VA Health Care: Preliminary Information on the Joint Venture Proposal for VA's Charleston Facility
Published: 2005-09-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of Veterans Affairs (VA) maintains partnerships, or affiliations, with university medical schools to obtain medical services for veterans and provide training for medical residents. In 2002, the Medical University of South Carolina (MUSC)--which is affiliated with VA's medical facility in Charleston--proposed that VA and MUSC enter into a joint venture for a new VA facility as part of MUSC's plan to expand its medical campus. Under the proposal, MUSC and VA would jointly construct and operate a new medical center in Charleston. In 2004, the Capital Asset Realignment for Enhanced Services (CARES) Commission, an independent body charged with assessing VA's capital asset requirements, issued its recommendations on the realignment and modernization of VA's capital assets. Although the Commission did not recommend a replacement facility for Charleston, it did recommend, among other things, that VA promptly evaluate MUSC's proposal. This testimony discusses GAO's preliminary findings on the (1) current condition of the Charleston facility, (2) extent to which VA and MUSC collaborated on the joint venture proposal, and (3) issues for VA to consider when exploring the opportunity to participate in the joint venture. VA concurred with GAO's preliminary findings.
section_title: What GAO Found
paragraphs: The most recent VA facility assessment and the CARES Commission concluded that the Charleston medical facility is in overall good condition and, with some renovations, can continue to meet veterans' health care needs in the future. VA officials attribute this to VA's continued capital investments in the facility. For example, over the last 5 years, VA has invested approximately $11.6 million in nonrecurring maintenance projects, such as replacing the fire alarm system and roofing. To maintain the facility's condition over the next 10 years, VA officials from the Charleston facility have identified a number of planned capital maintenance and improvement projects, totaling approximately $62 million. VA and MUSC have collaborated and communicated to a limited extent over the past 3 years on a proposal for a joint venture medical center. For example, before this summer, VA and MUSC had not exchanged critical information that would help facilitate negotiations, such as cost analyses of the proposal. As a result of the limited collaboration, negotiations over the proposal stalled. However, after a congressional delegation visit in August 2005, VA and MUSC took steps to move the negotiations forward. Specifically, VA and MUSC established four workgroups to examine critical issues related to the proposal. The MUSC proposal for a new joint venture medical center presents an opportunity for exploring new ways of providing health care to Charleston's veterans, but it also raises a variety of complex issues for VA. These include the benefits and costs of investing in a joint facility compared with other alternatives, legal issues associated with the new facility such as leasing or transferring property, and potential concerns of stakeholders, including VA patients and employees. The workgroups established by VA and MUSC are expected to examine some, but not all, of these issues. Additionally, some issues can be addressed through collaboration between VA and MUSC, but others may require VA to seek legislative remedies.

section_title: Letter
paragraphs: I am pleased to be here in Charleston to provide our preliminary findings  on the possibility of the Department of Veterans Affairs (VA) and the  Medical University of South Carolina (MUSC) entering into a joint venture  for a new medical center in Charleston. For decades VA has developed and  maintained partnerships, or affiliations, with university medical schools to  obtain medical services for veterans and provide training and education to  medical residents. Today, VA has affiliations with 107 medical schools.  These affiliations—-one of which is with MUSC—help VA fulfill its mission  of providing health care to the nation’s veterans. For example, many  MUSC physicians serve as residents at VA’s medical facility in Charleston,  the Ralph H. Johnson VA Medical Center. This medical facility is an  important part of the VA health care network, providing over 4,000  inpatient stays for veterans in 2004.
To provide health care to veterans, in part through partnerships with  university medical schools, VA manages a diverse inventory of real  property. VA reported in February 2005 that its capital assets included  more than 5,600 buildings and about 32,000 acres of land. However, many  of VA’s facilities were built more than 50 years ago and are no longer well  suited to providing accessible, high-quality, cost-effective health care in  the 21st century. To address its aging infrastructure, VA, in 1999, initiated  the Capital Asset Realignment for Enhanced Services (CARES) process— the first comprehensive, long-range assessment of its health care system’s  capital asset requirements in almost 20 years. In February 2004, the  CARES Commission—an independent body charged with assessing VA’s  capital assets—issued its recommendations regarding the realignment and  modernization of VA’s capital assets necessary to meet the demand for  veterans’ health care services through 2022. For example, the Commission  recommended replacing VA facilities in Denver and Orlando. The  Commission did not recommend replacing the VA facility in Charleston,  which is a primary, secondary, and tertiary care facility. However, the  Commission recommended that, among other things, VA promptly  evaluate MUSC’s proposal to jointly construct and operate a new medical  center with VA in Charleston, noting that such an arrangement could serve  as a possible framework for partnerships in the future. In responding to  the Commission’s recommendations, the Secretary stated that VA will  continue to consider options for sharing opportunities with MUSC.
My statement today will cover the (1) current condition of the Charleston  facility and the actions VA has taken to implement CARES  recommendations at the facility, (2) extent to which VA and MUSC  collaborated on the proposal for a joint medical center, and (3) issues for  VA to consider when exploring the opportunity to participate in the joint  venture. My preliminary comments are based on our ongoing work for the  full Committee as well as GAO’s body of work on VA’s management of its  capital assets. For our ongoing work, we interviewed VA and MUSC  officials as well as other stakeholders in the Charleston area, including  officials from the City of Charleston and the U.S. Navy. We also reviewed  the CARES Commission’s comments on and recommendations for the  Charleston facility; documents relating to the MUSC proposal, including  correspondence between MUSC and VA; federal statutes; and past GAO  reports. We obtained comments on this testimony from VA and MUSC  officials, which we incorporated as appropriate. We conducted our work  from June through September 2005 in accordance with generally accepted  government auditing standards.
The most recent VA facility assessment and the CARES Commission  concluded that the Charleston facility is in overall good condition and with  some renovations can continue to meet veterans’ health care needs in the  future. VA officials attribute the facility’s condition to VA’s continued  capital investments. For example, over the last 5 years, VA has invested  approximately $11.6 million in nonrecurring maintenance projects, such as  replacing the fire alarm system and roofing. The CARES Commission did  not recommend replacing the Charleston facility; however, the  Commission recommended renovations of the nursing home care units as  well as the inpatient wards in order to meet the needs of the projected  veterans’ population in the Charleston area. The CARES projections  indicate that demand for inpatient beds at VA’s facility in Charleston will  increase by 29 percent from 2001 to 2022, while demand for outpatient  services will increase by 69 percent during the same period. To maintain  the facility’s condition over the next 10 years, officials from the VA facility  in Charleston have identified a number of planned capital maintenance  and improvement projects, including repairing expansion joints, making  electrical upgrades, and adding a parking deck for patients. VA officials  estimate that the costs of these planned maintenance and improvement  projects will total about $62 million.
VA and MUSC collaborated and communicated to a limited extent on a  proposal for a joint venture medical center over the past 3 years. In  November 2002, the President of MUSC made a proposal to the Secretary  of VA to participate in a 20-year, multiphase construction plan to replace  and expand its campus. Under MUSC’s proposal, MUSC would acquire the  site of the current VA facility in Charleston for part of its expansion  project and then enter into a joint venture to construct and operate a new  facility on MUSC property. The CARES Commission recommended that  VA promptly evaluate MUSC’s proposal to jointly construct and operate a  new medical center with VA. Although there has been some discussion  and correspondence between VA and MUSC since 2002 on the joint  venture proposal, collaboration has been minimal. For example, before  this summer, VA and MUSC had not exchanged critical information that  would help facilitate negotiations, such as cost analyses of the proposal.  As a result of the limited collaboration, negotiations over the proposal  stalled. After a congressional delegation visited Charleston in August 2005,  however, VA and MUSC took some initial steps to move the negotiations  forward. Specifically, VA and MUSC established four workgroups to  examine critical issues related to the proposal.
The MUSC proposal for a new joint venture medical center presents a  unique opportunity for VA to explore new ways of providing health care to  Charleston’s veterans now and in the future; however, it also raises a  variety of complex issues for VA. These include the benefits and costs of  investing in a joint facility compared with those of other alternatives, such  as maintaining the existing facility or considering options with other  health care providers in the area; legal issues associated with the new  facility, such as leasing or transferring property, contracting, and  employment; and potential concerns of stakeholders. The workgroups  established by VA and MUSC are expected to examine some, but not all, of  these issues. In addition, some issues can be addressed through  collaboration between VA and MUSC, while others may require VA to seek  legislative remedies. Until these issues are explored, it will be difficult to  make a final decision on whether a joint venture is in the best interest of  the federal government and the nation’s veterans.
subsections: section_title: Background
paragraphs: VA manages a vast medical care network for veterans, providing health  care services to about 5 million beneficiaries. The estimated cost of these  services in fiscal year 2004 was $29 billion. According to VA, its health care  system now includes 157 medical centers, 862 ambulatory care and  community-based outpatient clinics (CBOC), and 134 nursing homes. VA  health care facilities provide a broad spectrum of medical, surgical, and  rehabilitative care. The management of VA’s facilities is decentralized to  21 regional networks referred to as Veterans Integrated Service Networks  (networks). The Charleston facility is part of Network 7, or the Southeast  Network.
The Charleston medical facility is a part of the VA health care network and  has served the medical needs of Charleston area veterans since it opened  in 1966. The Charleston facility is a primary, secondary, and tertiary care  facility. (See fig. 1.) The facility consists of more than 352,000 square feet  with 117 medical and surgical beds and 28 nursing home care unit beds;  according to VA officials, the average daily occupancy rate is about 80  percent. The outpatient workload was about 460,000 clinic visits in fiscal  year 2004. VA employs about 1,100 staff at the Charleston facility, which  has an annual operating budget of approximately $160 million.
VA’s Charleston medical facility is affiliated with MUSC. MUSC is the main  source of the Charleston facility’s medical residents, who rotate through  all major VA clinical service areas. VA also purchases approximately $13  million in medical care services from MUSC, including gastroenterology,  infectious disease, internal medicine, neurosurgery, anesthesia,  pulmonary, cardiovascular perfusion, and radiology services. In addition,  VA has a medical research partnership with MUSC for a mutually  supported biomedical research facility, the Thurmond Biomedical  Research Center.
MUSC operates a 709 licensed bed acute care hospital in Charleston that  also provides primary, secondary, and tertiary services. The services  available through MUSC span the continuum of care with physician  specialists and subspecialists in medicine, surgery, neurology,  neurological surgery, psychiatry, radiology, and emergency medicine,  among other specialties. During a 12-month period ending on June 30,  2003, MUSC admitted 28,591 patients (including newborns), representing  an occupancy rate of approximately 78 percent of available beds.  Outpatient activity for the same period included 6,802 same-day surgeries,  551,914 outpatient visits, and 35,375 emergency visits. MUSC’s net patient  service revenue for the fiscal year ending on June 30, 2003, was about $559  million.
section_title: VA Determined That the Charleston Facility Is in Good Condition and Is Currently Investing in Minor Renovations
paragraphs: VA and the CARES Commission concluded that the Charleston facility is in  overall good condition and, with relatively minor renovations, can  continue to meet veterans’ health care needs in the future. VA conducts  facility condition assessments (FCA) at its facilities every 3 years on a  rotating basis. FCAs evaluate the condition of a VA facility’s essential  functions—electrical and energy systems, accessibility, sanitation and  water—and subsequently estimate the useful and remaining life of those  systems. The Charleston facility’s most recent FCA was conducted in 2003,  and this assessment showed that the facility currently is in overall good  condition. According to VA officials, the facility’s current condition is a  result of targeted capital investments. In particular, VA invested about  $11.6 million in nonrecurring maintenance projects over the last 5 years.  Such projects include installing a new fire alarm system, replacing roofing,  painting the exterior of the building, and upgrading interior lighting.
The CARES Commission did not recommend replacing VA’s facility in  Charleston as it did with facilities in some other locations. In assessing the  capital asset requirements for the Charleston facility, the Commission  relied on the 2003 FCA and projections of inpatient and outpatient service  demands through 2022, among other things. These projections indicate  that demand for inpatient beds at VA’s facility in Charleston will increase  by 29 percent from 2001 to 2022, while demand for outpatient services will  increase by 69 percent during the same period. Although the CARES  Commission did not recommend a new facility in Charleston, it did call for  renovating the nursing home units and the inpatient wards. In his response  to the Commission’s recommendations, the Secretary agreed to make the  necessary renovations at the Charleston facility.
VA officials at the Charleston medical facility have a number of ongoing  and planned capital maintenance and improvement projects to address the  CARES Commission recommendations and to maintain the condition of  the current medical center. For example, two minor capital  improvements—totaling $6.25 million—are currently under construction.  These projects include    a third floor clinical addition, which will add 20,000 square feet of space to  the medical center for supply processing and distribution, rehabilitation  medicine, and prosthetics; and the patient privacy project, which will renovate the surgical in-patient  ward to provide private and semiprivate bathrooms for veterans.
Planned capital maintenance and improvements projects over the next 10  years include electrical upgrades, renovation of several wards to address  patient privacy concerns, renovation of operating rooms and the intensive  care units, and the expansion of the specialty care clinics. VA officials  estimate that the total cost for all planned capital maintenance and  improvement projects is approximately $62 million.
In addition to the capital improvement projects at the medical center in  Charleston, VA is currently constructing a CBOC, in partnership with the  Navy, at the Naval Weapons Station in Goose Creek, South Carolina. The  new clinic will be a joint VA-Navy facility and will help VA address the  projected increase in demand for outpatient services. The new clinic— called the Goose Creek CBOC—is scheduled to open in 2008 and will  serve a projected 8,000 patients who are currently served by VA’s  Charleston facility. VA estimates its investment in the planning, design,  and construction of the Goose Creek CBOC will be about $6 million.
section_title: Limited Collaboration between VA and MUSC on a Joint Venture Facility Characterized Negotiations until Recently
paragraphs: VA and MUSC have collaborated and communicated to a limited extent on  a proposal for a joint venture medical center over the past 3 years. As a  result of the limited collaboration, negotiations over the proposal stalled.  In August 2005, however, initial steps were taken to move the negotiations  forward. Specifically, four workgroups were created—which include both  VA and MUSC officials—and tasked with examining critical issues related  to the proposal.
subsections: section_title: Limited Communication and Collaboration Have Hampered Negotiations over MUSC’s Joint Venture Proposal
paragraphs: To meet the needs of a growing and aging patient population, MUSC has  undertaken an ambitious five-phase construction project to replace its  aging medical campus. Construction on the first phase began in October  2004. Phase I includes the development of a four-story diagnostic and  treatment building and a seven-story patient hospitality tower, providing  an additional 641,000 square feet in clinical and support space—156 beds  for cardiovascular and digestive disease services, 9 operating rooms,  outpatient clinics with a capacity of 100,000 visits, and laboratory and  other ancillary support services. Phase I also includes the construction of  an atrium connecting the two buildings, a parking structure, and a central  energy plant. Initial plans for phases II through V include diagnostic and  treatment space and patient bed towers. As shown in figure 2, phases IV  and V would be built on VA property. In particular, phase V would be built  on the site of VA’s existing medical center. MUSC has informed VA about  its proposed locations for these facilities. According to MUSC officials,  there are approximately 2 years remaining for the planning of phase II.
In November 2002, the President of MUSC sent a proposal to the Secretary  of VA about partnering with MUSC in the construction and operation of a  new medical center in phase II of MUSC’s construction project. Under  MUSC’s proposal, VA would vacate its current facility and move to a new  facility located on MUSC property to the south of phase I. MUSC also  indicated that sharing medical services would be a component of the joint  venture—that is, VA and MUSC would enter into sharing agreements to  buy, sell, or barter medical and support services. VA and MUSC currently  share some services—for example, VA purchases services for  gastroenterology, infectious disease, and internal medicine. According to  MUSC officials, the joint venture proposal would increase the level of  sharing of medical services and equipment, which would create cost  savings for both VA and MUSC. VA officials told us that the proposed joint  venture between MUSC and VA is unprecedented—that is, should VA  participate in the joint venture, it would be the first of its kind between VA  and a medical education affiliate.
In response to MUSC’s proposal, VA formed an internal workgroup  composed of officials primarily from VA’s Southeast Network to evaluate  MUSC’s proposal. The workgroup analyzed the feasibility and cost  effectiveness of the proposal and issued a report in March 2003, which  outlined three other options available to VA: replacing the Charleston  facility at its present location, replacing the Charleston facility on land  presently occupied by the Naval Hospital in Charleston, or renovating the  Charleston facility. The workgroup concluded that it would be more cost  effective to renovate the current Charleston facility than to replace it with  a new facility. This conclusion was based, in part, on the cost estimates for  constructing a new medical center. In April 2003, the Secretary of VA sent  a counterproposal to the President of MUSC, which indicated that VA  preferred to remain in its current facility. The Secretary indicated,  however, that if VA agreed to the joint venture, it would rather place the  new facility in phase III—which is north of phase I—to provide better  street access for veterans. (See fig. 3 for MUSC’s proposal and VA’s  counterproposal.) In addition, the Secretary indicated that MUSC would  need to provide a financial incentive for VA to participate in the joint  venture. Specifically, MUSC would need to make up the difference  between the estimated life-cycle costs of renovating the Charleston facility  and building a new medical center—which VA estimated to be about $85  million—through negotiations or other means.
The MUSC President responded to VA’s counterproposal in an April 2003  letter to the Secretary of VA. In the letter, the MUSC President stated that  MUSC was proceeding with phase I of the project and that the joint  venture concept could be pursued during later phases of construction. The  letter did not specifically address VA’s proposal to locate the new facility  in phase III, nor the suggestion that MUSC would need to provide some  type of financial incentive for VA to participate in the joint venture. To  move forward with phase I, the MUSC President stated that MUSC would  like to focus on executing an enhanced use lease (EUL) for Doughty  Street. Although MUSC owns most of the property that will be used for  phases I through III, Doughty Street is owned by VA and serves as an  access road to the Charleston facility and parking lots. The planned facility  for phase I would encompass Doughty Street. (See fig. 4.) Therefore,  MUSC could not proceed with phase I—as originally planned—until MUSC  secured the rights to Doughty Street. To help its medical affiliate move  forward with construction, VA executed a EUL agreement with MUSC in  May 2004 for use of the street. According to the terms of the EUL, MUSC  will pay VA $342,000 for initial use of the street and $171,000 for each of  the following eight years.
Although both entities successfully collaborated in executing the  enhanced use lease for Doughty Street, limited collaboration and  communication generally characterize the negotiations between MUSC  and VA over the joint venture proposal. In particular, before this summer,  VA and MUSC had not exchanged critical information that would help  facilitate negotiations. For instance, MUSC did not clearly articulate to VA  how replacing the Charleston facility, rather than renovating the facility,  would improve the quality of health care services for veterans or benefit  VA. MUSC officials had generally stated that sharing services and  equipment would create efficiencies and avoid duplication, which would  lead to cost savings. However, MUSC had not provided any analyses to  support such claims. Similarly, as required by law, VA studied the  feasibility of coordinating its health care services with MUSC, pending  construction of MUSC’s new medical center. This study was completed in  June 2004. However, VA officials did not include MUSC officials in the  development of the study, nor did they share a copy of the completed  study with MUSC. VA also updated its cost analysis of the potential joint  venture this spring, but again, VA did not share the results with MUSC.  Because MUSC was not included in the development of these analyses,  there was no agreement between VA and MUSC on key input for the  analyses, such as the specific price MUSC would charge VA for, or the  nature of, the medical services that would be provided. As a result of the  limited collaboration and communication, negotiations stalled—prior to  August 2005, the last formal correspondence between VA and MUSC  leadership on the joint venture was in April 2003.  (See fig. 5 for a time line  of key events in the negotiations between VA and MUSC.)
section_title: Recent Events Have Spurred Discussion and Collaboration Between VA and MUSC
paragraphs: On August 1, 2005, a congressional delegation visited Charleston to meet  with VA and MUSC officials to discuss the joint venture proposal. After  this visit, VA and MUSC agreed to establish workgroups to examine key  issues associated with the joint venture proposal. Specifically, VA and  MUSC established the Collaborative Opportunities Steering Group  (steering group). The steering group is composed of five members from  VA, five members from MUSC, and a representative from the Department  of Defense (DOD), which is also a stakeholder in the local health care  market. The steering group chartered four workgroups, and according to  VA:    The governance workgroup will examine ways of establishing  organizational authority within a joint venture between VA and MUSC,  including shared medical services.
The clinical service integration workgroup will identify medical  services provided by VA and MUSC and opportunities to integrate or share  these services.
The legal workgroup will review federal and state authorities (or identify  the lack thereof) and legal issues relating to a joint venture with shared  medical services.
The finance workgroup will provide cost estimates and analyses relating  to a joint venture with shared medical services.
The workgroups will help VA and MUSC determine if the joint venture  proposal is mutually beneficial. The workgroups are scheduled to provide  weekly reports to the steering group and a final report to the steering  group by October 28, 2005. The steering group is scheduled to submit a  final report by November 30, 2005, to the Deputy Under Secretary for  Health for Operations and Management and to the President of MUSC.
section_title: Joint Venture Proposal Raises a Variety of Issues
paragraphs: The possibility of participating in the joint venture raises a number of  issues for VA to consider. The proposed joint venture presents a unique  opportunity for VA to reevaluate how it provides health care services to  veterans in Charleston. Our ongoing work, as well as our previous work on  VA’s capital realignment efforts, cost-benefit analysis, organizational  transformation, and performance management, however, suggests many  issues to consider before making a decision about a joint venture,  including governance, legal, and stakeholder issues. Some of these issues  will be directly addressed by the workgroups, while others, such as the  concerns of stakeholders, will not. In addition, some issues can be  addressed through collaboration between VA and MUSC, while others may  require VA to seek legislative remedies. Among the issues to explore are  the following:    Comparing appropriate options and assessing the costs and  benefits of all options: According to Office of Management and Budget  (OMB) guidelines on evaluating capital assets, a comparison of options, or  alternatives, including the status quo, is critical for ensuring that the best  alternative is selected. In its guidance, OMB encourages decision makers  to consider the different ways in which various functions, most notably  health care service delivery in this case, can be performed. OMB  guidelines further state that comparisons of costs and benefits should  facilitate selection among competing alternatives. The finance workgroup  is examining the potential costs for shared services within a joint facility.  However, it is unclear whether the workgroup will weigh the benefits and  costs of a new facility against those of other alternatives, including  maintaining the existing medical center.
VA will also need to weigh the costs and benefits of investing in a joint  venture in Charleston against the needs of other VA facilities in the  network and across the nation. VA did not include the Charleston facility  on its list of highest priority major medical facility construction  requirements for fiscal years 2004 through 2010. According to VA, the list  of priorities, which includes 48 projects across the nation, aligns with  existing CARES recommendations. Nevertheless, exploring the potential  costs and benefits of a joint venture gives VA an opportunity to reexamine  how it delivers health care services to the nation’s veterans and uses its  affiliations with medical universities now and in the future. As we have  stated in previous reports, given the nation’s long-term fiscal challenges  and other challenges of the 21st Century, such reexaminations of federal  programs are warranted. Moreover, as the CARES Commission noted, the  potential joint venture between VA and MUSC is a possible framework for  future partnerships.
Developing a governance plan that outlines responsibilities and  ensures accountability: If VA and MUSC decide to enter into a joint  venture for a new facility, they will need a plan for governing the facility.  Any governance plan would have to maintain VA’s direct authority over  and accountability for the care of VA patients. In addition, if shared  medical services are a component of a joint venture between MUSC and  the VA, the entities will need a mechanism to ensure that the interests of  the patients served by both are protected today and in the future. For  instance, VA may decide to purchase operating room services from   MUSC. If the sharing agreement was dissolved at some point in the  future, it would be difficult for VA to resume the independent provision of  these services. Also, if MUSC physicians were to treat VA beneficiaries, or  VA physicians were to treat MUSC patients, each entity would need a clear  understanding of how to report health information to its responsible  organization. Therefore, a clear plan for governance would ensure that VA  and MUSC could continue to serve their patients’ health care needs as well  as or better than before.
Identifying legal issues and seeking legislative remedies: The  proposed joint venture raises a number of complex legal issues depending  on the type of joint venture that is envisioned.  Many of the legal issues  that will need to be addressed involve real estate, construction,  contracting, budgeting, and employment. The following are among some  of the potential issues relating to a joint venture that VA previously  identified:   What type of interest will VA have in the facility? If MUSC is  constructing the facility on MUSC property, will VA be entering into a  leasehold interest in real property or a sharing agreement for space,  and what are the consequences of each? If the facility is to be located  on VA property, will it involve a land transfer to MUSC or will VA lease  the property to MUSC under its authority to enter into a EUL  agreement? What are the advantages and disadvantages of these  options?
Because MUSC contracting officials do not have the authority to legally  bind the VA, how would contracting for the services and equipment be  handled?
The legal workgroup is currently identifying VA’s and MUSC’s legal  authorities, or lack thereof, on numerous issues relating to entering into a  joint venture. Should VA decide to participate in the joint venture, it may  need to seek additional authority from the Congress.
Involving stakeholders in the decisionmaking process: Participating  in a joint venture medical center, particularly if it includes significant  service sharing between VA and MUSC, has significant implications for the  medical center’s stakeholders, including VA patients, VA employees, and  the community. These stakeholders have various perspectives and  expectations—some of which are common to the different groups, while  others are unique. For example, union representatives and VA officials  whom we spoke to indicated that VA patients and employees would likely  be concerned about maintaining the quality of patient care at a new facility  and access to the current facility during construction. Union  representatives also said the employees would be concerned about the  potential for the loss of jobs if VA participated in the joint venture and  purchased additional services from MUSC. As VA and MUSC move  forward in negotiations, it will be important for all stakeholders’ concerns  to be addressed.
Developing a system to measure performance and results: If VA and  MUSC decide to jointly build and operate a new facility in Charleston, it  will become, as noted in the CARES Commission report, a possible  framework for future partnerships between VA and other medical  universities. As a result, a system for measuring whether the new joint  venture facility is achieving the intended results would be useful. In our  previous work on managing for results, we have emphasized the  importance of establishing meaningful, outcome-oriented performance  goals. In this case, potential goals could be operational cost savings and  improved health care for veterans. If the goals are not stated in  measurable terms, performance measures should be established that  translate those goals into concrete, observable conditions. Such  measures would enable VA and other stakeholders to determine whether  progress is being made toward achieving the goals. This information could  not only shed light on the results of a joint venture in Charleston, but it  could also enable VA to identify criteria for evaluating other possible joint  ventures with its medical affiliates in the future. It would also help  Congress to hold VA accountable for results.
section_title: Concluding Observations
paragraphs: In conclusion, Mr. Chairman, we have stated over the past few years that  federal agencies, including VA, need to reexamine the way they do  business in order to meet the challenges of the 21st century. To address  future health care needs of veterans, VA’s challenge is to explore  alternative ways to fulfill its mission of providing veterans with quality  health care. The prospect of establishing a joint venture medical center  with MUSC presents a good opportunity for VA to study the feasibility of  one method—expanding its relationships with university medical school  affiliates to include the sharing of medical services in an integrated facility.  This is just one of several ways VA could provide care to veterans.  Evaluating this option would involve VA officials, working in close  collaboration with MUSC officials, weighing the benefits and costs as well  as the risks involved in a joint venture against those of other alternatives,  including maintaining the current medical center. Determining whether a  new facility for Charleston is justified in comparison with the needs of  other facilities in the VA system is also important. Until these difficult, but  critical, issues are addressed, a fully-informed final decision on the joint  venture proposal cannot be made.
Mr. Chairman, this concludes my prepared statement. I will be happy to  respond to any questions you or other Members of the Subcommittee may  have.
section_title: Contact and Acknowledgments
paragraphs: For further information, please contact Mark Goldstein at (202) 512-2834.  Individuals making key contributions to this testimony include Nikki  Clowers, Daniel Hoy, Jennifer Kim, Edward Laughlin, Donna Leiss, James  Musselwhite Jr., Terry Richardson, Susan Michal-Smith, and Michael  Tropauer.
section_title: Related GAO Products
paragraphs: VA Health Care: Key Challenges to Aligning Capital Assets and  Enhancing Veterans’ Care. GAO-05-429. Washington, D.C.: August 5, 2005.
Federal Real Property: Further Actions Needed to Address Long-standing  and Complex Problems. GAO-05-848T. Washington, D.C.: June 22, 2005.
VA Health Care: Important Steps Taken to Enhance Veterans’ Care by  Aligning Inpatient Services with Projected Needs. GAO-05-160.  Washington, D.C.: March 2, 2005.
High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January  2005.
VA Health Care: Access for Chattanooga-Area Veterans Needs  Improvements. GAO-04-162. Washington, D.C.: January 30, 2004.
Budget Issues: Agency Implementation of Capital Planning Principles Is  Mixed. GAO-04-138. Washington, D.C.: January 16, 2004.
Federal Real Property: Vacant and Underutilized Properties at GSA, VA,  and USPS. GAO-03-747. Washington, D.C.: August 19, 2003.
VA Health Care: Framework for Analyzing Capital Asset Realignment  for Enhanced Services Decisions. GAO-03-1103R. Washington, D.C.:  August 18, 2003.
Department of Veterans Affairs: Key Management Challenges in Health  and Disability Programs. GAO-03-756T. Washington, D.C.: May 8, 2003.
VA Health Care: Improved Planning Needed for Management of Excess  Real Property. GAO-03-326. Washington, D.C.: January 29, 2003.
Major Management Challenges and Program Risks: Department of  Veterans Affairs. GAO-03-110. Washington, D.C.: January 2003.
High-Risk Series: Federal Real Property. GAO-03-122. Washington, D.C.:  January 2003.
VA Health Care: VA Is Struggling to Address Asset Realignment  Challenges. GAO/T-HEHS-00-88. Washington, D.C.: April 5, 2000.
VA Health Care: Improvements Needed in Capital Asset Planning and  Budgeting. GAO/HEHS-99-145. Washington, D.C.: August 13, 1999.
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