Managing for Results: Efforts to Strengthen the Link Between Resources and Results at the Veterans Health Administration
Published: 2002-12-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Encouraging a clearer and closer link between budgeting and planning is essential to improving federal management and instilling a greater focus on results. Through work at various levels within the organization, this report on the Veterans Health Administration (VHA)--and its two companion studies on the Administration on Children and Families (GAO-03-09) and the Nuclear Regulatory Commission (GAO-03-258)--documents (1) what managers considered successful efforts at creating linkages between planning and performance information to influence resource choices and (2) the challenges managers face in creating these linkages.
section_title: What GAO Found
paragraphs: VHA's budget formulation and planning processes are centrally managed, but are not closely linked. Resource distribution to VHA's health care networks is mostly formulaic, determined primarily by the distribution of the veterans being served. VHA offices involved in budget formulation and strategic planning provide guidance to health care networks in developing their financial and strategic plans. Integrating performance information into resource allocation decisions is apparent at the health care network level during budget execution. Health care network managers told us that they use an internal data system as a tool to decide how to allocate resources to their facilities and programs. They also use various communication methods to share information on performance measures, and are held responsible for meeting those measures. Network managers provided specific examples where performance information influenced their resource allocation decisions. For example, one performance target specifies that all diabetic veterans are expected to receive retinal eye exams. An ophthalmologist must interpret the results of such an exam; however, most outpatient clinics do not have the resources to maintain an ophthalmologist on staff. One network invested in machines that record test results and transmit them to an ophthalmologist at another location, thereby increasing the network's capacity for meeting this performance target. While budget and performance integration has improved, VHA managers still face additional challenges. VHA's budgeting and planning processes are not directly linked, but VHA officials noted that steps are being taken to better integrate them. Also, VHA does not use the most complete information available when making resource allocation decisions to its health care networks, so the link between resources and results could be improved.

section_title: Letter
paragraphs: During the past decade, the Congress and the executive branch have  sought to improve federal management and instill a greater focus on  results. Through enactment of a number of major management reforms, the  Congress has created a statutory framework with the Government  Performance and Results Act of 1993 (GPRA) as its centerpiece. One of  GPRA’s major purposes is to encourage a closer and clearer linkage  between planning, performance—i.e., results—and the budget process.  Each administration takes a slightly different approach to implementing  results management.  Improving the integration of budget and performance  is a high priority initiative included in the President’s Management Agenda.  A central piece of that is the Office of Management and Budget’s (OMB’s)  new diagnostic tool, the Program Assessment Rating Tool (PART).  PART is  designed to provide a consistent approach to reviewing program design,  planning, and goals development as well as program management and  results.  OMB expects to use PART assessments in considering department  and agency budget submissions for the fiscal year 2004 President’s Budget  request to the Congress.
In a number of different reports to the Congress, GAO has examined  different aspects of the resources-to-results linkage.  A series of three  reports described agencies’ progress over a 4-year period in linking  performance plans, budgets, and, in the most recent report, financial  statements.  We found that between fiscal years 1999 and 2002, agencies  made significant progress in showing a direct link between expected  performance and requested program activity funding levels through  structural changes or cross-walks—the first step in defining the  performance consequences of budgetary decisions. We concluded that  additional effort was needed to more clearly describe the relationship  between performance expectations, requested funding, and consumed  resources.  Furthermore, we said that the uneven extent and pace of  developing these relationships were reflective of mission complexity and  differences in operating environments across the government.  Finally, we  observed that describing the planned and actual use of resources in terms  of measurable results was an essential long-term effort that would take  time, and adaptation on the part of all agencies.
In another approach to defining performance and resource integration, we  developed a framework of budget practices that we believe can contribute  to an agency’s capacity to manage for results. We viewed these practices as  desirable dimensions of budgeting that could be implemented in many  different ways to reflect the characteristics and circumstances of a  particular agency. Both our assessments of performance and budget  account alignments and the framework of budget practices have led to the  next phase of work and the subject of this report.  This report—one of a  group of three—looks at the resources-to-results link from the perspective  of agency managers charged with making the linkage happen.
The objectives of this report on the Veterans Health Administration (VHA),  and its two companion studies on the Administration for Children and  Families and the Nuclear Regulatory Commission, are to document what  managers in these three agencies considered successful efforts at creating  linkages between planning and performance information to influence  resource choices and the challenges they face in doing so.  We neither  evaluated their choices nor critiqued their processes.  Instead, we asked  managers to describe when and how planning and performance  information was included in the budget cycle, to explain what strategies  were used and why, and to provide evidence that there was a related  programmatic effect.  A third purpose was to show that there are multiple  ways to get at these linkages, and that there can be successful applications  even if progress in budget and performance integration is uneven.
Budgeting is and will remain an exercise in political choice, in which  performance can be one, but not necessarily the only, factor underlying  decisions.  However, efforts to infuse performance information into  resource allocation decisions can more explicitly inform budget  discussions and focus them—both in the Congress and in agencies—on  expected results, rather than on inputs. We believe that showcasing  agencies’ successes with and challenges in integrating budgeting and  planning may prove useful to other agencies; congressional authorizing,  appropriation, and oversight committees; and OMB in the shared goal of  strengthening the link between program performance and resources.
subsections: section_title: Background
paragraphs: VHA, an administration of VA, is primarily a direct service provider of  primary care, specialized care, and related medical and social support  services to veterans through an integrated health care system.  Headed by  the Under Secretary for Health, VHA employed approximately 180,000  health care professionals to serve about 4.3 million veterans in fiscal year  2002.  VHA’s fiscal year 2002 budget included $21.3 billion in discretionary  funds from the VA/HUD (Department of Housing and Urban Development)  appropriations act and an additional $142 million from an emergency  supplemental enacted in August 2002.
VHA developed its six strategic goals to support VA’s GPRA goals.  These  strategic goals are as follows:   put quality first until first in quality;  provide easy access to medical knowledge, expertise, and care;  enhance, preserve, and restore patient function;  exceed patients’ expectations;  maximize resource use to benefit veterans; and  build healthy communities.
VHA’s strategic planning document describes strategies to show how each  goal will be met.  The administration then develops performance measures  to support the strategies identified.
VHA is headquartered in Washington, D.C. and has 21 Veteran Integrated  Service Networks (networks) located throughout the country.  The  networks are the basic budgetary and decision-making units of VA’s health  care system.  They have responsibility for making a wide range of decisions  about health care delivery options, including contracting with private  providers for health care services and generating revenue by selling excess  services.  A network director, who reports to the Deputy Under Secretary  for Health for Operations and Management, heads each network.  This  organization is illustrated in figure 1, with offices we talked to regarding  VHA’s budget and planning processes shaded.
The VHA Office of Quality and Performance develops and recommends  performance measures (mentioned above) to the Under Secretary for  Health.  A Performance Management Work Group, comprised of a variety  of VHA staff with different subject matter expertise, provides overall  guidance with regard to the measures and helps to prioritize them.  VHA’s  Office of Policy and Planning prepares VHA’s contribution to VA’s 5-year  Strategic Plan, as well as the Network Strategic Planning Guidance, which  is used by networks to prepare their strategic planning documents.  Among  other responsibilities, VHA’s Office of Finance is responsible for policy and  operational issues relating to budget formulation and execution, financial  management, and financial analyses.
As a consequence of VHA’s field structure reorganization, decision making  is currently more decentralized.  In 1995, the 172 independent VA Medical  Centers were reorganized into 22 networks, headed by network directors.   Network directors are accountable for a variety of functions, such as  contracting, budgeting, and planning for the medical facilities within their  purview.  Under this reorganization, VHA management anticipated that  network directors could manage the distribution of the networks’  resources to maximize the advantages to veterans within their service  areas.  Furthermore, the administration expected to perform less  operational decision making and oversight at the central office level.  Along  with the decentralization, VHA shifted its service delivery focus from  inpatient hospital care to outpatient care; between fiscal years 1995 and  2001, the average number of hospital inpatients declined from 31,137 per  day to 13,452 per day.  The number of annual outpatient visits increased  from 26 million to 41 million during the same period.
section_title: Scope and Methodology
paragraphs: To address the report’s objectives, we interviewed senior officials in VHA  and VA to find out how they used performance information in the budget  process.  We reviewed several network managers’ performance contracts  and information on network performance measures to learn about the level  of accountability VHA expects from its networks.  We reviewed VA  guidance on preparing budget requests, budget submissions, and other  related documents for information on the budget process and the use of  performance information.  To learn about the planning process within VHA  and assess its integration with the budget process, we read VA strategic  plans and other planning documents.  We attended congressional hearings  and reviewed related documents to learn about VHA’s budget requests, use  of performance information, and VA/Department of Defense resource  sharing.   We did not assess the appropriateness of VHA’s performance  measures or budget requests, or the accuracy of VHA’s performance  management information.
We conducted interviews in Washington, D.C. with senior officials from the  VA Office of Budget, VHA Office of Finance, VHA Office of Policy and  Planning, VHA Office of Quality and Performance, VHA Management  Support Office, and the Liaison Staff Office to learn about VHA’s budget  process and performance measures.
Because we found the most evidence of a linkage between budget and  performance during budget execution at the network level, we focused our  work on that process at that level.  We selected two networks—Network 2,  in Albany, New York and Network 13, in Minneapolis, Minnesota—that VHA  officials believed made the best use of performance information in  managerial decision making.  Networks 13 and 14 were combined and  renamed Network 23 in January 2002, leaving 21 operational networks;  there is a break in numerical sequence.  We chose to focus on Network 13  rather than Network 23 since the structure of Network 23 had not yet been  finalized at the time of our review, and we were interested in looking at  processes that were already in place.  Just as findings at individual federal  agencies cannot be generalized across all agencies, the 2 networks selected  for review are not representative of the other 19 networks.  However, the  observations of the network managers we interviewed are useful in  understanding the different approaches taken to integrate budget and  performance.
We reviewed network-specific budget and planning documents, such as  strategic plans, annual performance plans, performance reports, and  tactical plans for the two networks we visited.  We interviewed over 20  network officials, including senior network management, care and patient  service line managers, facility managers, information technology managers,  quality management officials, and strategic planners to learn about  network structures and the use of performance information in decision  making at the networks.
We also reviewed a number of background documents on administration  initiatives and performance budgeting implementation, as well as recent  public administration literature and GAO reports for general background  and context.
We conducted our work between January 2002 and June 2002 in  accordance with generally accepted government auditing standards.
section_title: Budget Formulation and Planning Efforts Are Centrally Managed, While Budget Execution and Planning Are Linked in Networks
paragraphs: Although VHA’s budget formulation and planning processes are both  centrally managed, they are not closely linked.   The agencywide budget  request is based primarily on the previous year’s appropriations with some  adjustments for workload and new policies.  Distribution of funds to  networks is largely driven by a system that is heavily based on the veteran  population served at each network.  Budget and performance are more  clearly linked at the networks we visited.   See figure 2 for an overview of  VHA’s budget and planning processes.
subsections: section_title: VHA’s Budget Formulation and Planning Processes Are Centralized but Not Integrated
paragraphs: VHA reported that its budget formulation processes for fiscal years 2002  and 2003 were developed centrally with limited input from the networks  and reflected an incremental approach, with some adjustments in fiscal  year 2003 for projected workload increases and administrative efficiency  assumptions.  Prior to the development of the fiscal year 2003 budget,  senior budget officials told us that VHA sought selected information from  the networks, such as estimates of collections and long-term care  expenditures.  In preparing the budget that would eventually be included in  VA’s submission to OMB, VHA generally used the current appropriations  levels as a baseline and added an adjustment for workload, as well as an  increase for new programmatic initiatives.  One VHA official commented  that the process was very “top down.”  For fiscal year 2003, the main  change to this process was the introduction of some enrollment growth  projections from an actuarial model and administrative efficiency  adjustments for reducing resource requirements.
VHA receives guidance on how to formulate its budget through a budget  call memorandum issued by VA in April.  This memorandum includes VA  strategic goals and objectives and stresses the need to focus on outcome  and performance goals and measures.  Once VHA’s Office of Finance  formulates the administration’s budget, it is sent to VA’s Office of Budget  where the VHA request is reviewed and recommendations are made by VA  senior staff, culminating in a department budget request for VHA and the  other two administrations.  This submission is sent to OMB in September.   Decisions made by OMB are incorporated into the President’s Budget  presented to the Congress.  Following congressional action and enactment  of the appropriations bill, OMB apportions and VA allots the funding  provided in the VHA appropriations, thus beginning the execution phase of  VHA’s budget cycle.
While the VHA-related information in VA’s annual Performance Plan  describes goals, strategies, and performance measures, the relationship to  the budget formulation process is unclear.  VHA officials told us that they  use strategic planning information as source material for departmental  reports (e.g., the Accountability Report and VA’s Annual Performance  Plan), to review networks’ policies for consistency, and generally to have  the information on hand in an organized format.  VA’s Annual Performance  Plan outlines resource requirements by strategic goal, and each strategic  goal is accompanied by performance goals and measures.  However, a VHA  official told us that planning documents are typically finalized after VHA’s  budget is formulated.
section_title: VHA Resource Allocation Is Largely Formula-Driven
paragraphs: About 90 percent of VHA’s medical care appropriation, which is  approximately 86 percent of VHA’s total budgetary resources, is allocated  to networks through the Veterans Equitable Resource Allocation system  (VERA), which uses a formula that calculates resource allocation based on  workload.  The remainder of the appropriated funds is allocated to  networks either through Specific Purpose Funding, which is designated  for certain programs such as state home funds or Vietnam veterans’  readjustment counseling.   Monies in the no-year Medical Care Collections  Fund (MCCF), as well as other small nonappropriated funds, are also  available to the networks.
section_title: Network Planning and Budget Execution Processes Are More Closely Related
paragraphs: Decisions regarding resource allocation and planning are closely aligned at  both networks we visited.  The same officials are involved in strategic  planning and budget execution, and network-produced documents show  some alignment between planning efforts and resource allocation.
The Office of Policy and Planning prepares VHA Network Strategic  Planning Guidance, directing networks on how to develop their individual  strategic plans.   According to the guidance, strategic plans must associate  performance measures with each strategic objective. For example, the  fiscal years 2003-2007 Guidance for Strategic Objective 1, “Put Quality First  Until First in Quality,” identifies the first strategy as, “Systematically  measure and communicate the outcomes and quality of care,” and the  related performance measure as “Improve performance on the Chronic  Disease Care Index II.”  Networks must then identify their plans to meet  each performance measure.
VHA’s Office of Finance issued guidance that required networks to provide  financial or operating plans for a range of possibilities.  According to  officials, networks prepare plans in anticipation of final appropriations  actions.  Once VHA receives its appropriations and VERA allocations are  calculated, networks submit plans to the Office of Finance that lay out the  networks’ spending plans for their VERA funds.
The two networks we visited, Network 2 and Network 13, are structured  somewhat differently with regard to resource allocation authority.  At  Network 2, service delivery is organizationally divided into Care Lines;  Care Line Directors have resource allocation authority across all medical  facilities in the network.  For example, according to network officials, the  Geriatrics and Extended Care manager can make resource allocation  decisions concerning nursing home care at all Network 2 facilities.   Network 13, on the other hand, is structured around Patient Service Lines  (PSLs).  PSL Chief Executive Officers (CEOs) share resource allocation  authority with the Chief Operating Officers (COO) at each medical center.   PSL CEOs make allocation decisions for the facilities that support their  PSL at the beginning of the fiscal year, while day-to-day smaller resource  decisions during the fiscal year are handled primarily by each medical  center COO.  CEOs and COOs collaborate on larger budget-related  decisions across the PSL.  The subject of the resource decision determines  which PSL CEO is involved; for example, the PSL CEO for Mental Health is  involved with decisions regarding psychiatric care.  Annual budgets are  developed by the PSL CEOs in conjunction with site COOs and Chief  Financial Officers (CFOs).
At Network 2, network leadership works with Care Line Directors in  developing and prioritizing strategic goals and targets.  Network 2’s  strategic plan shows a link between VHA strategies and performance  measures, and network-specific actions to achieve them.  (See fig. 3 for an  example of this linkage.)  The plan also shows how expected increases in  annual funding will be used by program line.
Network 13 senior managers told us about annual 2-day tactical planning  meetings that were designed to provide an outlet for stakeholders to plan  and share information on performance and strategic planning, cost  information, performance measures, successful practices, and lessons  learned.  Participants include PSL CEOs, a PSL COO, PSL managers under  COO control, union representatives, and congressional stakeholders.  A  network official stated the purpose of including managers with resource  allocation authority in tactical planning meetings was to strengthen the link  between the processes of resource allocation decisions and planning.
section_title: Performance Information Influences Resource Allocation Decisions in a Variety of Ways at These Networks
paragraphs: Integrating performance information into resource allocation decisions is  apparent at the network level during budget execution.  At the two  networks we visited, managers told us that they use an internal data system  that compares cost and performance data across facilities as a tool to make  resource allocation decisions.  Network performance is monitored by VHA,  and networks establish their own processes to monitor their performance.   Network managers also use various communication methods, both within  their networks and across other networks, to share information on  performance measures and ways to meet those measures.  Managers  reported that they were accountable for performance and provided  examples where they used performance information to make resource  allocation decisions.
subsections: section_title: Cost and Performance Data Used in Managerial Decision Making
paragraphs: Network managers told us that they use data from the Decision Support  System (DSS) to make resource allocation decisions to their facilities and  programs.  DSS is an executive information system designed to provide  VHA managers and clinicians with data on patterns of patient care and  patient health outcomes. It is also used to analyze resource utilization and  the cost of providing health care services.  For example, a manager in  Network 2 said that he uses DSS data for comparisons of facilities,  population and market share data, and veterans’ length of stay in inpatient  units.  Since veterans are staying in inpatient units for fewer days in certain  facilities, the manager has been able to reallocate money across facilities  because of DSS data.
section_title: Networks’ Performance Monitored
paragraphs: As we noted in “Results-oriented Budget Practices in Federal Agencies,” it  is important for agency management to monitor performance.  VHA  leadership uses several methods to monitor network performance and hold  network officials accountable for that performance.  At its quarterly  meeting, the VHA Executive Leadership Council (ELC), which includes the  deputy secretary, managers from all three administrations, network  directors, other key staff, interest groups, and the public, monitors the  status of performance measures at each network.  In addition, the Deputy  Secretary of Veterans Affairs began holding monthly meetings in late 2001  with the Under Secretary of VHA and all the network directors.  At these  meetings, the senior officials provide information on each network’s  successes in meeting VHA-established performance measures and share  best practices in meeting performance measures.  Networks must provide  remedial action plans at these meetings for measures that are not being  met.  For example, one network was deemed deficient in testing patients  for Hepatitis C.  Its action plan included a review of patients who had not  been tested and an electronic clinical reminder to help service providers  identify patients who have risk factors but were not tested.
To make sure network directors understand the importance VHA places on  performance, directors sign an annual performance agreement with the  Under Secretary for Health called the Network Performance Plan.  The  agreement includes expectations regarding VHA-level performance  measures and their associated strategic goals.  According to VHA guidance,  a network director’s appraisal is affected by his or her network’s  performance in relation to agency goals.  As a result, the director’s  compensation may also be affected.  For example, in 2001 a network  director received a bonus because his network exceeded VHA-established  performance goals.
section_title: Networks Establish Their Own Processes to Monitor Performance
paragraphs: The two networks we visited each had its own ELC to review performance  measures on a network level and commissioned task teams to work on  areas where performance has not met the intended goal.  Quality  Management Officers (QMOs) also serve as performance monitors.  The  QMO at Network 2 keeps track of the network’s action plans to improve  upon deficient performance measures, and reports on performance-related  data at the Transforming Systems Performance & Quality Council (TSPQ),  a forum to address issues across care lines and facilities to work  collaboratively toward addressing performance measure issues, quality  management, information systems, and related operational issues.   Membership includes top network management, care line managers, and  network office staff.
Network 2 uses its Web site in various ways to maintain up-to-date  information on performance measures.  For example, Network 2 managers  told us about the Web-based Pulse Points, which are performance  indicators that assist management in monitoring achievement of  performance measures.  Additional performance-related information is  available to network staff on the intranet.
section_title: Communication Important to Help Managers Meet Performance Measures
paragraphs: Sharing information about lessons learned and strategies to achieve  performance measures can lead to more informed resource allocation  decisions.  Between networks, managers have a number of opportunities to  learn from each other via regularly scheduled meetings and conference  calls.  Network managers told us about periodic meetings where they  interact with managers from other networks and share lessons learned  with regard to cost-saving measures and approaches to performance  measures.   Within a network, staff may also use a variety of  communication tools to share information to improve performance.  For  example, two Network 2 care line managers jointly established a team to  discuss ways that the network could better meet performance goals for  length-of-stay rates.  This team, which spanned multiple care lines, worked  on the issue and communicated its recommendations quarterly.  Also, VA  sponsors a “Lessons/Innovations” database on the Internet, where network  managers can read ideas for performance improvement.
section_title: Network Managers Reallocate Resources in Response to Performance Measures
paragraphs: In both of the networks we visited, managers provided examples where  performance information and the responsibility to meet performance  targets affected the way in which they allocated resources.  The examples  incorporated a number of different approaches to improve performance,  including investing in telemedicine and technology advancements,  resource reallocation, low-tech methods to improve performance, and the  use of outside contractors.
Performance target: 100 percent  of diabetic veterans should receive  retinal eye exams to decrease the  potential incidence of blindness.
Network manager approach:  Use telemedicine and special  equipment to allow diabetic  veterans who receive care at  locations that do not have  ophthalmologists the ability to have  their exam results read by  qualified specialists.
An initial investment of network resources in advanced telemedicine  techniques led to an increased percentage of diabetic veterans receiving a  necessary test.  To reduce the potential for blindness later in life, all  diabetic veterans are supposed to have retinal eye exams to monitor their  vision.  However, this requires the services of an ophthalmologist who must  interpret the exam results.   The network did not have resources to  maintain an ophthalmologist on staff at each site, so many diabetics were  not being tested.  A Network 2 manager found that a particular piece of  equipment could record test results, then transmit them to an  ophthalmologist at another location.  Thus, the network invested resources  in a number of these machines for Community Based Outpatient Clinics  (CBOCs) to use, thereby increasing the network’s capacity for meeting this  performance target.
Performance target: Annual cost  per patient must be below a given  threshold.
Network manager approach:  Moved $100,000 from one facility  that was not taking on as many  patients as expected to another  facility with an increased  workload.
A manager at Network 13 noted that facilities are expected to keep their  average cost per patient down.  Regular monitoring revealed that one  facility was not taking on as many patients as planned, which led to higher  average costs.  To reinforce his expectation that this performance target  should be met, the manager chose to transfer financial resources from this  facility to another facility that required additional staffing to meet other  performance targets.  According to the manager, the facility that received  the funds was able to improve its outcomes in the targeted area.
Performance measures:  Reducing the number of falls out of  bed and the use of restraints.
Network manager approach:  Buying lower beds (9” off ground).
A Network 13 manager noted that veterans were falling out of their beds  and thus incurring injuries, and the manager searched for a way to reduce  this incidence.  He also wanted to reduce the use of restraints, another  performance measure.  Based on staff recommendations, the manager  agreed to invest in beds that were only 9 inches off the ground.  This  investment prevented more serious injuries from occurring, reduced the  need for restraints, and directly improved the network’s performance in  these areas.
Performance target: Veterans  should be able to obtain  appointments with mental health  professionals within 30 days of  request.
Network manager approach:  Reviewed various staff practices  and made recommended  improvements.
A PSL manager in Network 13 noted that wait times for veterans to obtain  appointments with mental health specialists exceeded the performance  target.  The manager hired an outside consultant who looked at a variety of  factors, including (1) how physicians’ time was being spent, (2) physicians’  practices regarding rescheduling appointments, and (3) hiring psychiatrists  instead of contracting for them.  According to the manager, after the  network adopted the consultant’s recommendations, including hiring  (instead of contracting for) psychiatrists and hiring administrative staff to  prescreen patients, Network 13 met the performance target by eliminating  wait time completely.
section_title: Challenges
paragraphs: VHA has undergone a cultural shift over the past 7 years that has helped to  integrate budget and performance, but managers face continuing  challenges to further integration and in defining areas for improvement.   The agency’s budgeting and planning processes are not directly linked, so  opportunities are missed to fully use planning information in the budget  process.  Additionally, VHA does not use the most complete information  available when making resource allocation decisions.
subsections: section_title: Planning and Budgeting Linkage Could Improve
paragraphs: VHA’s planning and budgeting processes are not fully integrated (see fig. 2  for an overview of these processes).  VHA officials acknowledged the  offices in charge of these processes did not work closely together in the  past, but steps are being taken to improve this linkage.  For example, a  member of VHA’s Office of Finance now works in the Office of Policy and  Planning on the agency’s demand model, which will be used to project  costs for fiscal year 2004.  According to VHA, this model projects workload  for VHA nationwide and was partially used to prepare the fiscal year 2003  budget request.  Future workload is projected through the use of a detailed  formula that includes enrollment, anticipated utilization, and reliance on  VA services.  It does not assume an incremental increase over current  workload.
section_title: Performance Information is Available but Not Included in Resource Allocation Decisions
paragraphs: VHA does not include the most complete information available when  allocating resources.  As we noted in VA Health Care:  Allocation Changes  Would Better Align Resources with Workload (GAO-02-338), VA does not  adequately account for important variations in patients’ health care needs  across networks nor does it include all veterans who use health care  services in its resource allocation decisions.  Without complete  information, it is difficult for agencies to consider fully the relative  priorities of programs and activities and, when funding tradeoffs are  necessary, where adjustments can be best made. Producing reliable  funding estimates requires an agency to include reasonable assumptions  about factors affecting program costs or budgetary resources, assess the  accuracy of previous estimates, and if necessary, make appropriate  adjustments to its estimating methods.
section_title: Agency Comments and Our Evaluation
paragraphs: In its comments, VA agreed with our observations but asserted that our  report does not give the reader an adequate grasp of the depth and breadth  of managing such a large health care system.  VA also included three  enclosures: the first was intended to clarify certain points in the draft  report, the second provided information on VA’s actuarial model, and the  third outlined VA’s new budget account structure.
In the first enclosure, VA suggested three clarifications regarding our  report language. 1. VA stated that the fiscal year 2003 budget was based on actuarial  projections of workload broken down by specific disease and veteran  priority level using prior years’ costs; it also noted that administrative  efficiency assumptions were further included for reducing resource  requirements.  During our interviews, officials told us that the process  was generally incremental, but actuarial projections were used only to  calculate potential increases in workload for fiscal year 2003; these  projections were not used to reassess the base.  For the fiscal year 2004  budget and beyond, officials expected to use the actuarial projections  to calculate the entire workload, not just the potential increase.  We  made changes in our report language to reflect this process. 2. VA noted that it does not include all Priority 7 veterans in its VERA  calculations because it does not want to provide financial incentives  that encourage network managers to provide care to Priority 7 veterans  at the expense of higher-priority veterans.  As we recommended in our  February 2002 report, networks with a disproportionately large  number of Priority 7 veterans already have fewer resources under  VERA to treat higher-priority veterans on a per-patient basis.  To  remedy this problem, we recommended that VA align measures of  workload with actual workload served, regardless of veteran priority  group.  Doing so will help provide comparable resources for  comparable workload.  Thus, we maintain that complete information  allows agencies to better consider the relative priorities of programs  and activities. 3. VA also noted that the funds it received under the Emergency  Supplemental appropriation were not intended for homeland security- related activities.  We changed our report language appropriately.
VA’s second enclosure was a report that describes the actuarial model it  uses to project the demand for health services.  This report was prepared  for the Senate Appropriations Committee, in response to a congressional  mandate identified in S. Rpt. 107-156.  During our fieldwork, we were told  that there was no documentation available regarding this model.  We  received the documentation when the draft report was sent for agency  comment and therefore did not review the model and its ability to project  VA’s workload.
The third enclosure focuses on VA’s budget account restructuring for its  fiscal year 2004 budget submission.  VA notes that this structure will allow  it to more readily determine the full cost of each of VA’s programs and make  resource decisions based on programs and their results rather than on  other factors.  We did not review this new structure or its ability to more  effectively link resources with results since the outcome will not be  available until the administration’s budget proposal is released in early  2003.
As agreed with your office, we will distribute copies of this report to the  Secretary of Veterans Affairs, appropriate congressional committees, and  other interested parties.  We will make copies available to others upon  request.  In addition, the report will be available at no charge on the GAO  Web site at http://www.gao.gov.
Please contact me on (202) 512-9573 or Denise Fantone, Assistant Director,  on (202) 512-4997 if you or your staff have any questions about this report.  Major contributors to this report are Kimberly Gianopoulos, Kelli Ann  Walther, and James Whitcomb.
section_title: Comments From the Department of Veterans Affairs
subsections: section_title: GAO’s Mission
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section_title: Obtaining Copies of GAO Reports and Testimony
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