savings to reduce the budget request.

Agency Comments By letter dated May 10, 1996 (see app. I), the Under Secretary for Health

said that VA appreciates our positive acknowledgment of its efforts to

restructure the VA health care system but disagrees with many of our

findings, conclusions, and recommendations. In VHA’s opinion, the report

presents outdated information that does not accurately reflect the current

direction of VA health care.

Overall Comments VHA said that our analysis is particularly inadequate as a basis for

projecting future resource requirements for VA medical care. Specifically,

VHA said that our report

• does not adequately consider all factors that affect VA’s future resource

needs,

• incorrectly states that VA does not adequately consider the declining

veteran population in forecasting future resource needs, and

• unfairly bases comments about the extent to which VA resources are spent

on discretionary care on work done by the VA IG at one facility.

As discussed in the following paragraphs, we do not find VHA’s comments

convincing.

All Factors Not Considered Our analysis, VHA said, places too much significance on the findings of our

September 1995 review of VA’s response to a congressional request (a

static assessment of different funding proposals and their effect over

future years) in concluding that VHA’s forecasting of future resource needs

is overstated. Our September 1995 analysis was, VHA said, a fragmented

discussion of efficiencies that did not consider other factors. Resource

needs are projected on the basis of assessment of inflation, current

Page 27 GAO/HEHS-96-121 VA Health Care Resource Needs
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workload, new efficiencies, health care technology, and VA health care

system deficiencies.

Our analyses were, by necessity, limited to review of the estimates of

future resource needs developed by VA. We tried to obtain the basis for the

5-year projections of resource needs in VA’s fiscal year 1996 budget

submission, but VA officials, including the Under Secretary for Health, said

that they had no part in developing the estimates. VHA offered no estimates

of its future resource needs beyond those included, either during our

review or in its comments on this report.

VHA said that it recognizes that further management efficiencies can and

must be achieved in future budget years to continue to provide quality

health care. Our report, VHA said, does not recognize the efficiencies

included in VA’s fiscal year 1996 budget request. In this request, VA assumed

that management efficiencies would save $335 million. The Congress

increased this savings amount by an additional $397 million in

administrative savings that have no impact on patient care. This results in

$732 million in permanent administrative savings in fiscal year 1996.

Our report does recognize that VA planned to achieve unspecified savings

of $335 million in fiscal year 1996. In addition, we have added a discussion

to reflect the final appropriation action approved after this report was sent

to VA for comment. The reductions, however, will not necessarily be

achieved without impacting patient care. Because VA does not have a plan

to achieve the needed savings, VA facilities may achieve these savings by

reducing patient care.

VA Does Consider Impact of

Declining Population

VHA said that VA’s model for projecting hospital workload explicitly

considers not only the change in the size and age of the veteran

population, but also changes in observed hospital use rates over time. VHA

said that one of the more misunderstood variables relates to the change in

the veteran population versus the number of veterans who use VA for their

health care services. According to VHA, although the veteran population is

declining, the number of veteran users is expected to increase. VHA said

that although the number of hospital admissions declined by 19 percent

between 1980 and 1995, the number of outpatient visits increased by

53 percent in the same period.

Figure 2 shows the increases in demand for outpatient care from 1980 to

1995. Such data do not, however, adequately reflect changing resource

needs. The savings from the decreased demand for inpatient hospital care

Page 28 GAO/HEHS-96-121 VA Health Care Resource Needs
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should more than offset the costs of meeting the increased demand for

outpatient care. Between fiscal years 1980 and 1995, the number of days of

hospital care provided in VA facilities declined from 26.1 million to

14.7 million, a decrease of over 11 million days of care. During the same

period, outpatient visits to VA clinics increased from 15.8 million to

26.5 million, an increase of 10.7 million visits. Because an outpatient visit

is 2-1/2 to 3-1/2 times cheaper than a day of inpatient hospital care, savings

from the declining inpatient workload should have more than offset the

costs of the increased outpatient workload VA experienced over the

16-year period.

The increase in demand for outpatient care is also consistent with what we

have been saying about VA’s efforts to (1) improve accessibility of VA health

care through access points and (2) expand outpatient eligibility.

Expanding eligibility, as was done in 1973 with outpatient eligibility to

include services that would obviate the need for hospital care, has

historically resulted in increased demand for outpatient services. For

example, in its fiscal year 1975 annual report, VA includes a figure showing

the “relationship of workload to the progressive extension of legislation

expanding the availability of outpatient services.” Similarly, in its

comments, VA noted that the number of VA outpatient clinics grew by

72 percent between 1980 and 1995. In other words, the number of clinics

was growing faster than the number of visits, which VA says grew by

53 percent in the same time period.

Report Inappropriately Relies

on Work at One Location

VHA said that our conclusions that a significant portion of VA resources go

to discretionary care and that services provided are not covered under

veterans’ VA benefits are based on two IG reports that reviewed the work of

one satellite outpatient clinic and one VA medical center.

Our conclusions are based both on our own work and on a series of IG

studies. The IG’s report discussed problems at two facilities—the Allen

Park VA medical center and the Columbus, Ohio, outpatient clinic. The

Allen Park facility was, the IG report notes, “. . . selected as the review site

in consultation with VHA program officials because it was considered to be

a typical outpatient environment in an urban tertiary care facility.”

Although our report cited only one IG report, the IG has found lax

enforcement of eligibility provisions at many other medical centers.

One of the recommendations in the IG’s report was that VHA conduct

reviews of each facility’s outpatient workload to identify the proportion of

visits properly classified as mandatory, discretionary, and ineligible using

Page 29 GAO/HEHS-96-121 VA Health Care Resource Needs
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the definitions relevant to current law. VHA, however, as of May 1996, has

not conducted the recommended reviews.

VHA also said that our estimate of the percentage of VA users in the

discretionary care category was inaccurate. According to VHA, only

3 percent of VA inpatients and less than 5 percent of both inpatient and

outpatient users were discretionary in fiscal year 1995.

Our estimate better reflects the extent to which care is provided to

veterans in the discretionary care category. VA’s estimate is apparently

based on unverified data provided by veterans when they apply for care;

such data underestimate veterans’ incomes. We compared VA’s fiscal year

1990 treatment records with federal income tax records and found that

about 15 percent of the veterans with no service-connected disabilities

who used VA medical centers had incomes that placed them in the

discretionary care category for both inpatient and outpatient care.25

Our review showed that VA may have incorrectly placed as many as

109,230 veterans in the mandatory care category in 1990. Tax records for

these veterans showed they had incomes that should have placed them in

the discretionary care category. We estimated that VA could have billed as

much as $27 million for care provided to these veterans.

Although data from our study are now 6 years old, data from VA’s own tax

record reviews are yielding similar results. VA has now established its own

income verification program. Its initial review found that about 18 percent

of veterans with no service-connected conditions underreported their

income. VA’s matching agreement with the Internal Revenue Service

indicates that VA expects its comparison of fiscal year 1996 treatment

records with tax data to generate about $30.5 million in copayment

collections for care provided to veterans who were incorrectly classified

as mandatory care category veterans. Accordingly, we believe our

estimate—and VA’s own data—show that about 15 percent of veterans with

no service-connected disabilities who use VA medical centers are in the

discretionary care category for both inpatient and outpatient care.

VHA also said that they do not believe that extrapolating data from a single

facility to the VA system nationwide is appropriate. According to VHA, our

report states that “systemwide, 56% of discretionary care outpatient visits

did not meet eligibility criteria in 1992, and may have resulted in

$321 million to $831 million being potentially used to provide outpatient

25GAO/HRD-92-159, Sept. 15, 1992.

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care to veterans in the discretionary care category who may not have been

entitled to that care.”

What our report actually says is that the VA IG further reported that about

56 percent of discretionary care outpatient visits provided services that

were not covered under the veterans’ VA benefits . . . . We state that an

estimated $321 million to $831 million of the approximately $3.7 billion VA

spent on outpatient care in fiscal year 1992 may have been for treatments

provided to veterans in the discretionary care category that were not

covered under VA health care benefits.

Nowhere in the report do we suggest that the problem is one of

“entitlement.” No veteran, whether in the mandatory or discretionary care

category, is entitled to care from VA. The issue is one of eligibility. The IG

report found that veterans in the discretionary care category for outpatient

care received treatments that they were not eligible for regardless of

whether VA had the space and resources to provide the services. In other

words, these veterans received services that were not needed to prepare

for, to follow up after, or to obviate the need for hospital care.

According to VHA, this report and the IG reports demonstrate the need for

eligibility reform. In VHA’s opinion, the law needs to be amended to enable

VA to provide care so that veterans are treated in the most appropriate,

most efficient, and most cost-effective setting. VHA said that this is an

instance where, despite statements to the contrary in this report, the law

contributes to the system’s inefficiencies by perpetuating complicated

outpatient eligibility criteria. VA needs the outpatient eligibility reform tool

to achieve the best patient and system outcomes.

Although we agree with VHA that eligibility reforms are needed, VA’s efforts

to expand eligibility are not effectively targeted toward meeting the health

care needs of veterans within available resources. Our concerns about

current proposals to expand eligibility were expressed in our recent

testimony before the Senate Committee on Veterans’ Affairs and will be

explored more fully in a forthcoming report.

VHA said that our report’s statement that medical centers frequently

overstate the number of inpatients and outpatients treated is no longer

true. VHA said that it improved its information systems and eliminated false

workload credits in response to the IG reports.26 Before this, facilities

26Since October 1, 1992, no automatic workload credit has been granted for scheduled outpatient

visits, and facilities must physically check in each patient to receive such credit.

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could obtain automatic workload credit for all scheduled visits unless

action was taken to indicate that a patient failed to appear. We revised the

discussion in our report to reflect the actions taken in response to the IG’s

reports. We also added a discussion of a September 1995 VA IG report

showing continued problems in VA facilities’ reporting of outpatient

workload.

Actions Will Be Taken to

Establish a Preadmission

Certification Program

VHA agreed with our recommendation that it establish an independent,

external preadmission certification program for VA hospitals. VHA said that

policies and processes for preadmission review are being developed by a

task force charged with reviewing and revising VHA’s existing utilization

review policy. The preadmission review will, according to VHA, identify the

appropriate level of care for both inpatient and outpatient care,

appropriate alternatives to care, and a system of referral and arrangement

of alternative care.

Although we found VHA’s agreement to pursue establishment of an external

preadmission certification program encouraging, we do not believe VHA’s

action fully responds to our recommendation because it provides no time

frames for completing development and implementation of the program. In

addition, it does not indicate how compliance with the findings of the

external reviews will be enforced. Because VA facilities currently incur no

financial risk from providing inappropriate care, external preadmission

certification requirements may not be effective unless coupled with a

financial penalty for noncompliance with the review findings.

Recommendations and VA promises to establish effective utilization review

mechanisms to help prevent inappropriate days of hospital care date back

over 10 years. Because of the hundreds of millions of dollars wasted from

VA’s past failure to address this problem, we believe VA needs to develop

and follow a specific timetable to implement an external preadmission

certification program and develop plans to place VA facilities at financial

risk if they admit patients not requiring a hospital level of care.

VHA Does Not Plan to

Provide the Congress

Information on Savings

VHA did not agree with our recommendation that it include (1) information

on savings achieved through improved efficiency and (2) plans to either

reinvest savings in new services or programs or use the savings to reduce

the budget request. The recommendation is, VHA said, unrealistic. Although

VHA is moving rapidly to implement several management initiatives, such

as those discussed in this report, VHA said it cannot predict the extent of

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possible savings or accurately predict future costs. VHA said that VA will be

better able to predict savings when the VISNs are fully operational but

probably not to the level of detail that our recommendation seems to

require.

Providing the Congress information on factors, such as inflation and

creation of new programs, that increase resource needs without providing

information on changes that could reduce or offset those needs leaves the

Congress with little basis for determining appropriate funding levels.

Because VA facilities are essentially allowed to keep any funds they

generate through efficiency improvements and seek additional funds to

compensate for the effects of inflation, the true rate of increase in VA’s

medical care appropriations is understated.

VA Does Not Plan to Give

the Congress Detailed

Information on Workload

Finally, VHA did not agree with our recommendation that it provide data to

the Congress on the extent to which VA services are provided to veterans

in the mandatory and discretionary care categories for both inpatient and

outpatient care. According to VHA, VA does not have accounting systems

that would allow VA to differentiate between mandatory and discretionary

care. Developing accounting systems capable of such differentiation

would, VHA said, be extremely difficult and may not be cost-effective given

the complexities of outpatient eligibility. For example, one outpatient visit

may comprise several clinic stops, across which outpatient eligibility may

vary. These complexities, according to VHA, make it very difficult to

efficiently and meaningfully track mandatory and discretionary care.

Future data systems, such as the DSS and resource allocation systems, may,

VHA said, improve the identification of patient care costs. The difficulties in

identifying mandatory versus discretionary care categories will, according

to VHA, remain until eligibility laws are amended.

Without information on the extent to which VA resources are used to

provide services to veterans in the priority categories established under VA

law, the Congress lacks the basic information needed to guide decisions

about what portion of VA’s discretionary care workload to fund. In

addition, it lacks the basic information it needs to ensure that resources

are equitably allocated to VISNs to ensure that veterans have reasonably

equal access to VA benefits regardless of where they live.

If VHA is applying the eligibility rules established under Public Law

100-322—as VHA maintained in its comments it has instructed its facilities

to do—it should be relatively easy to develop a reporting system to

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capture the results of those decisions. VA has, for years, indicated that it

may include data on mandatory and discretionary care in its resource

allocation system in DSS and in other data systems but has never detailed

any plans to accomplish this task. VA needs to promptly decide how to

gather such data and set realistic milestones for implementing the changes

needed to provide the Congress and VA managers the data they need to

effectively assess VA medical care budget needs. By not developing such

data, VA makes it exceedingly difficult for the Congress to consider

reductions in its budget request because the Congress does not know

whether its reduction would affect provision of services to veterans in the

mandatory care category for inpatient care.

According to VHA, in fiscal year 1995, less than 3 percent of VA inpatients

and less than 5 percent of both inpatient and outpatient users were

discretionary by inpatient eligibility standards. VHA said that any savings

available from no longer treating any discretionary care category veterans

defined by inpatient eligibility would be relatively very small.

The data VA cites are apparently based on unverified information provided

by veterans at the time of application. As discussed in this report, many

veterans underreport their income to VA to qualify for free care. VA expects

to recover about $30.5 million in copayments in fiscal year 1996 through its

recently established income verification program.

VHA provided additional comments in an attachment to its May 10, 1996,

letter. Those comments are addressed in appendix II and changes have

been made in the body of the report as appropriate in response to the

additional comments.

We are sending copies of this report to the Chairmen and Ranking

Minority Members, Subcommittee on VA, HUD, and Independent Agencies,

House Committee on Appropriations; the House and Senate Committees

on Veterans’ Affairs; the Secretary of Veterans Affairs; the Director, Office

of Management and Budget; and other interested parties. Copies will also

be made available to others upon request.

This report was prepared under the direction of Jim Linz and Paul

Reynolds, Assistant Directors, Health Care Delivery and Quality Issues.

Please call Mr. Linz at (202) 512-7110 or Mr. Reynolds at (202) 512-7109 if

you or your staff have any questions. Other evaluators who made

Page 34 GAO/HEHS-96-121 VA Health Care Resource Needs
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contributions to this report include Katherine Iritani, Linda Bade, and Walt

Gembacz.

Sincerely yours,

David P. Baine

Director, Health Care Delivery

 and Quality Issues

Page 35 GAO/HEHS-96-121 VA Health Care Resource Needs
Contents

Letter 1

Appendix I 

Comments From the

Veterans Health

Administration

38

Appendix II 

Evaluation of

Additional Veterans

Health Administration

Comments

42

Related GAO Products 64

Figures Figure 1: VA Hospital Users by Purpose of Treatment, FY 1995 5

Figure 2: Changes in VA Facilities’ Workload, FY 1980-95 6

Figure 3: VA Medical Care Budget Authority, FY 1980-95 7

Figure 4: Operating Beds in VA Hospitals, FY 1969-94 9

Figure 5: Projected Age-Adjusted Days of VA Hospital Care,

1994-2010

10

Abbreviations

DOD Department of Defense

DSS Decentralized Support System

FTE full-time equivalent

HIV/AIDS human immunodeficiency virus/acquired immunodeficiency

syndrome

IG Office of Inspector General

NCCC National Cost Containment Center

PBM Pharmacy Benefit Management

RPM Resource Planning and Management System

UM utilization management

UR utilization review

VA Department of Veterans Affairs

VHA Veterans Health Administration

VISN Veterans Integrated Service Network

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Appendix I 

Comments From the Veterans Health

Administration

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Appendix I 

Comments From the Veterans Health

Administration

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Appendix I 

Comments From the Veterans Health

Administration

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Appendix I 

Comments From the Veterans Health

Administration

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Appendix II 

Evaluation of Additional Veterans Health

Administration Comments

VHA’s additional comments noted on the following pages are copied from

the enclosure that accompanied VHA’s May 10, 1996, letter to us.

References to page numbers in our draft report have been changed to refer

to the appropriate page numbers in our final report. Each VHA comment is

followed by our evaluation.

VHA Comment 1 [This comment responds to GAO’s reporting on page 2 that facilities receive

scant pressure to effect efficiencies but do so when they want to

implement new services or expand existing ones.]

Headquarters normally makes a commitment to support a facility’s budget

before the beginning of the fiscal year starts. However, 1996 is an

exception in that the initial allocation of resources are delayed due to the

uncertainty as to the outcome of the Congressional action for the fiscal

year. This budget provides incentives for the facility to figure out how to

operate during the year at a lower per-unit-of-service cost. Any savings

that the facility can make during the year after meeting savings targets can

be put back into either enhancing the level of service in specific areas or

into expanding services. In addition to a prospective budget, the Central

Office, for the past three years, established facility budgets using

per-capita prices for five different risk groups. While some of these groups

include bed-service care; e.g., the extended care group, the largest risk

group, basic care, has no inpatient/outpatient designation. In this risk

group, a facility receives budget credit based solely on the number of

patients that they will care for times a single average price. A significant

amount of information is provided facilities and VISNs on their relative cost,

casemix [sic] and productivity. This peer comparison is structured to

promote the treatment of patients with the most appropriate care in the

most cost-effective manner. In developing the 1997 allocation prices, VHA

will be developing incentives for shifting to ambulatory care.

The Resource Allocation Methodology (RAM), which was used to make

adjustments to medical centers’ budgets during fiscal years 1985-1990,

provided more workload credit for inpatient care. Over the years, VHA has

tried to remedy the situation. In 1995, under the Resource Planning and

Management (RPM) system, VHA changed the structure of the workload

classification system to promote primary and ambulatory care. As VHA is

preparing for the FY 1997 budget allocation, the Capitation Advisory Panel

will be making recommendations to provide incentives in the resource

allocation system for ambulatory surgery. As VHA develops a

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Evaluation of Additional Veterans Health

Administration Comments

capitation-based resource allocation system for FY 1998, it will continue

its ongoing efforts to promote incentives for ambulatory care.

GAO Evaluation We believe VHA has taken these remarks out of context. We reported that,

historically, VA’s central office provided few incentives for facilities to

become more efficient. Furthermore, the report goes to say that recent

changes at VA are starting to create the types of efficiency incentives that

have long existed in the private sector. The remainder of this section of the

report discusses the kinds of changes, such as capitation funding and

establishment of performance measures, VA is making to create efficiency

incentives.

VHA Comment 2 [This comment responds to GAO’s reporting on page 10 that many veterans

leave the VA system when they become eligible for Medicare.]

This is misleading, because while a VA study of inpatients only (Feitz)

reveals some VA inpatients do leave VA upon reaching age 65, many do

return in the following years, especially as outpatients (Hisnanick). A large

proportion (46 percent) of VA unique patients across both inpatient and

outpatient care are Medicare eligible.

GAO Evaluation We did not mean to imply that all veterans leave the VA system or even that

those who leave the system discontinue all use of VA services. We have

revised the wording in the final report to state that many veterans reduce

their use of the VA system when they become eligible for Medicare.

When veterans have both Medicare and VA coverage, they overwhelmingly

use Medicare. In 1990, for example, almost 62 percent of Medicare-eligible

veterans used Medicare but no VA services during the year; 7 percent used

VA but no Medicare services; and 8 percent used a combination of both

Medicare and VA services. About 24 percent did not use services under

either program.

While most Medicare-eligible veterans rely primarily on private-sector

providers participating in Medicare for their health care needs,

Medicare-eligible veterans do, as VHA points out, and as we have pointed

out in previous reports, account for about half of VA’s workload.27

27See, for example, Veterans Health Care: Most Care Provided Through Non-VA Programs

(GAO/HEHS-94-104BR, Apr. 25. 1994) and Veterans’ Health Care: Use of VA Services by

Medicare-Eligible Veterans (GAO/HEHS-95-13, Oct. 24, 1994).

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VHA Comment 3 Throughout the report, you continually shift your statements from

inpatient care to outpatient care without adequately differentiating them.

This is at times confusing or misleading.

GAO Evaluation Changes have been made in the final report to clarify discussions of

inpatient and outpatient care as appropriate.

VHA Comment 4 Pages 10 & 11. Your discussion seems to hinge on comments made in a VA

Inspector General report (report no. 2AB-A02-059, dated March 31, 1992),

regarding outpatient provisions of Public Law 100-322. VHA finds it

inappropriate to base these specific findings and conclusions upon

findings in the Inspector General report, which were based on one tertiary

care facility. This certainly cannot be deemed to represent the system as a

whole, nor can it be assumed that the same concerns identified at this

location, and a satellite outpatient clinic also cited in the Inspector

General report, would necessarily be found at all other VA health care

facilities.

GAO Evaluation The IG’s report discussed problems at two facilities—the Allen Park VA

medical center and the Columbus, Ohio, outpatient clinic. The Allen Park

facility was, the IG report notes, “...selected as the review site in

consultation with VHA program officials because it was considered to be a

typical outpatient environment in an urban tertiary care facility.” It was

selected as a typical tertiary care facility because VHA had previously

expressed concern that the findings at the Columbus outpatient clinic did

not represent conditions at a typical tertiary care outpatient clinic.

One of the recommendations in the IG’s report was that VHA conduct

reviews of each facility’s outpatient workload to identify the proportion of

visits properly classified as mandatory, discretionary, and ineligible using

the definitions relevant to current law. VHA, however, was unwilling to

conduct such reviews, which might possibly have disproved the IG’s

findings or shown the problems to be isolated to a few facilities. As of

May 1996, VHA still has not conducted the recommended reviews.

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Administration Comments

Although we focused on a single IG report in our testimony, the IG found

lax enforcement of eligibility provisions at many other medical centers.28

In addition, our recent work on VA access points found no indication that

VA requires access point contractors to establish veterans’ eligibility or

priority for care or that contractors were making such determinations for

each new condition.

Perhaps the strongest evidence to suggest that the IG’s work and our work

on access points represent the system as a whole is VHA’s recent comments

to the Ranking Minority Member of the Senate Committee on Veterans’

Affairs on our March 20, 1996, testimony on eligibility reform.29 According

to VHA,

“...VA physicians generally practice with little real regard for the illogical eligibility rules.

Indeed, it appears to me as if these rules are more of a hassle factor than anything

else—bureaucratic barriers to be circumvented in one way or another in the interest of

taking care of patients. In fact, over the last 7 years VHA has provided approximately

200 million outpatient visits and about 7 million hospital admissions, but there has not been

one instance where an administrator or practitioner has been reprimanded for violating the

eligibility rules, despite several GAO and IG reports finding ‘varying interpretations of the

statutory outpatient eligibility criteria,’ incorrect coding of mandatory visits, physicians

‘not consistently involved in required clinical examination to determine eligibility status,’

and other such things.”

VHA Comment 5 Nowhere in the Inspector General audit does it state that “VA incorrectly

applied inpatient eligibility categories to its outpatients,” which insinuates

that administratively, VHA field facilities used inpatient eligibility criteria to

determine a veteran’s eligibility for outpatient care. It is repeatedly implied

that veterans were provided outpatient care under the auspices of the

“obviate-the-need for hospital care” criterion. In the Inspector General’s

opinion, some of these veterans did not medically fit their definition of

“obviate-the-need for hospital care,” because many of these individuals

were treated for chronic conditions.

28See, for example, Audit of Selected Activities Department of Veterans Affairs Medical Center

Muskogee, Oklahoma, Report No. 3R6-A99-053, VA Office of Inspector General (Washington, D.C.: Feb.

19, 1993); Audit of Medical Center Fort Lyon, Colorado, Report No. 1R5-F03-026, VA Office of

Inspector General (Washington, D.C.: Jan. 23, 1991); and Audit of VA Medical Center Denver, Colorado,

Report No. 1R5-F03-050, VA Office of Inspector General (Washington, D.C.: Apr. 5, 1991).

29The comments were provided in a May 10, 1996, letter from the Under Secretary for Health to the

Ranking Minority Member of the Senate Committee on Veterans’ Affairs.

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Evaluation of Additional Veterans Health

Administration Comments

GAO Evaluation VA is mixing up the IG’s two distinct findings, one of which concerns an

administrative determination of the veterans’ priority for care and the

other of which deals with the medical determination of whether outpatient

care was needed in preparation for, as a follow-up to, or to obviate the

need for hospital care. With respect to the administrative determination of

veterans’ priorities for care, the IG found that VA was not reporting

outpatient workload according to the mandatory and discretionary care

categories established under the Public Law 100-322 and was instead

reporting workload on the basis of the mandatory and discretionary care

categories set in 1986 by Public Law 99-272 and still applicable to hospital

care. We have, however, clarified the wording in the final report to

indicate that VA was incorrectly reporting workload.

VHA Comment 6 The Inspector General report implies that VHA may be providing outpatient

care to veterans who are otherwise eligible for discretionary care, but not

to the outpatient care they are receiving. However, there is disagreement

as to whether or not this statement is true, in that in some cases VA

provides care that clinical staff deem to be mandatory under the

“obviate-the-need” criterion, but which some do not see as clearly meeting

the administrative definition of mandatory as defined in Public Law

100-322. This appears to be what you are referring to when stating that VA

is incorrectly applying inpatient eligibility categories, although one has

nothing to do with the other.

GAO Evaluation We were careful in our report to distinguish between the IG’s two major

findings. First, the IG reported that VHA’s budget plans do not accurately

reflect statutory definitions for outpatient eligibility according to the

mandatory and discretionary care categories defined in Public Law

100-322. Second, the IG reported that VA has not adequately defined the

conditions and circumstances under which outpatient treatment may be

provided to obviate the need for hospitalization. When we discuss veterans

obtaining care for which they were not eligible, we are not discussing

differences between being in the mandatory and discretionary care

category. These categories define priorities for care, not eligibility for care.

What we are referring to is providing veterans eligible for only

hospital-related care services that are not needed in preparation for, as a

follow-up to, or to obviate the need for hospital care.

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Evaluation of Additional Veterans Health

Administration Comments

VHA Comment 7 Policy directives are in place to guide administrative staff on the eligibility

provisions of Public Law 100-322. These directives spell out mandatory

versus discretionary outpatient medical care from an administrative

perspective. The Inspector General, and by extension GAO, through its use

of the Inspector General report, are concerned with the fact that

“obviate-the-need for hospital care” is not clearly defined. This leads, in

their opinion, to providing inappropriate care to veterans, who are

determined eligible, based on their need for care to obviate the need for

hospital care. Eligibility under this criterion is a medical decision and not

an administrative decision.

GAO Evaluation We agree that interpreting the obviate-the-need criterion is a medical

decision. That fact does not, in our opinion, preclude issuance of

guidelines intended to bring greater consistency to those medical

decisions or independent reviews to determine compliance with those

guidelines.

Medical decisions are questioned every day. For example, a primary

purpose of utilization review is to examine the reasonableness of a

physician’s medical decisions. Similarly, a preadmission certification

program uses an independent party to evaluate the reasonableness of the

medical decisions physicians make to admit their patients to hospitals.

Similarly, practice guidelines are frequently issued setting expectations for

how physicians will practice. For example, at our urging, VA issued

guidelines defining what constitutes a complete physical examination for

women veterans. Those guidelines set expectations that VA physicians will

provide women veterans complete cancer screening examinations at

recommended intervals. Similarly, as noted elsewhere in its comments, VA

recently required its Veterans Integrated Service Network (VISN) directors

to establish formularies of medications to guide VA physicians toward

prescribing certain drugs.

VHA Comment 8 Page 13. You indicate that because of separate planning processes, there

might be double counting, in that the projected new workload may well be

associated with the activations. Budgeting for activations requirements in

1997 is modified as the medical care request does not include “line item”

requests for the activation of specific projects. The networks will activate

projects from within the level of resources provided in their total Medical

Care 1997 budget allocations.

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Evaluation of Additional Veterans Health

Administration Comments

GAO Evaluation We included the updated information in the final report.

VHA Comment 9 Page 13. Although VA facilities received separate reimbursement for the

workload generated through those sharing agreements, the workload was

nevertheless included in VA’s justification of its budget request. In 1994, VA

provided care to about 45,000 unique sharing agreement patients. No

appropriated funds are requested for this workload since it is supported by

reimbursements from DOD and other sharing partners. Even though our

base workload counts do include sharing, the levels are small and the

inclusion of sharing makes no material difference in our workload

presentations. The Resource Planning and Management (RPM) model

excludes data for sharing patients in developing changes in both unique

patients and cost per unique patient. The actual patient counts for the last

actual year are straightlined in all RPM projections. In addition, some of the

DOD sharing agreement earnings are for non-patient workload such as

pounds of laundry processed, etc.

GAO Evaluation We have expanded the discussion in our final report to include the

information VA provided. Because the workload data VA reported to the

Congress included services provided under sharing agreements, VA was, in

the past, receiving appropriated funds to pay for services paid for through

sharing agreements.

VHA Comment 10 Page 15. VA agrees that there are potential opportunities for savings which

will allow VA to operate more effectively and efficiently. We are actively

pursuing these opportunities, including most of those initiatives cited in

the report. However, it is important to qualify your estimate of billions in

savings. It is impossible to project savings for some of the cited initiatives.

To do so establishes peg points for reducing VA resources without any real

justification.

GAO Evaluation We agree that estimating precise savings from all of the initiatives included

in this report is impossible. That is why we conservatively estimated that

VA could save billions through management improvements over a 7-year

period. To the extent possible, we have cited estimates developed by VA

program officials and the VA IG.

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Evaluation of Additional Veterans Health

Administration Comments

We do not agree, however, that VA should not establish “peg points” for

reducing VA’s budget request on the basis of planned savings and then

monitor management initiatives to determine whether the savings were

realized. Effectively determining future resource needs is impossible

without tracking savings. In its fiscal year 1997 budget request, VA seeks an

increase over the fiscal year 1996 appropriation to offset inflation. The

actual increase, however, is really much higher because no offsetting

decrease exists in the request to compensate for any management savings

likely to occur during the year, such as efficiency improvements expected

to occur through full implementation of VISNs.

VHA Comment 11 Assuming a 5 percent compound annual inflation requirement, VA medical

care would need to be 40 percent more efficient in order to operate at

Congress’ straightlined 1995 level of $16.2 billion through 2002. It is highly

unlikely that VA could reach these dramatic savings without severely

impacting the level of health care currently provided to veterans. These

additional savings would be over and above the $10.5 billion in savings

that have resulted from the VA medical care budget increasing at a rate less

than the Medical Consumer Price Index over the period from 1980 through

1995.

GAO Evaluation VHA’s comparison of increases in its budget with increases in the medical

consumer price index are inappropriate. VA’s inpatient hospital

workload—which accounts for over one-half of VA’s medical care

budget—declined dramatically between 1980 and 1995, while less costly

outpatient workload increased just as dramatically. Comparing the

increase in the overall budget with the consumer price index is

inappropriate without considering changes in workload over the time

period. A more appropriate comparison would be to compare the increase

in VA’s average cost of hospital, nursing home, and outpatient care with

growth in the consumer price index. For example, while VA’s medical care

budget increased by about 170 percent between 1980 and 1995 (from

$6.0 billion to $16.1 billion) the cost of a day of care in a VA hospital

increased by over 305 percent (from $154 to $625).

VHA Comment 12 Page 15. You often point out savings expected from reduced acute

inpatient care, but seem to ignore large increases needed in outpatient and

other non-institutional care programs for current levels of eligible veterans

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Evaluation of Additional Veterans Health

Administration Comments

and the greater use of VA services by veterans despite their population

reductions.

GAO Evaluation We agree that savings from shifting nonacute inpatient care to other

settings will be partially offset by increased costs under other programs.

We do not agree, however, that shifting nonacute care to outpatient

settings will result in large increases in outpatient demand. Veterans who

use VA for inpatient care already receive significant amounts of their care

as outpatients. For example, in fiscal year 1995, veterans with no

service-connected conditions who were hospitalized in a VA facility during

the year received, on average, over 15 outpatient visits from VA clinics.

We discuss the increased demand for outpatient care on page 5 of the

report.

VHA Comment 13 Page 15. Since 1979, VA medical facilities have had the option to dispense

multi-month quantities of locally determined medications to eligible

veteran patients. Due to a number of reasons, including budgetary

limitations, lack of automation to facilitate implementation, and patient

care concerns, only a small number of VA medical facilities implemented

such programs in the 1980’s. Subsequent to an expressed interest in this

program by the Congress and GAO in the early 1990’s, additional guidance

was distributed to all facilities regarding implementation of the program.

Again, due to budgetary and patient care concerns; e.g., psychiatric

patients, some facilities have been slow to adopt the program. Despite

slow implementation by some facilities, there has been a dramatic

increase in the use of this program in recent years. For example, in FY

1994, 9 million fewer prescriptions were dispensed by VA pharmacies due

to multi-month dispensing. In FY 1995, this figure increased to 15 million

fewer prescriptions, and VHA anticipates further efficiencies in FY 1996. We

believe we have implemented this program in a prudent manner, balancing

quality of care issues and budgeting issues. In addition, VHA issued analysis

and guidance to medical facilities in FYs 1994 through 1996, and will

continue to monitor the impact and implementation of the program.

GAO Evaluation Our report, in reflecting the estimated savings in fiscal year 1995,

recognizes the progress VA has made since issuance of our 1992 report. It

seems to us, however, that budgetary concerns, rather than slowing

implementation of more cost-effective drug-dispensing methods, would

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Evaluation of Additional Veterans Health

Administration Comments

encourage quicker implementation. This is particularly true because

essentially no start-up costs are involved in going from a 30-day

prescription to a 90-day prescription.

VHA Comment 14 Access points are not alternatives to VA outpatient clinics. They include VA

operated outpatient clinics as well as contractual or sharing agreements.

The term “access points” was used to reorient managers’ attitudes toward

outpatient care; i.e., not as pre- or post-hospital care but as a veteran’s

principal contact with the system.

The cost of outpatient treatment would generally be lower than the cost of

inappropriate hospital days. The cost of privately provided outpatient care

is not necessarily lower than the cost of VA-provided outpatient care. One

would expect a facility to arrange for private provision of only those

services which can be obtained at less cost.

GAO Evaluation We have clarified the wording of this part of the final report. Our recent

review of access points suggests that VA medical centers that have

established access points have generally found that contracting for

services is less expensive when an access point serves a relatively small

number of veterans. As the number of veterans served by an access point

increases, the decision on whether to contract for services or provide

them directly becomes more difficult.

VHA Comment 15 The issue of new users attracted to VA by the opening of new clinics is

exaggerated. The purpose in establishing access points is to improve

access to VA services by veterans, not to expand the system. We

acknowledge that establishing access points may result in new users to the

system. The net effect does not appear substantial in that between 20 and

30 percent of individuals treated by VA in each year are new to the VA

system.

GAO Evaluation We believe the suggestion that making health care services more

accessible does not substantially affect veterans’ use of VA services is

naive. Elsewhere in its comments, VHA presented data showing that as the

number of VA outpatient clinics increased 72 percent between 1980 and

1995, the number of outpatient visits increased by 53 percent.

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Although VA may be correct in stating that 20 to 30 percent of the veterans

who use VA services each year did not use VA services the year before, we

used a more conservative approach in estimating new users. In our

analyses, we considered veterans to be “new” users only if they had not

used VA services within the preceding 3 consecutive years. Veterans who

had used VA within the 3-year period—about 4 to 5 million veterans

nationwide—were considered current users. In other words, we

considered only those veterans attracted to the access points who had not

sought VA care for over 3 years new users.

VHA Comment 16 Page 17. Your comment that VA could realize potentially $100 million in

savings through use of a national formulary is most likely overstated. If the

intention is that overall pharmaceutical expenditures be reduced by

$100 million through implementation of a national formulary, this is

misleading. In all probability, savings realized through volume committed

contracts will be offset by new therapies. For example, this year new

agents for the treatment of HIV/AIDS have been granted accelerated approval

by the Food and Drug Administration. It is estimated that VA expenditures

will increase by over $50 million annually for the new HIV/AIDS therapies. It

is also very difficult to predict how much lower VA can drive drug prices,

keeping in mind that Public Law 102-585 established drug pricing for VA

that is much more favorable than for other managed care organizations.

GAO Evaluation Because VHA could not provide an estimate of potential savings from

establishing a national formulary, we included a “ballpark” estimate of

what potential savings could be if the formulary allowed VA to save

10 percent of its pharmaceutical costs. We recognize that the estimate has

no precision but note that VHA’s directive on establishing VISN formularies

notes that the advantages of such formularies are decreased inventory,

increased efficiency, and lower pharmaceutical prices.

Although savings from establishing VISN formularies or a national

formulary may be used to offset increased costs for new therapies or for

other uses, we nevertheless believe that the savings, and how they are

used, should be accounted for in VA budget submissions.

VHA Comment 17 VA has taken a number of additional actions to improve management of

pharmaceuticals in the last six years. VISN network formularies have been

established which will evolve into a national formulary, by approximately

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April 1997. More important is the approval by the Under Secretary for

Health of the Pharmacy Benefit Management (PBM) function as part of the

restructured VHA. Basically, the PBM will address (1) contracting for

pharmaceuticals to ensure the most efficient and effective contract

processes; (2) the most efficient and effective distribution systems for

pharmaceuticals (e.g., consolidated mail outpatient pharmacies); and,

(3) the appropriate utilization of pharmaceuticals through the issuance of

evidence-based disease management protocols, treatment protocols and

drug use protocols. VHA is also testing commercial software to compare

pharmaceutical utilization against these established protocols and to

measure outcomes achieved from drug therapy. In short, the goal of the

PBM is to reduce overall health care costs through appropriate use of

pharmaceuticals, not reduce the cost of individual pharmaceuticals.

GAO Evaluation The final report has been revised to indicate that VHA has taken other

actions to improve management of pharmaceuticals.

VHA Comment 18 Page 17. VHA had strategically planned to consolidate mail prescription

processing through automated technology well before 1992. In fact,

through research and development at the VA Medical Center Nashville, TN

beginning in 1990, VHA essentially developed the automated prescription

dispensing technology that is on the commercial market today. GAO’s 1992

report was not the determining factor prompting VA’s decision to

implement consolidated mail outpatient pharmacies or the timing of their

implementation. Timing of the implementation was actually influenced by

the development of suitable technology associated with efficient human

resources management. Due to the fact that none of the existing mail

prescription facilities is operating at full capacity, it is too early for either

VA or GAO to estimate annual cost avoidance. Experience to date suggests

that substantial savings will accrue. How much savings is also very

difficult to estimate due to the fact that technology is continually evolving.

GAO Evaluation Our report does not indicate that VA’s decision to establish consolidated

mail service pharmacies was in response to our January 1992 report. Our

report, did, however, recommend that VA require pharmacies to maximize

the use of 90-day supplies when dispensing maintenance drugs. It also

contained recommendations on the location and operation of the bulk

processing centers.

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We got our estimate of savings from VA pharmacy officials.

VHA Comment 19 Page 19. The 1991 study is based on FY 1986, or ten year old data. The 1993

study is based on 1989 data. In both studies, trained reviewers were

instructed to assume all levels of care were available at each VA medical

center in the determination of the appropriateness of inpatient services. In

the 1991 study, social factors were only considered if documented in the

patient’s chart. In the 1993 study, reviewers were explicitly instructed not

to consider social factors in the determination of the appropriateness of

inpatient care. This would, of course, have bearing on the conclusions

drawn in the current GAO report.

GAO Evaluation We reviewed the two studies because VA, the National Performance

Review, and the Independent Budget cite them as support for their views

that eligibility reform would allow VA to shift 20 to 43 percent of nonacute

admissions to outpatient settings. We agree with VA that the assessments

of the “appropriateness of inpatient care” under both studies were based

on application of medical necessity criteria, not on whether extenuating

circumstances, such as nonavailability of an ambulatory surgery program,

long travel distance, and eligibility restrictions, might lead to nonacute

admissions. A secondary goal of the studies, however, was to provide

some insights into the reasons for nonacute care. Our comments are based

on the reasons for nonacute admissions identified by the researchers. For

example, the 1993 study notes that “hospital reviewers were asked to

prioritize up to three reasons for each nonacute admission and day of

care.” The reviewers, in identifying reasons for nonacute admissions,

looked both at the availability of other care settings and social factors. For

example, the study notes that “[l]ack of an ambulatory care alternative was

the most important reason for nonacute admissions to surgery.”

VHA Comment 20 You fault VA for nonacute inpatient admissions. Yet in order to shift much

of this nonacute care of mandatory VA inpatients to cost-effective

outpatient alternatives when outpatient eligibility is discretionary or

limited, VA needs the outpatient eligibility reform tool. VA gets blamed for

both the problem and the solution when much of the problem stems from

the complexity of or lack of outpatient eligibility in order to achieve the

best patient and system outcomes.

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GAO Evaluation As discussed in our March 20, 1996, testimony before the Senate

Committee on Veterans’ Affairs, we see little basis for linking nonacute

admissions to VA hospitals to eligibility restrictions. Rather, nonacute

admissions are most often caused by the VA system’s inefficiencies, VA’s

resource allocation systems that have historically rewarded VA medical

centers for choosing inpatient over outpatient care, and the system’s

slowness in developing ambulatory care facilities. VA continues to

emphasize expanding hospital capacity over outpatient capacity in its

fiscal year 1997 budget submission. VA proposes to spend over

$383 million, including about $75 million in fiscal year 1997, to build major

hospital capacity in two markets that already have a surplus of

private-sector beds.

VHA Comment 21 Your report minimizes the role of outpatient eligibility as a reason for

nonacute admissions. The Smith study notes:

“Practitioner reasons such as conservative practice for admissions and delays in discharge

planning for nonacute days of care accounted for 32% of nonacute admissions and 43% of

nonacute days of care for medical service. Lack of availability of an ambulatory program

for surgery and invasive medical procedures explained 36% of nonacute admissions to

surgery and 18% to medicine. Other important reasons for nonacute admissions included

social and environmental reasons such as homelessness, and long travel distances to the

hospital. Administrative reasons included admissions to permit placement in nursing

homes, payment for travel or for disability evaluations.

GAO Evaluation For the following reasons, we believe the above quotation supports our

position that the study did not attribute most nonacute admissions to

eligibility problems.

• “Conservative practice was,” the study notes, “generally interpreted by

reviewers to mean both that no other social, VA system, or regulation

[emphasis added] reason was identifiable, and the decision of the

practitioner to admit the patient to the acute hospital service was an

example of conservative medical practice.”

• “Delays in discharge planning” would contribute to nonacute days of care,

not to nonacute admissions. Nor were those nonacute days of care the

result of eligibility restrictions. Under current law, all veterans are eligible

for posthospital outpatient treatment.

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• The quotation cites the lack of an ambulatory “program” for surgery and

invasive medical procedures, not the lack of patient eligibility for such

services as the cause of nonacute admissions.

• Social and environmental reasons such as homelessness and travel

distance are unrelated to eligibility restrictions.

• Two of the three administrative reasons cited (admissions to pay travel

reimbursement and admissions to perform disability examinations) are not

related to eligibility for health care services. The requirement that veterans

with no service-connected disabilities be admitted to VA hospitals before

they can be placed in community nursing homes is an eligibility-related

limitation. The study found that this limitation accounted for 2.5 percent of

the nonacute admissions to acute medical wards.

VHA Comment 22 [This comment responds to GAO’s reporting that the Smith study

recommended only minor changes in VA eligibility provisions, specifically,

that VA establish a systemwide utilization program and that VA has not

established such a review function.]

The final report of the Smith study, 1993, did not make “minor”

recommendations related to outpatient eligibility as you suggest. Of the

three recommendations, which follow, two are related to limited

outpatient eligibility and its impact upon the development and availability

of such care:

A. VA should establish a system-wide program for using the ISD criteria for

utilization review with emphasis on identifying the local and systemic

reasons for nonacute admissions and days of care and for monitoring the

effectiveness of changes in policy.

B. VA physicians need to be encouraged to make greater use of ambulatory

care alternatives and to be more effective and timely in planning for

patient discharges.

C. VA needs to facilitate the shift of care from the inpatient to the

outpatient setting. This should include incentives in the reimbursement

methodology for providing ambulatory care, changes in eligibility

regulations that promote rather than prohibit ambulatory care,

prioritization of construction funds and seed funds for new programs to

support the shift to ambulatory care.

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GAO Evaluation VA does not need eligibility reform to implement either of the first two

recommendations. VHA agreed with the recommendation made in our

report that it establish an independent preadmission certification program

to reduce inappropriate admissions to VA hospitals. In addition, VA has,

through its emphasis on primary care, encouraged the shift to ambulatory

care. Nor does VA need eligibility reform to change its reimbursement

methodology to promote ambulatory care (such a change is under way

through RPM) or to prioritize construction funds to facilitate the shift

toward ambulatory care (VA continues to seek construction funds

primarily for hospital construction rather than ambulatory care programs).

Concerning the recommendation to change eligibility “regulations,” the

detailed section of the Smith report recommended that legislation be

enacted to (1) allow veterans with nonservice-connected disabilities to be

placed in VA-supported community nursing homes without first being

admitted to a VA hospital and (2) remove limitations on eligibility for

outpatient compared with inpatient services such as dental services and

provision of needed prosthetic devices. The eligibility reform proposal

developed by VA would allow direct admission of nonservice-connected

veterans to community nursing homes and the provision of prosthetic

devices on an outpatient basis for treating nonservice-connected

conditions. The VA proposal would not remove the limitations on provision

of dental services on an outpatient basis.

Trying to link the studies discussed here to broader VA eligibility reform is

inappropriate because the studies did not contain the types of data needed

to make such a link. In other words, the studies did not determine whether

the patients inappropriately admitted to VA hospitals had

service-connected or nonservice-connected disabilities, the degree of any

service-connected disability, whether they were in the mandatory or

discretionary care category for outpatient care, or whether they would

have been eligible to receive the services they needed on an outpatient

basis. Had such information been included in the studies, it would be

possible to determine whether a higher incidence of nonacute admissions

occurred for veterans eligible for only hospital-related outpatient services

than for those eligible for comprehensive outpatient services.30

VHA Comment 23 In a more detailed section, the Smith report notes:

30This is a limitation in how the studies can be used, not a deficiency in how the studies were

conducted.

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“The most important reason for nonacute admissions to surgical services in previous VA

studies and in this study was the lack of an available ambulatory care alternative. This was

also an important reason for nonacute admissions to medical services. These findings

support the need to facilitate the shift of care from an inpatient to an outpatient setting.”

GAO Evaluation Elsewhere in its comments, VHA maintains that the reviewers conducting

the study were expressly told to assume that all care settings were

available. It seems to us to be inconsistent to now cite the study’s finding

that the most important reason for nonacute admissions to surgical

services was the lack of an ambulatory care alternative.

We agree, however, that VA’s slowness in developing ambulatory care

capabilities is a primary reason for nonacute admissions to VA hospitals.

We applaud VHA’s recent efforts to expand such capabilities.

VHA Comment 24 One of the four specific detailed recommendations of the Smith study was:

“The eligibility regulations need to be adjusted to encourage outpatient rather than

inpatient care. Legislation will be needed to allow contract nursing homes to be reimbursed

by VA for patients admitted directly from outpatient status to nursing home care.

Limitations need to be removed on eligibility for outpatient as compared to inpatient

services such as dental services and provision of needed prosthetic devices.”

GAO Evaluation We cited this recommendation in our report, and we believe we correctly

characterize it as suggesting only minor changes in VA eligibility

provisions. Rather than recommending a significant expansion of VA

eligibility, it recommends three specific changes affecting a relatively

small portion of VA benefits—nursing home care, dental care, and

prosthetics.

VHA Comment 25 Contrary to the statement in the report, VHA has had a systemwide

utilization review (UR) program since October 1993. In planning for this

program, VHA’s Office of Quality Management initiated a utilization

management (UM) pilot study in 1992. The UM pilot study had a two-fold

purpose. One, to provide guidance for development of a national policy

and data base to assist managers at all levels in VHA to assess the

appropriateness and efficiency of resource utilization. Second, to

determine the reliability and validity of an appropriateness measure that

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facilities could use to determine the extent and causes of these allegedly

inappropriate admissions and days of care. The UM pilot study concluded

in November 1992. A UR national training program was conducted in the

summer of 1993, prior to implementation in October 1993. In addition to

the internal UR program, VHA has also actively pursued the potential of

external utilization review for national data collection to address system

issues.

GAO Evaluation We have clarified the wording in the final report to indicate that VA does

not have a utilization review program focusing on medical necessity. VA’s

current utilization review program focuses almost exclusively on quality of

care.

VHA Comment 26 VHA is currently assessing the use of pre-admission reviews systemwide as

a method to encourage the most cost-effective, therapeutically appropriate

care setting. A number of facilities have adopted some form of

pre-admission reviews already and their models are being reviewed. In

addition, VHA is implementing a performance measurement and monitoring

system which contains a number of measures for which all network

directors and other leaders will be held accountable. Several of these

measures, such as percent of ambulatory surgery done at each facility, and

implementation of network-based utilization review policies and programs

will move the VA system towards efficient allocation and utilization of

resources.

GAO Evaluation We have added a discussion of VHA’s current efforts to the final report.

VHA Comment 27 Page 25. With VHA restructuring, resources are allocated to the network

director. VISN directors now have both the responsibility and incentive to

examine cost variations among facilities within their network. Network

directors are at the cutting edge, assessing the current configuration of VA

health services and costs in order to make decisions on redirecting

resources to achieve a more efficient and patient centered health care

system.

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GAO Evaluation We agree that the VISN restructuring and the planned move to capitation

funding should lead to an increased emphasis on efficiency, as discussed

in the final report.

VHA Comment 28 The National Cost Containment Center (NCCC) was premised on the goal of

analyzing costs across the system to identify opportunities for

improvement. They have published numerous analyses. In addition, VHA

clinical technical advisory groups; e.g., the Chronic Mental Illness group,

also analyze costs on a programmatic level.

GAO Evaluation We recognize that VA has taken some steps, through the NCCC and

Technical Advisory Groups, to analyze particular cost variations across the

system to identify potential efficiencies. These efforts are a step in the

right direction, but VA needs more comprehensive evaluations of unit cost

variations, their link to facility performance, and the need for changes to

supporting data systems to improve comparisons. Such evaluations and

improved data systems will be necessary to ensure a successful transition

to a capitation system and provide for the needed accountability in the

system for workload, efficiency, and other performance targets.

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Page 63 GAO/HEHS-96-121 VA Health Care Resource Needs
Related GAO Products

VA Health Care: Approaches for Developing Budget-Neutral Eligibility

Reform (GAO/T-HEHS-96-107, Mar. 20, 1996).

VA Health Care: Opportunities to Increase Efficiency and Reduce Resource

Needs (GAO/T-HEHS-96-99, Mar. 8, 1996).

VA Health Care: Issues Affecting Eligibility Reform (GAO/T-HEHS-95-213,

July 19, 1995).

VA Health Care: Challenges and Options for the Future (GAO/T-HEHS-95-147,

May 9, 1995).

VA Health Care: Retargeting Needed to Better Meet Veterans’ Changing

Needs (GAO/HEHS-95-39, Apr. 21, 1995).

VA Health Care: Barriers to VA Managed Care (GAO/HEHS-95-84R, Apr. 20,

1995).

Veterans’ Health Care: Veterans’ Perceptions of VA Services and VA’s Role

in Health Reform (GAO/HEHS-95-14, Dec. 23, 1994).

Veterans’ Health Care: Use of VA Services by Medicare-Eligible Veterans

(GAO/HEHS-95-13, Oct. 24, 1994).

Veterans’ Health Care: Implications of Other Countries’ Reforms for the

United States (GAO/HEHS-94-210BR, Sept. 27, 1994).

Veterans’ Health Care: Efforts to Make VA Competitive May Create

Significant Risks (GAO/T-HEHS-94-197, June 29, 1994).

Veterans’ Health Care: Most Care Provided Through Non-VA Programs

(GAO/HEHS-94-104BR, Apr. 25, 1994).

VA Health Care: A Profile of Veterans Using VA Medical Centers in 1991

(GAO/HEHS-94-113FS, Mar. 29, 1994).

VA Health Care: Restructuring Ambulatory Care System Would Improve

Service to Veterans (GAO/HRD-94-4, Oct. 15, 1993).

VA Health Care: Comparison of VA Benefits With Other Public and Private

Programs (GAO/HRD-93-94, July 29, 1993).

(406123) Page 64 GAO/HEHS-96-121 VA Health Care Resource Needs
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