Defense Health Care Reform: Actions Needed to Help Ensure Defense Health Agency Maintains Implementation Progress
Published: 2015-09-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In 2013, DOD created the DHA to provide administrative support for the services' respective medical programs and combine common “shared” services to achieve cost savings. House Report 113-446 included a provision that GAO review DOD's progress in implementing the DHA. This report addresses the extent to which DOD has made progress in (1) assessing the personnel requirements of the DHA and its effect on MHS personnel levels; (2) developing an approach to achieving cost savings through shared services; and (3) fully developing performance measures to assess its shared services.
GAO reviewed DOD's personnel requirements assessment process, business case analyses, and performance measures for the DHA's shared services. GAO compared this information with key management practices and DOD guidance. Additionally, GAO interviewed officials from the DHA and the military services.
section_title: What GAO Found
paragraphs: Nearly 2 years after the creation of the Defense Health Agency (DHA), the Department of Defense (DOD) has made progress toward completing its implementation process, but has not addressed issues related to GAO's past recommendations regarding personnel requirements, an approach to cost savings, and performance measures.
Personnel - The DHA has initiated the process of assessing personnel requirements, but this process has been delayed, does not have a detailed timeline for completion with milestones and interim steps, and is not comprehensive. It does not address key issues—such as the effect of possible personnel growth in the DHA and workforce composition issues. DOD cannot determine the DHA's effect on the Military Heath System's (MHS) administrative and headquarters staff levels because (1) the DHA has not completed the personnel requirements assessment process and (2) it has not, as GAO recommended in November 2013, developed a baseline estimate of personnel in the MHS before the DHA was created. DOD stated that the requirements assessment process will not be completed until September 2016. Further, although DOD does not plan to develop a baseline estimate and is not tracking personnel-related savings, DOD can take steps that would contribute to the development of comprehensive personnel information, such as including information concerning the number and cost of administrative and headquarters personnel within the MHS in annual budget documents.
Approach to help achieve cost savings - The DHA has developed a business case analysis approach to help it achieve cost savings for 8 of its 10 DHA shared services. This approach largely addresses GAO's November 2013 recommendations that DOD provide more information on its cost savings estimates and monitor implementation costs. However, the DHA has not developed comprehensive business case analyses for 2 shared services—Public Health, and Medical Education and Training. Specifically, the DHA has proposed the transfer of their functions from the military services, but has not identified common functions to consolidate in order to achieve cost savings, which is the primary purpose of establishing shared services.
Performance measures – The DHA has made progress in developing measures to assess the progress of its10 shared services toward achieving their respective goals; however, these measures do not demonstrate some key elements that GAO has found can contribute to success in assessing performance, such as clarity, measurable targets, and baseline data. Specifically, all 10 DHA shared services have measures that demonstrate at least some of these attributes; however, collectively, they do not demonstrate all of the attributes, as GAO recommended in November 2013. These key attributes can help ensure that DOD officials have the information necessary to measure progress toward achieving the stated goals of the shared services. While DOD has made progress in the development of these performance measures, GAO's November 2013 recommendation that DOD develop performance measures that fully exhibit those key attributes is valid and should be completely implemented.
section_title: What GAO Recommends
paragraphs: In addition to GAO's prior recommendations, GAO is making a number of recommendations related to the DHA's personnel requirements and approach to achieving cost savings. DOD concurred with all but one recommendation to develop a plan for reassessing its personnel requirements, partially concurring and citing existing guidance. GAO continues to believe that current guidance in this area is insufficient, and that DOD would benefit from a plan for reassessing its personnel needs as the DHA's missions and needs evolve.

section_title: Letter
paragraphs: Since fiscal year 2001, the Department of Defense’s (DOD) Military  Health System (MHS) budget has grown substantially, from about $13.6  billion to about $32.6 billion in fiscal year 2014, an increase of nearly 140  percent. As we reported in 2005, DOD’s health care system is an  example of a key challenge facing the U.S. government in the 21st  century as well as an area in which DOD can achieve economies of scale  and improve delivery by combining, realigning, or otherwise changing  selected support functions. In June 2011, the Deputy Secretary of  Defense created an internal task force to review the governance of the  MHS, and the task force identified (1) cost containment, (2) greater  integration, and (3) increased unity of effort as priorities. In March 2012,  DOD submitted a report to Congress that, among other things, proposed  creating the Defense Health Agency (DHA) to create a more effective and  integrated MHS and to achieve cost savings, particularly at headquarters  and administrative level organizations—organizations such as the former  TRICARE Management Activity, the headquarters of the services’  medical commands and agencies, and other management organizations  within the MHS that do not directly provide health care services. DOD  established the DHA on October 1, 2013, to provide administrative  support for the services’ respective medical programs, combining  common “shared” services, but also coordinating the work of the  services’ military treatment facilities and care purchased from the private  sector. In its implementation plan, DOD stated that initial operating  capability of the DHA was to be achieved by October 1, 2013, and “full  operating capability”—that is, the organization would complete its  transition period and assume its full responsibilities—would be reached  within 2 years.
In the 2011 report on governance reform options by the Task Force on  Military Health System Governance, DOD stated that its preferred option,  which became the DHA, would (1) result in $46.5 million in annual  headquarters and administrative personnel cost savings and (2) achieve  savings in operations from combining common business operations  through the establishment of shared services. During its first year of  operation, DHA established ten shared services, combining functions  from the Army, the Navy, the Air Force, and the former TRICARE  Management Activity. For example, in its Health Information Technology  shared service, the DHA consolidated information technology  management, infrastructure, and applications functions, creating a single  point of accountability for the delivery of information technology services  to MHS customers.
Since the establishment of the DHA in 2013, we have highlighted  weaknesses related to the anticipated cost savings estimates,  performance measures, and personnel requirements. Specifically, in  November 2013, we recommended that DOD develop (1) a more  thorough explanation of the potential sources of cost savings from DOD’s  implementation of shared services; (2) performance measures that are  clear, quantifiable, objective, and include a baseline assessment of  current performance; and (3) a baseline assessment of the number of  personnel currently working within the MHS headquarters and an  estimate for the DHA at full operating capability. DOD concurred with our  recommendations. In February 2014, we testified before the House  Armed Services Subcommittee on Military Personnel that it is imperative  for DOD to complete these actions so that decision makers will have  complete information to gauge reform progress. We noted that, although  a DOD representative had told us since the issuance of our November  2013 report that DOD had begun to take action to address the  recommendations, DOD had not addressed them at the time of our  testimony.
The House Report accompanying the National Defense Authorization Act  for Fiscal Year 2015 included a provision that we review the progress that  DOD has made in implementing the DHA. This report examines the  extent to which DOD has made progress in: (1) assessing the personnel  requirements of the DHA and the effect of its establishment on total MHS  administrative and headquarters personnel levels; (2) developing an  approach to achieving cost savings through its shared services; and (3)  fully developing performance measures to assess progress in achieving  the goals of its shared services.
For our first objective, we focused on DHA and military services  administrative and headquarters-related personnel working within the  MHS. We interviewed relevant DOD, DHA, and military service officials to  gather information about DOD’s personnel requirements assessment  process and MHS personnel before and since the DHA’s establishment.
We analyzed this information as well as DHA documentation related to  DOD’s personnel requirements assessment process for the DHA and its  personnel efficiency initiatives and compared them with DOD’s Guidance  for Manpower Management, which states that resources are to be  programmed in accordance with validated personnel requirements and in  consideration of all segments of DOD’s workforce, including military,  civilian, and contractor personnel. We also compared this information with  our prior work on results-oriented management and human capital best  practices, which state, among other things, that timelines with  milestones and interim steps can be used to show progress toward  implementing efforts or to make adjustments to those efforts when  necessary and that workforce planning efforts linked to strategic goals  and objectives can enable an agency to remain aware of and be prepared  for its current and future needs as an organization. We examined any  DOD efforts to report to Congress on DHA’s personnel requirements as  mandated in the National Defense Authorization Act for Fiscal Year  2013 and to develop a baseline personnel estimate as we had  recommended in 2013. We use the term “ MHS administrative and  headquarters personnel” throughout this report to refer to all personnel  working within MHS organizations which do not directly provide health  care services within DOD military treatment facilities.
For our second objective, we reviewed documentation of business case  analyses for the DHA’s ten shared service projects and interviewed  relevant officials. Shared services are a subset of the changes being  implemented by the DHA, and do not cover all of its activities. We  compared DOD’s business case analyses with principles in our Business  Process Reengineering Assessment Guide. These principles require,  among other things, clear business case analyses that state the benefits,  costs, and risks of a proposed change.
For our third objective, we obtained and reviewed documentation and  interviewed relevant officials regarding performance measure information  as of April 2015 for the ten DHA shared services, including the measures’  names, definitions, and methodologies. To evaluate the extent to which  these measures adhered to GAO criteria on key attributes of successful  measures, such as measurable targets, baseline and trend data, and  clarity, two analysts used a scorecard methodology to independently  review the measures for each of the product lines for the ten shared  services, comparing them with the key attributes and assigning scores  as to whether the performance measures “addressed,” “partially  addressed,” or “did not address” the attributes. The only data we collected  and present in this report relate to cost savings and we find that these  data are sufficiently reliable for contextual purposes since our focus is on  the process and approach to savings (e.g., spelling out savings,  implementation costs, having a formal review process, etc.) and not on  the actual savings that may result.
We conducted this performance audit from August 2014 to September  2015 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Structure and Governance of the MHS
paragraphs: The MHS is a complex organization that provides health services to  almost 10 million beneficiaries across a range of care venues, including  the battlefield, traditional hospitals and clinics at stationary locations, and  authorized civilian providers. Responsibility for the delivery of care is  shared among the Office of the Assistant Secretary of Defense for Health  Affairs (OASD HA), the military services, and the DHA. The OASD HA  reports to the Under Secretary of Defense for Personnel and Readiness,  who in turn reports to the Secretary of Defense, whereas the Army, the  Navy, and the Air Force medical commands and agencies report through  their Service Chiefs to their respective Military Department Secretary and  then to the Secretary of Defense. The OASD HA manages the Defense  Health Program appropriation, which funds the service medical  departments, but the military treatment facilities, including hospitals and  clinics, are under the direction and control of the services, which maintain  the responsibility to staff, train, and equip those commands to meet  mission requirements. The MHS collaboratively develops strategy to meet  policy directives and targets, with the service components, the DHA, or  both responsible for execution. See figure 1 for the current MHS  organizational structure.
Decision making within the MHS reflects the many actors and complex  nature of this relationship. Important decisions are made collaboratively  by a number of bodies with representation from each service and the  DHA throughout the decision making process. See figure 2 for a diagram  of the MHS governance structure.
The roles and responsibilities within the MHS governance structure are as  follows:
The Military Health System Executive Review, which is chaired by the  Under Secretary of Defense for Personnel and Readiness and has  other members such as the Vice Chiefs of Staff for the three services  as well as the Director of the Joint Staff, serves as a senior-level  forum for DOD leadership discussion of strategic, transitional, and  emerging issues facing the MHS.
The Senior Military Medical Action Council, which is chaired by the  Assistant Secretary of Defense for Health Affairs and includes the  service Surgeons General, the DHA Director, and others, presents  enterprise-level guidance and operational issues for decision making  by the Assistant Secretary of Defense for Health Affairs.
The Medical Deputies Action Group, which consists of the service  Deputy Surgeons General, the Joint Staff Surgeon, and a DHA  representative, and is chaired by the Principal Deputy Assistant  Secretary of Defense for Health Affairs, reports to the Senior Military  Medical Action Council to ensure that actions are coordinated across  the MHS and are in alignment with strategy, policies, directives, and  initiatives of the MHS.
Reporting to the Medical Deputies Action Group are four supporting  governing bodies, consisting of flag or general officers from the service  medical departments and senior executives from DHA:
The Medical Operations Group carries out assigned tasks and  provides enterprise-wide oversight of the direct and purchased care  systems.
The Medical Business Operations Group provides a forum for  providing resource management input on direct and purchased care  issues.
The Manpower and Personnel Operations Workgroup supports  centralized, coordinated policy execution and guidance for  development of coordinated human resources and personnel policies  and procedures for the MHS.
The Enhanced Multi-Service Markets Leadership Group provides a  forum for managers of geographic MHS markets to discuss clinical  and business issues, policies, performance standards, and  opportunities.
section_title: Structure of the DHA
paragraphs: DOD established the DHA to assume management responsibility for  numerous functions of its medical health care system. The DHA supports  the delivery of services to MHS beneficiaries and is responsible for  integrating clinical and business processes across the MHS. The DHA  also exercises management responsibility for the ten joint shared services  and the military’s health plan and oversees the medical operations within  the National Capital Region, which include those at the Walter Reed  National Military Medical Center and at the Fort Belvoir Community  Hospital. See figure 3 for the organizational structure of the DHA.
section_title: DHA Shared Services
paragraphs: According to DOD, a “shared services concept” is a combination of  common services performed across the medical community to reduce  variation, eliminate redundant processes, and improve performance.  Further, according to DOD, the overall purpose and core measure of  success for all shared services is the achievement of cost savings. DHA  stood up the following ten shared services during its first year of  operation, bringing together elements from the Army, the Navy, the Air  Force, and the former TRICARE Management Activity:
Budget and Resource Management promotes the cost-effective use of  program and budgeted funds, increased reimbursements, and  improved financial transparency and utilization in support of the MHS,  and encompasses financial management activities including cost  accounting and billing to other health insurance providers as well as to  inter-agency entities.
Contracting and Procurement centralizes the strategy for the  acquisition of goods and services to meet the needs of shared  services and common functions and product lines.
Facility Planning centralizes enterprise facility planning requirements,  to better tailor investment decisions to meet future needs, to build and  operate less space while better meeting the mission. Additionally, the  DHA establishes and strengthens enterprise standards, standard  business processes, and performance measurement functions,  decreasing variance across the entire facilities business.
Health Information Technology consolidates health information  technology services—information technology management,  infrastructure, and applications—under the management of the DHA,  creating a single point of accountability for the delivery of health  information technology services to MHS customers.
Medical Education and Training provides administrative support;  academic review and policy oversight; and professional development,  sustainment, and program management to the military departments’  medical services, the combatant commands, and the Joint Staff.
Medical Logistics standardizes clinical demand signals for medical  supplies, equipment, and housekeeping services, and establishes  DHA oversight of compliance with best purchasing practices across  the MHS.
Medical Research, Development, and Acquisition executes specific  activities to improve coordination, process efficiency, and output  quality across the enterprise, producing greater operational efficiency,  and reducing research costs allowing DOD to recapture funds that  can be reinvested into additional research programs.
Pharmacy delivers and centrally manages funding for enterprise-wide  pharmacy programs, services, and initiatives, and is responsible for  leading the strategy, management, and oversight of pharmacy  operations across the enterprise.
Public Health consolidates and centralizes governance for all  appropriate public health product lines, including Deployment Health,  Health Surveillance, and other processes that promote health, and  manage population and individual health risks, to field a fit and  medically ready force.
TRICARE Health Plan supports the MHS integrated health delivery  system and the purchase of health care services contracts, executes  the requirements determined by the integrated health delivery system,  and provides assurance that those requirements are purchased and  implemented effectively.
To accomplish the purposes listed above, some of these shared services  are composed of a number of projects or “product lines.” For instance,  within the Budget and Resource Management shared service, DOD  identified three product lines, which involve the (1) implementation of a  common cost accounting structure throughout the three military services  in support of DHA budget operations; (2) standardization of medical  record coding procedures throughout the three military departments  through the establishment of a Medical Coding Program Office; and (3)  implementation of a joint billing solution to improve the medical treatment  facilities’ ability to bill and collect.
section_title: DOD Has Initiated the Process to Determine DHA Personnel Requirements, but Cannot Determine the Effect of the DHA’s Establishment on MHS Administrative and Headquarters Personnel Levels
paragraphs: DOD has initiated a process for assessing the personnel requirements of  the DHA, but it continues to operate without information that would allow it  to determine the effect of the DHA’s establishment on the number of  headquarters and administrative personnel in the MHS. The DHA has  started assessing its personnel requirements, but this analysis will not be  completed by the DHA’s proposed full operating capability in October  2015, and is not comprehensive in that it does not include a complete and  detailed timeline, and does not address key issues, including the final size  of the agency and its workforce mix. In addition, DOD does not have the  information it would need to determine whether creating the DHA resulted  in an increase or decrease in the number of MHS headquarters and  administrative personnel. As we reported in November 2013, determining  the impact of the DHA’s creation on MHS personnel levels necessitates  finalized personnel requirements for the DHA and a baseline estimate of  MHS headquarters and administrative personnel prior to the  establishment of the DHA. However, the DHA has just begun its  personnel requirements assessment, and DOD does not have a baseline  estimate of MHS administrative and headquarters personnel levels that  existed before the DHA was established.
subsections: section_title: DOD Has Initiated a Process for Assessing the DHA’s Personnel Requirements, but This Process Has Been Delayed and Does Not Have a Detailed Timeline for Completion
paragraphs: DOD has initiated the process of assessing personnel requirements for  the DHA, but this analysis will not be finished by the DHA’s proposed full  operating capability in October 2015, and does not include a finalized  timeline for its completion. According to DHA officials, the assessment will  not be completed until September 2016. The National Defense  Authorization Act for Fiscal Year 2013 mandated that DOD include  personnel requirements for the DHA in its series of three reports to  Congress on the DHA’s implementation; however, we testified in  February 2014 that DOD’s reports did not include DHA personnel  requirements. The DHA Manpower and Organization Division, which is  responsible for the DHA personnel requirements assessment, was not  established until July 2014, 9 months after the DHA’s creation in October  2013. DHA officials said that initial staffing for the office took an additional  6 months and that the office is currently almost completely staffed, but  that the time necessary to create an operational, fully-functioning office  contributed to the assessment’s delay.
According to DHA officials, the TRICARE Management Activity—the  DHA’s predecessor and the only organization that was brought into the  DHA in its entirety—did not have personnel requirements. DHA officials  stated that they are conducting an assessment of the requirements  needed to perform the functions of the former TRICARE Management  Activity, which the DHA absorbed. Similarly, in 2010, we reported on the  services’ medical personnel requirements processes in military treatment  facilities, finding that these processes were not validated and verifiable  and that the services did not centrally manage civilian personnel  requirements.
DHA officials stated that the requirements assessment process includes  personnel specialists analyzing each part of the agency, documenting its  functions, and determining how many personnel hours are needed to  execute those functions. DOD Directive 1100.4, Guidance for Manpower  Management, states that resources are to be programmed in  accordance with validated personnel requirements. DHA officials said that  they are currently developing procedures for the assessment of DHA  personnel requirements; however, as of July 2015, officials stated that  this document had not been fully developed and were unable to provide  specific information.
In addition, DHA provided a tentative timeline as of June 2015 for  completion of its requirements assessment process, but this timeline was  not complete or finalized. Further, DHA officials stated that they will not  complete the personnel requirements assessment when the DHA reaches  full operational capability on October 1, 2015. DHA created the tentative  personnel requirements assessment timeline that provides estimated  personnel days for assessing the different parts of the agency as well as  estimated dates for beginning and completing portions of the assessment.  According to this timeline, DHA expects to complete the assessment of its  Health Information Technology and Business Support directorates by  October 9, 2015. However, tentative start and end dates for assessing  other parts of the DHA, including the National Capital Region Medical  Directorate, Medical Education and Training Directorate, Defense Health  Agency Support, and the Research, Development and Acquisition  Directorate are “To Be Determined.” DHA officials stated that they expect  to complete the assessment of DHA’s personnel requirements by fiscal  year 2017, but the timeline does not include established timelines for  completion of the entire assessment or for all interim steps of the process.
Our reports on performance planning indicate that timelines with  milestones and interim steps can be used to show progress toward  implementing efforts or to make adjustments to those efforts when  necessary. In 2013, we found that DOD had not consistently identified  milestones for all activities between initial operating capability and full  operational capability for each of the goals of its reform, and we  recommended that DOD develop and present to Congress a timeline with  interim milestones for all reform goals that could be used to show  implementation progress. DOD concurred with the recommendation but  has not yet implemented it. The timeline focused on implementation of  DOD’s shared services and other reform objectives, but did not  specifically address development of personnel requirements for the DHA.  By developing a timeline for DHA’s personnel requirements assessment  that includes milestones and interim steps for determining those  requirements, DOD could provide Congress with important information  concerning the size and scope of the DHA that Congress requested 2  years ago.
section_title: DOD’s Requirements Assessment Process for the DHA Does Not Address Key Issues Related to Size and Workforce Mix
paragraphs: DOD’s ongoing assessment does not address key issues that are  important to the size and workforce mix of the DHA. Specifically,  according to DHA officials, their personnel requirements assessment  does not account for the possible addition of other missions or  organizations to the DHA, and DOD has not made a decision as to  whether military personnel will be permanently assigned to the DHA. The  DHA has already incorporated a number of components for which a  military service formerly served as executive agent, such as the Joint  Medical Executive Skills Institute under the Army, and various DHA and  service officials said that the DHA could incorporate additional missions  or organizations in the future. DHA officials stated they expect  adjustments to personnel requirements with any added mission.  However, the current assessment process does not specifically address  such potential changes. Our work on effective strategic workforce  planning found that agency personnel planning should consider not only  the needs of its current workforce, but its future workforce as well.  Should DOD not take into account the additional skills and competencies  required to meet future missions, its requirements assessment will be  incomplete.
DOD’s assessment also does not address aspects of workforce mix – the  proportion of military, civilian, and contractor personnel that perform  DOD’s functions. DOD Directive 1100.4, Guidance for Manpower  Management, instructs that all three segments of the workforce should  be considered when determining how DOD’s work should be performed.  Further, 10 U.S.C. § 115b requires DOD to address in its strategic  workforce plan, among other things, the appropriate mix of military,  civilian, and contractor personnel capabilities. In 2012, we reported that  DOD’s plan submissions have not addressed this requirement.
DHA officials stated that their personnel requirements assessment will  include an analysis of whether work should be performed by military,  civilian, or contractor personnel. However, officials also stated that the  ongoing personnel assessment will not determine whether the DHA will  assume full responsibility for military personnel working at the DHA or  whether servicemembers’ respective military service will retain those  functions. The determination of military personnel status would also affect  the workforce mix of military, civilian, and contractor personnel within the  agency. Officials stated that if responsibility for military personnel were  transferred to the DHA, meaning the military billets and associated  funding were moved to the DHA budget, then the responsibility for related  human capital functions would transfer as well. The DHA’s human capital  office would require an increase in size to provide this support. Until a  decision is made, officials told us that the DHA and services plan to use a  specific code to identify assigned military personnel working at the DHA in  order to track the number of military personnel working within the DHA.  Officials further stated that they did not have an estimated timeframe for  the decision about military personnel. If the DHA absorbs additional  agencies or missions, or if full responsibility for military personnel  transfers to the DHA, DOD will need to reassess requirements in light of  these changes. However, DOD does not have a plan for addressing these  potential changes or periodically reassessing the personnel needs of the  DHA.
DOD Directive 1100.4, Guidance for Manpower Management, states that  personnel management shall be, among other things, adaptive to  program changes and existing policies, procedures, and structures should  be periodically evaluated for efficient and effective use of resources and  long-range strategies and workforce forecasts should be developed to  implement major changes. The DHA published a Directive Type  Memorandum on its personnel planning process in January 2014, but this  guidance does not specifically address the need for a plan to reassess  and revalidate personnel requirements on a regular, recurring basis.
Without addressing the need to periodically reassess the DHA’s  personnel requirements, DOD cannot effectively plan for, manage, and  adjust to future programmatic and organizational changes that may occur  within the MHS or the DHA.
section_title: DOD Does Not Have Information to Determine the Effect of the DHA’s Establishment on MHS Administrative and Headquarters-Related Personnel Levels
paragraphs: DOD decided to implement the DHA, in part, on the assumption that it  would result in reduced personnel costs of $46.5 million annually in MHS  administrative and headquarters organizations. However, as we  reported in November 2013, DOD, citing internal disagreement over the  report’s personnel estimate, identified a more conservative goal of not  increasing overall personnel numbers in the MHS headquarters through  the establishment of the DHA. We recommended that DOD develop a  baseline estimate of headquarters personnel and an estimate of such  personnel needs at full operating capability. DOD concurred with our  recommendation and stated that it would provide this information in its  third submission to Congress on the implementation of the DHA, but as  we noted in our February 2014 testimony, DOD did not do so.
By comparing finalized personnel levels with a baseline of MHS  personnel levels before the DHA’s creation, DOD could demonstrate the  effect of the DHA’s establishment on the size of MHS administrative and  headquarters personnel levels. However, DOD has neither finalized  personnel levels for the DHA nor completed a baseline assessment of  MHS personnel levels. During the course of this review, officials from the  Office of the Assistant Secretary of Defense (Health Affairs) stated that  they do not plan to identify a historical baseline estimate of MHS  headquarters and administrative personnel levels prior to the  establishment of the DHA. Officials stated that it would prove impossible  to retroactively establish such a baseline estimate. However, we continue  to believe that, as we recommended in 2013, a pre-DHA baseline  estimate would provide decision makers with a transparent and complete  picture of the impact of the DHA’s creation on MHS headquarters  personnel levels. Our prior work on strategic human capital management  states that workforce planning efforts linked to strategic goals and  objectives can enable an agency to remain aware of and be prepared for  its current and future needs as an organization, such as the size of its  workforce. By developing a baseline, DOD would be able to  demonstrate whether MHS administrative and headquarters organizations  are larger or smaller since the establishment of the DHA.
Without reliable baseline and requirements personnel data, decision  makers at DOD and in Congress do not have comprehensive information  about previous and current personnel levels and needs for the DHA and  the MHS. As a result, they do not know whether the DHA has had an  effect on personnel costs and cannot make fully informed decisions about  future needs and long-term goals. Congressional decision makers have  expressed concern regarding the resources devoted to the Office of the  Secretary of Defense, the Joint Staff, and the military services’  secretariats and military staff, and we have conducted a number of  reviews in response to such concerns. We previously reported that DOD  has experienced challenges in accounting for headquarters resources,  including concerns with the completeness and reliability of data on its  headquarters personnel, weaknesses in DOD’s process for sizing its  geographic combatant commands, difficulty accounting for the  resources being devoted to management headquarters to use a starting  point for tracking reductions, and the absence of a systematic  requirements-determination process. Within DOD, in July 2013, the  Secretary of Defense directed a 20-percent cut in management  headquarters spending throughout the department, to include spending  within headquarters organizations such as the Office of the Secretary of  Defense, the Joint Staff, and the military services’ secretariats and  military staff.
DOD can take steps that would positively contribute to the development  of transparent and comprehensive personnel information, including  associated costs, for decision makers at present and in the future. For  example, an annual budget exhibit in the Congressional Budget  Justification delineating personnel costs allocated to MHS administrative  and headquarters organizations and the costs allocated to military  treatment facilities would provide information relevant to decision makers’  concerns about the cost of administering the MHS. Such a budget exhibit  would be in line with federal accounting standards that are aimed at  providing relevant and reliable cost information to assist Congress and  executives in making decisions about allocating federal resources.
section_title: DOD Has Developed a Business Case Analysis Approach to Help Achieve Cost Savings in Eight of the Ten Shared Services but Has Not Taken Fundamental Steps for the Remaining Two
paragraphs: DOD has developed a business case analysis approach to help achieve  cost savings and has applied this approach to eight of its ten shared  services; DOD has not, however, developed comprehensive business  case analyses for the remaining two shared services—Public Health and  Medical Education and Training. For eight of its shared services, DOD  has generally implemented recommendations we made in 2013 by  identifying discrete costs and cost savings for each of its shared services’  product lines and identifying the major types of implementation costs.  Regarding the remaining two shared services, the DHA has not, in  accordance with best practices, identified a stated problem that those  two shared services would be intended to address. Identifying a stated  problem is the first step in developing a business case analysis.  Specifically, the DHA has not identified any redundant functions to be  consolidated in the Public Health and in the Medical Education and  Training areas to justify the proposed transfer of responsibility of functions  in those areas from a military-service-level entity to a DOD-level one.
subsections: section_title: DOD Has Developed a Business Case Analysis Approach for Eight of Its Ten Shared Services
paragraphs: The National Defense Authorization Act for Fiscal Year 2013 required  DOD to develop business case analyses for its shared service proposals  as part of its submissions on its plans for the implementation of the DHA,  including, among other things, the purpose of the shared service and the  anticipated cost savings. According to the implementation plan that the  DHA submitted, the DHA would establish ten shared services to achieve  cost savings. In November 2013, we highlighted concerns regarding the  basis of cost savings estimates and the potential impact of  implementation costs on the DHA’s shared service projects. Since then,  the DHA has developed a business case analysis approach for eight of its  shared services that generally reflects best practices. We based our  assessment on discussions with officials from the various shared services  and their quarterly briefings to the Medical Deputies Action Group, which  includes the Deputy Surgeons General of each service and  representatives from Health Affairs and the DHA. In general, these  briefings indicate that the business cases for Budget and Resource  Management, Contracting and Procurement, Facility Planning, Health  Information Technology, TRICARE Health Plan, Medical Logistics,  Pharmacy, and Medical Research, Development, and Acquisition  generally reflect the characteristics of business case analyses outlined in  GAO’s Business Process Reengineering Assessment Guide. The guide  identifies a number of best practices that help make the business case for  change. In addition, the guide recommends the use of an investment  review process to evaluate the business case and decide whether to  proceed with proposed changes.
In November 2013, we reported that, while the information in DOD’s  implementation plans generally reflected key characteristics of business  case analyses, DOD did not present sufficient information to explain the  basis for its cost-savings estimates. Specifically, we reported that DOD  did not include detailed quantitative analysis regarding the sources of its  cost-savings estimates or provide a basis for or an explanation of key  assumptions and rationales used in estimating such savings. For  example, we noted that while the Medical Logistics shared service is  composed of three product lines, DOD presented one net savings  estimate for Medical Logistics, but did not provide estimates for each of  its three product lines. We noted that a business case should include  detailed qualitative and quantitative analysis in support of selecting and  implementing the new process that includes a statement regarding  benefits, costs, and risks. We recommended that DOD provide a more  thorough explanation of the potential sources of cost savings from the  implementation of its shared services, and DOD concurred.
During our current review, we found that in its quarterly reports to the  Medical Deputies Action Group, DOD provided additional information on  each of the eight shared services. For example, the Medical Logistics  shared service team now identifies discrete costs and cost savings for  each product line—Supply Management, Health Care Technology, and  MEDLOG Services (Housekeeping). After accounting for implementation  costs, the net savings estimate for each product line within this shared  service from fiscal years 2014 through 2019 range from $5.96 million for  services to $197.86 million for supplies. By differentiating between these  product lines, decision makers are able to obtain a sense of the relative  size and scope of each proposed change.
In addition, in 2013 we reported on the effect of potential increases in  implementation costs on net cost savings. We noted DOD’s past  experience in managing the implementation of large-scale projects,  particularly those involving investments in information technology,  illustrates such risk. According to the guide, business case analyses  should demonstrate the sensitivity of the outcome to changes in  assumptions, with a focus on the dominant benefit and cost elements and  the areas of greatest uncertainty. We recommended that DOD monitor  implementation costs to assess whether the shared services are on track  to achieve projected net cost savings or if corrective actions are needed,  and DOD concurred.
During our current review, we found that briefings to the Medical Deputies  Action Group now identify the major types of implementation costs where  relevant, or otherwise address their potential impact. For example,  information technology costs are identified as one primary type of costs  for the Health Information Technology and Medial Logistics shared  services, while contract costs are identified for the Budget and Resource  Management, Medical Logistics, and Health Information Technology  shared services. By identifying the major types of implementation costs,  decision makers are better able to gauge the sensitivity of areas of  uncertainty as they make decisions concerning future investments in  shared services.
DHA has also developed and implemented an investment review process  to assess the business case for shared services on their merits. Our  Business Process Reengineering Assessment Guide states that use of an  agency’s investment review process to evaluate a business case and  decide whether to proceed with a given change is a vital aspect of  business process reengineering. These estimates were reviewed by the  Council of Cost Assessment and Program Evaluation bodies, a group of  cost assessment subject matter experts from the services and the DHA.  Shared service teams presented the basis and reasoning for developing  costs and savings for each product line, and cost assessment experts  commented on the proposals. For example, when reviewing the business  case analysis for the health information technology shared service, the  Council of Cost Assessment and Program Evaluation’s report stated that  the analysis was based on an estimated reduction from current spending  based on, among other things, industry benchmarks and estimates from  subject matter experts. Each representative registered their agreement or  objection to the estimates and voted to express concurrence or non- concurrence. Ultimately, this process includes review by the Medical  Deputies Action Group, which includes the Deputy Surgeons General and  the Deputy Director of the DHA, followed by the Senior Military Medical  Action Council, which includes the Surgeons General, the Director of the  DHA, and is chaired by the Assistant Secretary. By sustaining its current  approach to shared services, DOD can help ensure it has a framework to  help it achieve cost savings.
section_title: DOD Has Not Fully Developed Business Case Analyses for the Public Health and the Medical Education and Training Shared Services
paragraphs: The DHA has proposed transferring existing public health and medical  education and training organizations from the services to the DHA;  however, the DHA has not developed a business case about how doing  so would consolidate activities to eliminate redundancies and result in  cost savings. During the process of planning for MHS governance reform,  the Deputy Secretary of Defense noted in a March 2012 memorandum  that this process should “realize savings in the MHS through the adoption  of common clinical and business processes and the consolidation and  standardization of various shared services.” This focus on achieving  savings through consolidation differentiates the objective of establishing  shared services from the six other objectives outlined in DOD’s plans for  the implementation of the DHA. However, in the case of both the Public  Health and Medical Education and Training shared services, the transfer  of responsibility for military-service level organizations to a defense  agency without consolidation of programs runs contrary to the stated  purpose of shared services. While these two shared services propose  some efficiencies in their operations, they either overlap with other shared  services or propose changes which could have been implemented without  a transfer of responsibility to the DHA.
The Public Health shared service consists of, in part, the adoption of a  number of Army public health agencies into the DHA. One proposed  efficiency initiative of this shared service, including the consolidation of  several redundant databases with an estimated net savings, accounting  for implementation costs, of about $1 million between fiscal years 2014  and 2019, partially overlaps with the responsibilities of the Health  Information Technology shared service. In addition, in briefings to the  Medical Deputies Action Group, the Public Health shared service team  stated that the “vision for health surveillance may not be fully realized in  terms of a true shared service.” Further, DHA officials stated that cost  savings was not a major goal of the Public Health shared service,  contrary to DOD’s stated intention for shared services.
Similarly, the Education and Training shared service adopts a number of  existing organizations, and the additional small changes it has proposed  overlap with other shared services. In 2014, we reported on this shared  service, and highlighted problems regarding its rationale. For example,  we noted that the “product line” proposals concerning modeling and  simulation and online learning overlap with the DHA’s Contracting and  Procurement and Health Information Technology shared services.  Specifically, while cost savings for modeling and simulation are allocated  to the Education and Training Directorate, implementation costs are to be  incurred by the Contracting and Procurement shared service. In addition,  the savings for the online learning project are found within the Health  Information Technology shared service portfolio.
We have previously highlighted the challenges DOD faces when it does  not fully analyze potential changes to business processes. For example,  in 2007, we reported that DOD did not comprehensively analyze the  costs, benefits, or risks of any of the four options for governance reform  under consideration at the time. Further, DOD developed and decided to  implement the fourth option as a compromise among the military  departments and the Office of the Secretary of Defense (Health Affairs)  similar to the current shared services concept, but did not develop a  supporting business case analysis. When we later reviewed  implementation of this compromise option, we found that DOD had only  implemented those steps that related to implementation of the Base  Realignment and Closure process, while others had not been sufficiently  addressed.
The Business Process Reengineering Assessment Guide states that a  business case analysis begins with (1) measuring performance and  identifying problems in meeting mission goals, which is then addressed  through (2) the development and selection of a new process. The new  process is to include a description of estimated benefits, costs, and risks.  However, in developing the Public Health and Medical Education and  Training shared services, the DHA did not address this first step of the  business case analysis process.
Without first identifying what redundant functions can be consolidated to  achieve efficiencies, the reason for creating these shared services will  remain unclear. Some shared services, such as the TRICARE Health  Plan shared service, entail more efficient provision of previously  centralized services provided by the former TRICARE Management  Activity, an agency which was absorbed into the DHA. However, both  Public Health and Medical Education and Training were not previously  centralized. Therefore, this central rationale of consolidation for shared  services that were not previously centralized is absent from the approach  to Public Health and Medical Education and Training and, as a result,  their purpose is inconsistent with the spirit of shared services. DOD could  articulate an alternative reason for the transfer of responsibility for these  services to the DHA. However, absent such an alternative explanation,  the rationale for the transfer of responsibility of the functions of these  services to the DHA remains unclear.
section_title: The DHA Has Made Progress in Developing Performance Measures to Assess Shared Services, but These Measures Do Not Fully Demonstrate Key Attributes of Successful Performance Measures
paragraphs: The DHA has made progress in developing measures to assess the  progress of its ten shared services toward achieving their respective  goals; however, these measures continue to not fully demonstrate key  elements that can contribute to success in assessing performance. In  November 2013, we found that the performance measures DOD provided  in its 2013 congressionally required MHS reform implementation plans did  not fully exhibit attributes that can help agencies determine whether they  are achieving their goals, such as accompanying explanations,  definitions, quantifiable targets, or baselines. To provide decision makers  with more complete information on the planned implementation,  management, and oversight of the DHA, we recommended that DOD  develop and present to Congress performance measures that are clear,  quantifiable, objective, and include a baseline assessment of current  performance. Through our prior work on performance measurement, we  have identified several important attributes of performance measures (see  table 1). While these attributes may not cover all the attributes of  successful performance measures, we believe they address important  areas.
DOD provided us performance measures for the DHA shared services in  April 2015. To assess the extent of their development, we compared the  performance measures with the ten key attributes of successful  performance measures. The results of our analysis are depicted in   table 2.
Shared service  and product  line  (if applicable)  Joint Billing  Solution (Post- ABACUS) *The Medical Education and Training shared service consists of three product lines: (1) Professional  Development, Sustainment, and Program Management; (2) Academic Review and Policy Oversight;  and (3) Administrative Support Functions. However, the initial measures for this shared service were  not aligned by these product lines. Instead, they were aligned by overall shared service deliverables.  While these product lines were integrated into the Public Health shared service at initial operating  capability on September 30, 2014, the respective business case analysis and business process  reengineering plans were not conducted. No metrics had been developed for these areas as of April  24, 2015; thus, we were unable to assess performance measures for these product lines. A fourth  product line, Health Surveillance, is pending transfer to the Defense Health Agency in July 2015. As  such, we did not review measures for that product line, either.
Since our November 2013 review, DHA has made progress in developing  performance measures to assess its shared services. Specifically, all ten  shared services have measures that demonstrate at least some of these  attributes; however, collectively, they do not demonstrate all of the  attributes, as we had previously recommended. In our analysis of the ten  shared services and their associated product lines, we made the following  observations:
Linkage. We found that the measures for all of the shared service  product lines we assessed addressed the attribute of linkage. A  measure demonstrates linkage when it is aligned with division and  agency-wide goals and mission and is clearly communicated  throughout the organization. DHA officials have communicated the  shared service performance measures throughout the organization  through the 2013 implementation plan submissions and through  regular updates to leadership and all the measures were aligned with  shared service goals as defined in those submissions and updates.
Clarity. We found that the measures for 13 of the 18 shared service  product lines we assessed addressed the attribute of clarity, while 4  partially demonstrated this attribute, and 1 did not address clarity. A  measure achieves clarity when it is clearly stated and the name and  definition are consistent with the methodology used for calculating the  measure. For instance, we found that although the name and  definitions for both measures under the Contracting and Procurement  shared service Acquisition Planning and Program Management  product line were consistent and clearly stated, the methodology for  those measures was under review, preventing a comparison of the  names and definitions with the methodology. We have previously  reported that a measure that is not clearly stated can confuse users  and cause managers or other stakeholders to think that performance  was better or worse than it actually was.
Measurable Target. We found that the measures for 8 of the 18  shared service product lines we assessed addressed the attribute of  measurable targets, while 9 partially demonstrated this attribute, and  1 did not have measurable targets. Where appropriate, performance  goals and measures should have quantifiable, numerical targets or  other measurable values. Some of DOD’s measures, however, lacked  such targets. For instance, DHA officials within the Joint Billing  Solution product line of the Budget and Resource Management  shared service have proposed 10 measures, such as “Billing  Turnaround” or “Revenue Collected” for various functions, but none of  these measures had targets.
Objectivity. We found that the measures for 12 of the 18 shared  service product lines we assessed addressed the attribute of  objectivity, while 5 partially demonstrated this attribute, and 1 did not  address objectivity. We have previously reported that to be objective,  measures should indicate specifically what is to be observed, in which  population or conditions, and in what time frame, and be free of  opinion and judgment. However, for instance, within the MEDLOG  Services (Housekeeping) product line of the Medical Logistics shared  service, one of the measures is “Frequency of Complaints,” but it is  not specific as to how complaints will be evaluated or remedied, or  what the comparison standard or criteria is for assessing the  measure.
Reliability. We found that the measures for 7 of the 18 shared service  product lines we assessed addressed the attribute of reliability, while  9 partially demonstrated this attribute, and 2 did not address reliability.  Reliability refers to whether a measure is designed to collect data or  calculate results such that the measure would be likely to produce the  same results if applied repeatedly to the same situation. We have  previously reported that if errors occur in the collection of data or the  calculation of their results, it may affect conclusions about the extent  to which performance goals have been achieved. Officials provided  information indicating specific data quality control processes for  several measures, such as the frequency of when data are reviewed  and whether the reviews are automated or done manually; however,  other measures we reviewed did not have any data quality control  processes specified or those processes were still in development. For  instance, within the Budget and Resource Management shared  service, officials indicated that a technical solutions working group had  been established to assess the data needs and to determine  applicable data quality control processes for each of the product line  performance measures, but did not indicate whether any quality  control processes had been developed.
Baseline and Trend Data. We found that 3 of the 18 shared service  product lines we assessed had baselines for each of their measures,  addressing this attribute, while 10 had baselines for only some of their  measures, and 5 did not have baselines for any of their measures.  Several measures that did not have baselines had expected dates by  when the baselines would be available. For instance, the baselines for  all of the metrics within the Contracting and Procurement shared  service were in the process of being re-established, but officials  anticipated that these baselines would be developed between fiscal  year 2018 and fiscal year 2019. Without adequate baseline data,  goals may not permit subsequent comparison with actual performance  or allow determination of whether net savings have been achieved.
Core Program Activities. We found that the measures for 4 of the 18  shared service product lines we assessed addressed the attribute of  core program activities, while 12 partially demonstrated this attribute,  and 2 did not address core program activities. Several of the sets of  measures did not address all program activities that would be  expected based on the descriptions of the shared services provided  by DOD in its 2013 submissions to Congress. For example, within the  Supply Management product line of the Medical Logistics shared  service, the two proposed measures were “Use of Standardized  Items” and “Use of eCommerce by All Enterprise.” These measures  align with the stated product line objective to “increase usage of  standardized consumable supplies across the services.” However,  another product line objective is to “increase visibility and controls on  purchase card usage and other local contracts,” which did not appear  to be addressed by the proposed measures. We have previously  reported that core program activities are the activities that an entity is  expected to perform to support the intent of the program, and that  performance measures should be scoped to evaluate those activities.
Limited Overlap. We found that the measures for 16 shared service  projects we reviewed demonstrated limited overlap, while 2 had the  potential for overlap. We have reported that each performance  measure in a set should provide additional information beyond that  provided by other measures. We found that, within the various product  lines of the Budget and Resource Management shared service, the  potential for overlap existed because the definitions were unclear as  to whether they would provide new information. Specifically, two of the  measures are “Percent of transactions including valid Budget Activity,  Budget Sub Activity, and Budget Line Item data” and “Percent of  transactions captured” in both legacy and up-to-date systems that  “include valid Budget Activity, Budget Sub Activity and Budget Line  Item data.” As written, it was unclear whether data for the legacy and  up-to-date systems are captured in both measures. When an agency  has overlapping measures, it can create unnecessary or duplicate  information, which does not benefit program management.
Balance. We found that the measures for 8 of the 18 shared service  product lines we assessed addressed the attribute of balance, while 5  partially demonstrated this attribute, and 5 did not address balance.  We have previously reported that balance exists when a set of  measures ensures that an organization’s various priorities are  covered. Some of the sets of measures are not balanced. For  instance, the measures we reviewed for the Contracting and  Procurement shared service were only focused on cost savings  attributed to the product line initiatives, but they did not address other  program activities, such as variation reduction, redundancy  elimination, and ensuring the timely completion of contractor  performance evaluations. Officials explained that the initial metrics  focused on savings, but they plan to develop and track other metrics  after initial operating capability in a phased approach. Performance  measurement efforts that lack balance overemphasize certain aspects  of performance at the expense of others, and may keep DOD from  understanding the effectiveness of its overall mission and goals.
Government-wide Priorities. We found that the measures for 10 of the  18 shared service product lines we assessed addressed the attribute  of government-wide priorities, while 8 partially demonstrated this  attribute. We have previously reported that agencies should develop a  range of related performance measures to address government-wide  priorities, such as quality, timeliness, efficiency, cost of service, and  outcome. For instance, within the Medical Logistics shared service,  the MEDLOG Services (Housekeeping) product line has a measure  “Cost per Square Foot,” which addresses cost. Shared service  officials are also developing a measure that would address  “Frequency of Complaints,” which will address quality of service when  completed. When measures do not cover government-wide priorities  managers may not be able to balance priorities to ensure the overall  success of the program.
A senior DHA official noted that the development of metrics for the DHA  shared services continues as a work in progress, with the more mature  shared services having made more progress on their specific measures,  and further noted that officials are continuing to evolve these measures  through the shared services work groups. DOD implemented the ten DHA  shared services in a phased approach between October 1, 2013, and  September 30, 2014.
We found that the maturity of the shared services’ metrics is determined  in part by the date they reached initial operating capability and also by the  extent to which those services were already consolidated prior to  incorporation into the DHA:
Already Joint Areas: According to DOD, 3 of the 10 shared services  represent areas that were already joint efforts prior to DHA. These  shared services had either previously been executed by the former  TRICARE Management Activity, including the TRICARE Health Plan  and the Pharmacy shared services, or were led by a single service  and managed through a series of joint program committees, such as  the Medical Research and Development shared service. According to  DOD, these shared services required the development of new  measures related to their respective business process reengineering  plan initiatives and improvements to be developed and included in an  enterprise-level “dashboard” set of metrics.
Newly Consolidated Areas with Mature Measurement Capabilities:  According to DOD, 5 of the 10 shared services already had mature  measurement capabilities within their respective communities prior to  their incorporation as a shared service into the DHA and required the  development of some enterprise-wide standard measures to be  included in enhanced dashboards. The shared services in this  category include Facility Planning, Medical Logistics, Health  Information Technology, Budget and Resource Management, and  Contracting and Procurement.
Newly Consolidated Areas without Mature Measurement Capabilities:  The final two shared services to reach initial operating capability,  Medical Education and Training and Public Health, are newly  consolidated areas that did not have mature measurement capabilities  prior to incorporation into DHA. Within both of these shared services,  DOD developed preliminary metrics prior to initial operating capability  to aid leadership, with continued development and implementation of  measures to occur after initial operating capability. As the least  mature shared services, we identified the following issues with the  performance measures in these areas:
DHA officials told us that the Medical Education and Training  shared service represents the first instance of Office of the  Secretary of Defense-level oversight in that area, and initial  performance measures in this area were not developed until April  2015. While we found that the measures address six of the  attributes and partially address four attributes, as noted  previously, the Education and Training shared service overlaps  with other shared services, including Health Information  Technology and Contracting and Procurement, and does not  directly address the consolidation of education programs. For  instance, four of the five measures address cost savings related to  the implementation of a single learning management system  across the MHS, savings for which are being applied within the  Health Information Technology shared service. Additionally, as we  reported in July 2014, the Medical Education and Training  shared service consists of three product lines, involving: (1)  management of professional development, sustainment, and  related programs; (2) academic review and policy oversight  functions, including management of online courses and modeling  and simulation programs; and (3) management of academic and  administrative support functions. However, the initial measures  provided by DOD were not aligned by product line, but by overall  shared service deliverables. Out of twelve proposed deliverables,  the measures only addressed two.
Within Public Health, officials told us that deployment health data  elements and reporting requirements were standardized prior to  initial operating capability; however, the services varied in how  they captured and exported the data. For example, the  Deployment Health product line has several measures for  assessing the percentage of the total force that is medically ready;  however, these metrics are tracked and reported at the service  level. While officials noted that a working group including the three  military services developed these metrics, the services may differ  in how they collect the data. Further, officials have not yet  developed joint metrics to assess their progress in meeting the  goals of the shared service. Shared service officials have begun to  develop additional metrics, such as “Business Process  Reengineering Savings Achieved” and “Completion of Periodic  Health Assessments”; however these metrics do not yet have  enough information to determine the extent to which they address  the key attributes and officials do not anticipate completing these  metrics until September 2015 and March 2016 respectively.  Further, Public Health officials have not yet conducted business  case analyses and business process reengineering plans for the  remaining Public Health product lines, precluding the development  of metrics for those areas; however, officials have developed a  timeline outlining their plans to conduct each of these  assessments.
DOD’s further development of performance measures for the ten DHA  shared service projects shows progress toward addressing our prior  recommendation—to develop and present to Congress performance  measures that fully exhibit those key attributes identified in our prior work.  However, because these measures continue to lack key elements that  can contribute to success in assessing performance, we continue to  believe that our prior recommendation is still valid and should be  completely implemented for all the objectives of the MHS reform. DOD  officials have stated, among other criteria, the shared services will be  considered to have reached full operating capability when they have  developed performance measures to help manage actions, report  progress, identify gaps, and identify areas for improvement. By  developing measures that reflect these attributes, DOD can help ensure  that decision makers have information needed to assess the DHA shared  services’ efforts and to measure progress toward achieving their stated  goals and whether, as part of DOD’s overall medical governance reform  effort, they are on track to achieve desired results.
section_title: Conclusions
paragraphs: In general, DOD has made progress in addressing concerns we  highlighted in our two most recent reviews of its implementation process  for the DHA. However, while the DHA plans to reach its formal full  operating capability in October 2015, some issues will remain unresolved  into late 2016. As such, the DHA may not be fully operational in practical  terms until it definitively addresses these issues. As the personnel  requirements assessment process for the DHA moves forward, it does so  without a detailed timeline, a clear understanding of the size and scope of  the DHA’s mission, a lack of a baseline to measure against, and the  status of responsibility for military personnel. Further, the DHA has made  significant improvements to its approach to achieving cost savings  through shared services. In general, the DHA’s approach provides more  detail, recognizes the impact of changing events, and reflects a review of  investments for eight of ten of the shared services. However, the DHA  has not sufficiently explained the role of its public health and medical  education and training shared services, as these do not currently reflect  the primary goal of achieving cost savings through consolidation.
Finally, while the DHA has made improvements to its performance  measures for shared services, some aspects of these metrics are still  evolving, and our analysis identified a number of instances where DHA’s  measures do not contain key attributes of successful performance  measures. As we noted in our February 2014 testimony, the successful  implementation of the DHA will require committed senior leadership to  sustain the momentum created by the current reform effort. However,  senior leaders need appropriate information to make decisions and guide  the reform. Given that the DHA’s evolution will continue far beyond its  formal full operating capability, DOD leaders will need to continue to  strengthen their framework for managing this major reform to the MHS  with attention to these areas.
section_title: Recommendations for Executive Action
paragraphs: To provide decision makers with appropriate and more complete  information on the continuing implementation, management, and  oversight of the DHA, we recommend that the Secretary of Defense direct  the Assistant Secretary of Defense (Health Affairs) to take the following  five actions:
Develop a timeline for completion of the personnel requirements  assessment that includes milestones and interim steps;
Develop a comprehensive requirements assessment process that  accounts for needed future skills through the consideration of potential  organizational changes and helps ensure appropriate consideration of  workforce composition through the determination of the final status of  military personnel within the DHA;
Develop a plan for reassessing and revalidating personnel  requirements as the missions and needs of the DHA evolve over time;
Develop information concerning the number and cost of administrative  and headquarters personnel within the MHS and provide this  information as an annual exhibit in the President’s budget; and
Determine the future of the Public Health and Medical Education and  Training shared services by either identifying common functions to  consolidate to achieve cost savings or by developing a justification for  the transfer of these functions from the military services to the DHA  that is not premised on cost savings.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments provided in response to our draft report, DOD  concurred with four of our five recommendations and partially concurred  with a fifth. DOD’s written comments are reprinted in appendix II of this  report.
In concurring with our recommendation that DOD develop a timeline for  completion of the personnel requirements assessment that includes  milestones and interim steps, DOD stated that it had developed a project  plan to track progress in this area. This action is a positive development  in DOD’s progress toward developing staffing requirements for the DHA.  At the time of our review, DOD provided a timeline with tentative dates for  completion of personnel requirements assessments for parts of the DHA.  In its response, DOD provided scheduled completion dates for  assessments of the National Capital Region Medical Directorate, DHA  Special Staff, Medical Education and Training Directorate, and the  Research, Development and Acquisition Directorate. However, as of June  2015, assessment dates for these divisions, with the exception of the  DHA Special Staff, were listed as “To Be Determined.” In addition, DOD’s  response does not address one of the DHA’s divisions, Defense Health  Agency Support, which was similarly listed as “To Be Determined” in  DOD’s initial timeline. Establishing a milestone for this division, along with  the milestones set for the other DHA divisions, will help DOD to complete  its assessment of staffing requirements. DOD’s response states that it will  complete this assessment by the end of fiscal year 2016.
DOD concurred with our recommendation to develop a comprehensive  requirements assessment process that accounts for needed future skills  through consideration of potential organizational changes and helps  ensure appropriate consideration of workforce composition, through  determination of the final status of military personnel within the DHA.  DOD stated that it had drafted a “desktop reference” document to guide  this process. We noted in our report that as of July 2015, DOD stated that  this document had not yet been fully developed. In its comments, DOD  stated that this document was still not yet finalized, but that it had  implemented the associated processes. We look forward to the  finalization of this document and are encouraged that DOD stated it will  take into account the current and future needs of the agency, including  required skills and workforce mix.
DOD partially concurred with our recommendation that it develop a plan  for reassessing and revalidating personnel requirements as the missions  and needs of the DHA evolve over time. In its response, DOD stated that  it had issued temporary guidance, expiring in January 2016, which  established processes for manpower and organization changes to the  DHA. However, as discussed in our report, this guidance does not  specifically address the need for a plan to reassess and revalidate  personnel requirements on a regular, recurring basis. Therefore, we  continue to believe that our recommendation is valid. Further, DOD noted  in its comments that it concurs that an Administrative Instruction detailing  the ongoing process for personnel requirements determination and  management within the DHA should be formalized before the current  guidance expires.
In concurring with our recommendation that DOD develop information  concerning the number and cost of administrative and headquarters  personnel within the MHS and provide this information as an annual  exhibit in the President's budget, DOD stated that such an effort is  currently underway as part of a larger DOD initiative to better define and  account for management headquarters functions. However, DOD noted  that it does not agree with the inclusion of administrative personnel in this  assessment given the lack of a department-wide definition of what  constitutes such personnel. For purposes of this report, we have defined  administrative personnel to include those other than headquarters  personnel who are assigned to MHS organizations, including the DHA,  that do not directly provide health care services within DOD military  treatment facilities. This includes personnel performing DHA shared  services activities. We believe the inclusion of administrative personnel as  defined in this report is crucial to accurately determining the number and  cost of personnel serving within MHS. As a result, we continue to  recommend that DOD include the number and costs of administrative  personnel in combination with similar information on headquarters  personnel within the MHS.
DOD concurred with our recommendation that it determine the future of  the Public Health and Medical Education and Training shared services by  either identifying common functions to consolidate to achieve cost  savings or develop a justification for the transfer of these functions from  the military services to the DHA that is not premised on cost savings. In  its response, DOD stated that it plans to revisit the application of the  business case analysis process to this shared service, including the  development of a “recommended future state.” Further, DOD stated that it  plans to employ its governance process to resolve issues related to  responsibilities and authorities within its Medical Education and Training  shared service to identify opportunities to reduce and eliminate  redundancies in this area. DOD also highlighted the status of its  “eLearning” and Modeling and Simulation product lines. We are  encouraged by the steps outlined in DOD’s response. However, as we  noted in our report, these product lines significantly overlap with the  Health Information Technology and Contracting and Procurement shared  services, with some associated costs and cost savings attributed to these  shared services. As a result, the reason for creating this shared service  remains unclear.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Deputy Secretary of Defense,  the Under Secretary of Defense for Personnel and Readiness, the  Assistant Secretary of Defense (Health Affairs), the Defense Health  Agency Director, the Surgeon General of the Air Force, the Surgeon  General of the Army, and the Surgeon General of the Navy. In addition,  the report is available at no charge on the GAO website at  http://www.gao.gov.
If you or your staff have any questions regarding this report, please  contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III.
section_title: Appendix I: History of Military Health System Governance Reform and Our Related Work
paragraphs: For many years, we and other organizations have highlighted long- standing issues surrounding the Department of Defense’s (DOD) Military  Health System (MHS) and DOD’s efforts to reorganize its governance  structure. Over the years, many efforts to control the increase in health  care costs led to a long series of studies to address the governance  structure of the MHS and to recommend major organizational  realignments. Recently, as a result of the report of the 2011 Task Force  on Military Health System Governance, the department began  implementation planning for the creation of a new Defense Health Agency  (DHA). Subsequently, the National Defense Authorization Act for Fiscal  Year 2013 required DOD to submit its plans for implementing its reform  effort in three submissions—the first in March 2013, the second in June  2013, and the third in September 2013—and mandated that GAO review  DOD’s first two submissions.
We examined the March and June 2013 submissions as well as an  August 2013 supplemental report to Congress of DOD’s plan to  implement the reform effort and reported the results in November 2013. In  February 2014, we examined DOD’s third and final reform plan, which  was submitted to Congress in November 2013. In reviewing the  submissions, we identified several areas in DOD’s implementation plan  where sustained senior leadership attention is needed to help ensure the  reform achieves its goals including determining personnel requirements,  clarifying cost estimates, and fully developing performance measures.  DHA officially began operations in October 2013 and DOD anticipates  that the organization will be fully operational in October 2015. See figure  4 for a timeline of our work related to DOD’s MHS governance reform and  key DOD documents.
For more detailed information on our past recommendations to DOD on  MHS governance issues and the status of DOD’s implementation of them,  see table 3.
section_title: Appendix II: Comments from the Department of Defense
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Lori Atkinson, Assistant Director;  Rebekah Boone; Jeffrey Heit; Mae Jones; Amie Lesser; Felicia Lopez;  Carol Petersen; Terry Richardson; Adam Smith; and Sabrina Streagle  made key contributions to this report.
section_title: Related GAO Products
paragraphs: Defense Health Care Reform: Actions Needed to Help Realize Potential  Cost Savings from Medical Education and Training. GAO-14-630.  Washington, D.C.: July 31, 2014.
Military Health System: Sustained Senior Leadership Needed to Fully  Develop Plans for Achieving Cost Savings. GAO-14-396T. Washington,  D.C.: February 26, 2014.
Defense Health Care Reform: Additional Implementation Details Would  Increase Transparency of DOD’s Plans and Enhance Accountability.  GAO-14-49. Washington, D.C.: November 6, 2013.
Defense Health Care: Additional Analysis of Costs and Benefits of  Potential Governance Structures Is Needed. GAO-12-911. Washington,  D.C.: September 26, 2012.
Defense Health Care: Applying Key Management Practices Should Help  Achieve Efficiencies within the Military Health System. GAO-12-224.  Washington, D.C.: April 12, 2012.  2012 Annual Report: Opportunities to Reduce Duplication, Overlap and  Fragmentation, Achieve Savings, and Enhance Revenue.   GAO-12-342SP. Washington, D.C.: February 28, 2012.
Follow-up on 2011 Report, Status of Actions Taken to Reduce  Duplication, Overlap, and Fragmentation, Save Tax Dollars, and Enhance  Revenue. GAO-12-453SP. Washington, D.C.: February 28, 2012.
Opportunities to Reduce Potential Duplication in Government Programs,  Save Tax Dollars, and Enhance Revenue. GAO-11-318SP. Washington,  D.C.: March 1, 2011.
Military Personnel: Enhanced Collaboration and Process Improvements  Needed for Determining Military Treatment Facility Medical Personnel  Requirements. GAO-10-696. Washington, D.C.: July 29, 2010.
Defense Health Care: DOD Needs to Address the Expected Benefits,  Costs, and Risks for Its Newly Approved Medical Command Structure.  GAO-08-122. Washington, D.C.: October. 12, 2007.