VA Health Care: Actions Needed to Improve Administration of the Provider Performance Pay and Award Systems
Released: 2013-08-23T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: VHA administers VA's health care system and strives to provide high-quality, safe care to veterans. Concerns continue about the quality of care VHA delivers, but many physicians and dentists, referred to as providers, receive performance-based pay and awards. In fiscal year 2011, about 80 percent of VHA's nearly 22,500 providers received approximately $150 million in performance pay, and about 20 percent received more than $10 million in performance awards. GAO was asked to review VHA's performance pay and award systems. This report examines (1) whether VA's performance pay and award policies ensure appropriate administration of this compensation and (2) VHA's oversight of medical centers' compliance with policy requirements. GAO reviewed documents and interviewed VA and VHA officials about the administration of performance pay and awards and VHA's oversight of the related policy requirements; analyzed data from a random sample of about 25 providers selected primarily from primary care, surgery, psychiatry, and dentistry at each of four medical centers GAO visited that had at least one provider who was the subject of an action related to clinical performance.

section_title: What GAO Found
paragraphs: The Department of Veterans Affairs' (VA) performance pay policy has gaps in information needed to appropriately administer this type of pay. The performance pay policy gives VA's 152 medical centers and 21 networks discretion in setting the goals providers must achieve to receive this pay, but does not specify an overarching purpose the goals are to support. VA officials responsible for writing the policy told us that the purpose of performance pay is to improve health care outcomes and quality, but this is not specified in the policy. Moreover, the Veterans Health Administration (VHA) has not reviewed the goals set by medical centers and networks and therefore does not have reasonable assurance that the goals make a clear link between performance pay and providers' performance. Among the four medical centers GAO visited, performance pay goals covered a range of areas, including clinical, research, teaching, patient satisfaction, and administration. At these medical centers, all providers GAO reviewed who were eligible for performance pay received it, including all five providers who had an action taken against them related to clinical performance in the same year the pay was given. The related provider performance issues included failing to read mammograms and other complex images competently, practicing without a current license, and leaving residents unsupervised during surgery. Moreover, VA's policy is unclear about how to document certain decisions related to performance pay. For example, the policy does not provide clear guidance on what to document regarding whether a provider's performance-related action should result in the reduction or denial of the provider's performance pay. In contrast to the performance pay policy, VA's performance award policy clearly states the purpose of these awards-- specifically, that they are to recognize sustained performance of providers beyond normal job requirements as reflected in the provider's most recent performance rating.

VA policy also lists the measures, such as clinical competence, that providers' supervisors are to use to determine these providers' performance rating. VHA's oversight is inadequate to ensure that medical centers comply with performance pay and award requirements. VHA's annual consultative reviews, initiated in 2011, help medical centers comply with human resources requirements, including performance award requirements. Recently, these reviews began to also include performance pay requirements, but do not yet include a standard list of performance pay elements to review, which would be needed to ensure consistency of reviews across medical centers. Further, reviewers do not have the authority to require medical centers to resolve compliance problems they identify, and VHA has not formally assigned specific organizational responsibility to ensure medical centers resolve identified problems. As a result, VHA is unable to ensure that reviews consistently identify problems, and that these problems are corrected and do not recur. GAO found that two of the four medical centers visited did not always correct problems identified through these reviews. For example, a May 2011 review of one of these two medical centers found that the medical center did not conduct a formal evaluation of its performance award program, as required. A review of the same medical center about a year later found the identical problem.

section_title: What GAO Recommends
paragraphs: GAO recommended that VA clarify the performance pay policy, by specifying the purpose and documentation requirements and that VHA review performance pay goals for consistency with the purpose, and improve oversight to ensure compliance. VA generally agreed with GAO's conclusions and recommendations.

section_title: Letter
paragraphs: The Department of Veterans Affairs (VA) operates one of the largest  health care systems in the nation and strives to provide high-quality and  safe care to veterans. One important element of VA’s efforts to sustain  and increase quality and safety is its pay and award systems. These  systems, which include evaluating the performance of physicians and  dentists, referred to in this report collectively as providers, are  administered by the Veterans Health Administration (VHA), which  administers VA’s health care system. In 2004, the VA Health Care  Personnel Enhancement Act established performance pay, an annual  lump sum payment based on the achievement of specific goals and  performance objectives, for providers. In addition to performance pay,  VA has established monetary performance awards that are available  annually to all staff, including providers, on the basis of annual  performance reviews. According to data provided by VA, more than  18,500 or approximately 80 percent, of the nearly 22,500 providers  received performance pay in fiscal year 2011. More than 4,000  providers, or approximately 20 percent, received performance awards.For fiscal year 2011, VHA paid providers nearly $150 million in  performance pay, an average of $8,049 per provider who received the  pay, and more than $10 million in performance awards, an average of  $2,587 per provider who received an award.

While VHA strives to provide high-quality and safe care to veterans,  concerns continue to surface about the quality of care it delivers.  Meanwhile, many providers continue to receive compensation that is tied  directly to their performance. According to federal standards for internal  control, part of VHA’s responsibility for administering performance pay  and awards is to ensure that providers understand the link between these   Furthermore, VHA may  sources of compensation and their performance.take action against providers who fail to deliver high-quality, safe health  care, including adverse or privileging actions, which we refer to as  performance-related personnel actions, to address issues related to  providers’ clinical performance.

You asked us to evaluate VHA’s performance pay and award systems. In  this report, we examine the extent to which (1) VA’s policies ensure  appropriate administration of performance pay and awards; and (2) VHA  oversees its medical centers’ compliance with policy requirements for  performance pay and awards.

To examine the extent to which VA’s policies ensure appropriate  administration of performance pay and awards, we reviewed and  analyzed relevant VA policy requirements and interviewed officials in VA’s  Office of Human Resources Management who are responsible for  developing VA’s policies on performance pay and awards, and officials in  VHA’s Workforce Management and Consulting Office who are  responsible for helping medical centers implement these policies. We  also reviewed the Senate Committee Report, Congressional Record  entries, and hearing transcripts associated with the VA Health Care  Personnel Enhancement Act of 2004. We visited four VA medical  centers—in Atlanta, Georgia; Togus, Maine; Dallas, Texas; and Seattle,  Washington—to examine the administration of VA’s performance pay and  award policies. We selected these medical centers because they were in  different geographic areas of VA’s 21 networks and U.S. Census  divisions, and had at least one provider who had a major adverse action  taken against him or her in fiscal year 2010 or 2011, which were the 2  most recent fiscal years for which data were available. We reviewed  documentation for the providers with performance-related personnel  actions, which include major adverse actions, during these 2 fiscal years  in order to determine whether the medical centers gave performance pay  and awards to these providers and their reasons for doing so. We  reviewed Standards for Internal Control in the Federal Government to  identify requirements for effective internal controls related to  documentation. Specifically, we reviewed federal standards for internal  control activities, which state that all transactions and significant events need to be clearly documented and readily available for examination.We interviewed VA and VHA officials in headquarters to obtain their  expectations for documenting pay and award decisions for providers with  such actions. We also asked officials at the four medical centers and at  the related networks how they interpreted specific requirements in the  performance pay and award policies and how they documented  compliance with them.

To examine the extent to which VHA oversees its medical centers’  compliance with policy requirements for performance pay and awards, we  reviewed VA’s policies mentioned in the first objective to identify any  references to VHA oversight of performance pay and awards. In addition,  we reviewed Standards for Internal Control in the Federal Government to  identify requirements for effective internal controls related to oversight.  Specifically, we reviewed federal standards for internal control  environment, which state that a good internal control environment  requires that agencies’ organizational structures clearly define key areas  of responsibility. We also reviewed federal standards for internal control  for monitoring, which state that monitoring should ensure that the findings  from reviews are promptly resolved and that management should follow  up on review findings, recommendations, and the actions decided upon to  ensure that those actions are taken. We reviewed VHA’s organizational  structure to determine the lines of oversight authority. We interviewed  officials from VHA’s Workforce Management and Consulting Office who  conduct Consult, Assist, Review, Develop, and Sustain (CARDS) reviews  of medical centers’ human resources offices to determine medical  centers’ compliance with VA’s requirements for human resources  personnel actions. For the four medical centers, we reviewed all  available CARDS reviews since CARDS was established in 2011. We  interviewed the human resources managers at the four VA medical  centers and the associated networks to understand their processes for  ensuring compliance with requirements in VA’s policies for performance  pay and awards.

In addition, to examine VHA’s oversight of its medical centers’ compliance  with these requirements, we reviewed performance pay and award  documents for a sample of approximately 25 providers from each of the  four medical centers we visited for the 2 most recent fiscal years—2010  and 2011. Specifically, we selected a random sample of physicians primarily from three specialties—primary care, psychiatry, and surgery.  We also reviewed documents for the supervisors—called service chiefs—  for each of these specialties at each of the four medical centers. These  three specialties are among the most common specialties at most VA  medical centers. We also selected a random sample of dentists to review,  as well as the dental service chief and the chief of staff at each medical  center.accuracy of these data with each medical center and found the data  sufficiently reliable for our purposes of selecting a sample. We also  interviewed the supervisors of the three physician specialties and the  dental specialty, as well as the chiefs of staff, to understand how they  implement the policy requirements for performance pay and awards.

We used VHA data to select the sample; we verified the  We conducted this performance audit from April 2012 to July 2013 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: Performance Pay
paragraphs: Most VA providers—including full- and part-time providers—are eligible  for performance pay, but they may choose not to participate.  Performance pay is given annually in a lump sum and may not exceed  the lesser amount of $15,000 or 7.5 percent of a provider’s combined  base and market pay, under the statute that defines the elements of  provider pay. However, according to VHA officials, VA headquarters and  each network and medical center have discretion to set a lower annual  cap for their providers, and the amounts awarded may also depend on  VA’s budget. Under the statute, performance pay is given on the basis of  a provider’s achievement of specific goals and performance objectives,  referred to in this report as goals. According to policy, performance pay  goals can be established by medical center and network officials. As a  result, the goals may be the same for all providers in the network, at a  particular medical center, or within a particular specialty, or they may vary  by individual provider. The amount of performance pay depends on the  extent to which it is determined that a provider met his or her performance  pay goals. Performance pay goals may include, for example, achieving a  specific patient panel size, and are required by VA policy to be  established within 90 days of the beginning of each fiscal year. VA’s  performance pay policy requires medical centers to use form 10-0432 for  each provider to document the goals and the provider’s achievement of  them. When completed, the form is given to the medical centers’  respective human resources offices, which process the performance  pay.

section_title: Performance Awards
paragraphs: Most providers are eligible for performance awards, although these  awards are not required. The awards are lump-sum payments that are  made annually and are based on providers’ annual performance reviews.  VA policy requires that all providers—including full- and part-time  providers—who have worked at VA medical centers receive annual  performance reviews. For nonsupervisory providers, the reviews consist  of a standard set of measures, including clinical, educational, and  administrative competence; research and development; and personal  qualities, such as dependability. A provider can receive an overall rating  of unsatisfactory, low satisfactory, satisfactory, high satisfactory, or  outstanding on an annual performance review. Service chiefs and chiefs  of staff at VA medical centers, and providers at headquarters and  networks who are in supervisory positions, also receive annual  performance reviews based on measures outlined in VHA’s managerial  performance plan. For nonsupervisory providers, the policy specifies that  performance award amounts should not exceed $7,500. However, as with  performance pay, VA headquarters, networks, and medical centers have  discretion to determine the level of performance that would merit an  award and the award amount within the $7,500 limit. For example, one  medical center may grant performance awards to all providers who  receive an overall performance rating of satisfactory or higher, while  another medical center may only grant performance awards for an overall  rating of outstanding, or not give them at all.

section_title: Performance-Related Personnel Actions
paragraphs: VA policy states that VA medical centers may take actions, such as major  adverse and disciplinary actions, against providers to address and correct  deficiencies related to providers’ clinical performance. These actions  range in severity from admonishment to termination of employment. In  addition, VHA also has the option of taking privileging action—that is,  reducing, revoking, denying, or failing to renew a provider’s clinical  privileges—against medical center providers to address performance  deficiencies.

Medical centers have discretion in determining the type of  action appropriate for each provider’s performance issue. Performance- related personnel actions may serve as an indication that the provider has  not delivered high-quality, safe health care.

section_title: VA’s Performance Pay Policy Has Gaps in Information Needed to Administer Performance Pay
subsections: section_title: VA’s Policy Allows Discretion in the Establishment of Performance Pay Goals, but Lacks an Overarching Purpose That the Goals Should Support
paragraphs: VA’s performance pay policy gives VA’s 21 networks and 152 medical  centers discretion in the establishment of performance pay goals for  providers. The policy, issued in 2005 and revised in 2008, states that  providers who meet established goals should receive performance pay.  However, the policy does not provide an overarching purpose that the  goals should support. VA’s Under Secretary for Health at the time the  performance pay law was being considered stated in a congressional  hearing that this pay would recognize providers’ achievements in quality,  productivity, and support of the overall goals of the department. The  Senate committee report and statements by members of Congress at the  time the bill was passed provided that performance pay would recognize  outstanding contributions to the medical center, to the care of veterans, or  to the practice of medicine or dentistry, and it would motivate providers  and ensure quality of care through the achievement of specific goals or  objectives set for providers in advance.responsible for writing the performance pay policy also told us that the   In addition, VA officials  purpose of performance pay is to improve health care outcomes and  quality; however, these goals are not documented in the policy.

Officials at the four medical centers we visited differed in their views of  what constituted appropriate goals for performance pay. The following are  examples of the factors these officials thought should be considered  when establishing performance pay goals. According to these officials,  the goals should be objective and measurable, measure only clinical achievements, recognize performance that is above and beyond expectations, or be measured at the individual provider level to ensure that the  provider has direct control over the achievement of the goals.

As a result of these differing views, our review of the goals established for  a mental health provider at each of four medical centers we visited found  similarities as well as differences in the fiscal year 2011 goals. For  example, one medical center used clinical goals exclusively, while others  used a combination of goal types, such as clinical, patient satisfaction,  and research.

Table 1 includes examples of the types of goals established for a mental  health provider at each of the four medical centers we visited.

VHA officials told us that they have not formally reviewed the various  goals that have been established by individual medical centers and  networks to determine the purpose or purposes these goals support. In  2009, the Principal Deputy Under Secretary for Health asked that a group  be convened to solicit and compile performance pay goals in order to  review the types of goals being developed for each physician specialty  and dental service across VA’s health care system. VHA officials told us  at the time of our review that they had not yet done this, but planned to  begin compiling and discussing a list of useful goals sometime in 2013.  Because VHA has not reviewed the goals that have been set across  medical centers and networks, it cannot have reasonable assurance that  the goals established make a clear link between performance pay and  providers’ performance. This condition is inconsistent with federal  standards for internal control activities, which includes management of  human capital.

Of the eight providers who were the subject of performance-related personnel actions in  fiscal year 2010 or 2011 at the four medical centers visited, three providers were not  eligible for performance pay during the same fiscal year. Two of the three providers were  not eligible because they were terminated or resigned before the end of the fiscal year,  and the third was not eligible because the provider was placed on indefinite suspension  without pay and was not practicing as of the end of the fiscal year. $7,663 in performance pay, 67 percent of the amount for which the  provider was eligible.

Another provider was reprimanded for refusing to see assigned  patients waiting in the emergency department because the provider  believed that patients had been triaged inappropriately. As a result,  wait times increased. Documentation provided by the medical center  indicated that, of the 98 patients who were triaged to the emergency  department that day, 15 patients waited for over 6 hours to be seen  and 9 patients left without being seen. That same fiscal year, this  provider received $7,500 out of a maximum of $15,000 in  performance pay. Specifically, this provider had 13 performance pay  goals, which included becoming a member of a committee, attending  staff meetings, and ensuring that all provider notes were signed in  accordance with medical center policy. The provider met 1 of the   13 goals, which was assigned a weight of 50 percent. This goal was  not specific to the individual provider, but instead was based on the  achievements of all emergency department providers; it included  meeting performance measures, such as maintaining productivity  despite reduced resources, and adhering to the medical center policy  for length of stay for patients in the emergency room. Since the  medical center determined that the emergency department providers,  which included this provider, met this goal, the provider received   50 percent of the maximum amount of performance pay. The service  chief told us that his preference would have been to deny  performance pay to this provider altogether, but he was told that the  provider was entitled to the pay.

In contrast to the performance pay policy, VA’s performance award policy  clearly states the purpose of these awards—specifically, that they are to  recognize sustained performance of providers beyond normal job  requirements as reflected in the provider’s most recent performance  rating. VA policy also lists the measures supervisors are to use to  determine the performance rating for providers in nonsupervisory  positions, such as clinical competence.

section_title: VA’s Policy Is Unclear about Documenting Certain Requirements and Silent about Documenting Performance Pay Decisions for Providers Who Had Performance- Related Personnel Actions
paragraphs: VA’s performance pay policy is unclear about how to document  compliance with two requirements—the goal-setting discussion between  the supervisor and provider and the approval of the performance pay  amount. For the documentation of goal-setting discussions, the policy  states that supervisors are to discuss established goals with individual  providers within 90 days of the beginning of the fiscal year, but it does not  specify how medical centers are to demonstrate compliance with this  requirement. VA’s policy specifies that form 10-0432 is to be used for  documenting performance pay. The form has space at the top for listing  the goals that a provider must meet to receive performance pay. The form  includes a signature and date box for the supervisor and for the provider,  respectively. (See fig. 1, section A.) The VA officials who wrote the policy,  and VHA officials who are responsible for helping medical centers  implement it, told us they expect that provider and supervisor signatures  on the top of the form would indicate that goals have been discussed and  the date would indicate when this discussion took place. The officials told  us that this date is to verify that the 90-day requirement was met, but they  have not documented or provided this guidance to the medical centers.

Because the policy does not specify how compliance with the 90-day  requirement should be documented, one of the four medical centers we  visited did not interpret the policy the way VA and VHA officials did, and  therefore, did not document compliance with the 90-day requirement  when administering performance pay. Officials responsible for processing  the performance pay form at this medical center told us that VA does not  have a requirement for documenting compliance with the 90-day  requirement and they do not believe form 10-0432 should be used for this  purpose. At this medical center, we found that none of the forms we  reviewed were signed by the supervisor and provider within 90 days of  the beginning of the fiscal year, and instead all the forms were signed  after the end of the fiscal year. Officials from the other three medical  centers said that the form should be signed by the provider and  supervisor within 90 days, or as soon as possible after the beginning of  the fiscal year to indicate that the goals have been communicated.  However, our review of the documentation from these three medical  centers indicates that their forms were not always signed within 90 days.

For the second documentation requirement, the policy states that the  performance pay amount must be approved and that performance  payments for the fiscal year must be disbursed no later than March 31 of  the following fiscal year, but does not state that the approving official must  sign form 10-0432 by that date. VA’s policy also states that the supervisor  should forward form 10-0432 to the designated approving official for  action. The bottom of form 10-0432 includes a signature and date box for  an approving official, who is to sign and date the form. (See fig. 1, section  B.) VA and VHA officials told us they expect that medical centers will not  disburse performance pay, which they are required to do by March 31 or  earlier, unless the approving official’s signature and date are on the form.  However, VA’s policy does not state that the approving official’s signature  must be dated before March 31.

Because the policy does not specify when the approving official should  sign the form 10-0432, officials at the four medical centers had not all  interpreted and implemented the policy the way VA and VHA officials did,  and the medical centers differed in how they documented approval when  administering performance pay. For example, one medical center official  who became responsible for processing these forms in 2011 told us that  he does not look for the approving official’s signature to be dated by  March 31. At this medical center, all of the fiscal year 2011 forms 10-0432  we reviewed were signed by the approving official after March 31, which  indicates that the payments were made after the required disbursement  date or that payments were made before they were approved. For fiscal  year 2010, when a different official at this medical center was responsible  for processing the performance pay forms, we found that nearly all of the  forms were signed by the approving official by March 31. At the other  three medical centers, we found that some forms were signed by the  approving officials after March 31 or not at all, even though officials at  these medical centers told us they strive to meet this date.

Further, VA’s policy lacks a requirement for documenting whether  performance-related personnel actions had an impact on providers’  achievement of performance pay goals, and as a result, how these  actions affected performance pay decisions, such as reducing or denying  this pay. Some VHA headquarters officials we interviewed said that  situations involving providers who had a performance-related personnel  action would need to be reviewed case by case to determine if the action  had an impact on whether the provider met established goals, since not  all performance-related personnel actions would merit reducing or  denying a provider’s performance pay. These officials told us they  expected medical center officials to document their review of these  actions when determining whether to give performance pay to these  providers. However, these expectations are not explicit in VA’s  performance pay policy. The documents provided by the four medical  centers for five providers who had performance-related personnel actions  did not include documentation that the actions were considered. Some  medical center officials told us that they did not consider the performance- related personnel actions when making performance pay determinations,  while others told us that they did but that they did not document it.

Without a performance pay policy that clearly specifies how to document  decisions or compliance with requirements, VHA does not have  reasonable assurance that documentation includes all necessary  information, a condition that is inconsistent with federal standards for  internal control activities. In addition, medical centers will likely continue  to vary in their interpretation of the policy for documenting goal-setting  within 90 days of the beginning of the fiscal year, and subsequent  approval of performance pay and the extent to which they document  compliance with it. As a result, VHA does not have reasonable assurance  that medical centers are complying with requirements.without documentation of whether performance-related personnel actions  affected performance pay decisions, VHA lacks information about how  these decisions were made and whether these decisions appropriately  reflected providers’ performance.

section_title: VHA’s Oversight Is Inadequate to Ensure Compliance with Performance Pay and Award Requirements
paragraphs: VHA does not provide adequate oversight to ensure that its medical  centers are in compliance and remain in compliance with performance  pay and award requirements. VHA’s Workforce Management and  Consulting Office conducts annual Consult, Assist, Review, Develop, and  Sustain (CARDS) reviews, which are consultative reviews that were  initiated in 2011 to assist medical centers in complying with human resources requirements, including performance award requirements.According to VHA officials, the results of these reviews are provided to  the medical centers. However, these reviews have limitations and, as a  result, do not always ensure that medical centers comply and remain in  compliance with human resources requirements.

The five CARDS reviewers take turns in the lead CARDS reviewer role on a yearly  basis. This individual was the lead CARDS reviewer during our review, and as such can  speak for all of the reviewers. centers. CARDS reviews use a standard list of elements to review other  human resources requirements, including performance awards.

In addition, the CARDS reviewers do not have the authority to require  medical centers to resolve compliance problems they identify, and VHA  has not formally assigned responsibility to an organizational component  with the knowledge and expertise of human resources issues to do this, a  condition that is inconsistent with internal control standards for control  environment. currently indicate that network human resources managers, who typically  accompany CARDS reviewers on reviews, are to follow up with medical  centers’ human resources offices to ensure identified problems are  resolved. However, this reviewer said CARDS reviewers do not have the  authority to require that this follow-up be done. Further, network human  resources managers lack the authority to require medical center human  resources managers to correct identified problems because medical  center directors, not network human resources managers, typically have  oversight authority over medical center human resources managers,  according to VHA officials. Figure 2 shows the organization of VHA  offices that are involved in performance pay and awards for providers at  medical centers.

GAO/AIMD-00-21.3.1.  network director reports directly to the Deputy Under Secretary for Health for Operations and  Management.

Generally, the applicable network human resources official attends the CARDS review.

As a result of the limitations with CARDS reviews—the lack of a standard  list of performance pay elements, as well as the lack of an organizational  component assigned to follow up on noncompliance and ensure it is  corrected—VHA is unable to ensure that medical centers correct the  problems found by the reviews and that problems do not recur, a  condition that is inconsistent with internal control standards for  monitoring. We found that two of the four VA medical centers we visited  did not always correct problems identified through CARDS reviews. For  example, a May 2011 CARDS review of one of these two medical centers  found that the medical center did not conduct a formal evaluation of its  awards program, as required. A CARDS review of this same medical  center about a year later found the identical problem. An October 2011  CARDS review of the second medical center found that the facility was  not using the required form 4659 for performance awards, and we found  that the same medical center did not use form 4659 for performance  awards in fiscal years 2010 and 2011. We also found that another  medical center was not using form 4659 for performance awards in fiscal  years 2010 and 2011. Additionally, we found other instances of  noncompliance at two of the four medical centers. For example, we found  that one of the medical centers we visited used form 4659 for  performance awards, but was unable to provide the form for two of the  five providers who received awards in fiscal year 2011. Further, we found  that another medical center was unable to provide the required form 10- 0432 for performance pay for six of the providers we reviewed in fiscal  years 2010 or 2011. Also, for the providers’ forms that were available in  fiscal year 2010, two forms did not indicate whether the goals were met to  justify the performance pay amounts, as required by VA policy.

section_title: Conclusions
paragraphs: Part of VHA’s responsibility for administering performance pay and  awards is ensuring that providers understand the link between this  compensation and their performance, according to federal internal control  standards. However, VA’s performance pay policy does not state a  purpose for this pay, and VHA, which administers this pay, has not  reviewed the performance pay goals that have been established across  VA medical centers and networks. Without stating a purpose for the pay  and reviewing the goals, VHA cannot determine the purposes these goals  support, and the relationship between performance pay and providers’  performance is unclear. All of the providers we reviewed who were  eligible for performance pay in fiscal year 2010 or 2011 received this pay,  including providers who had performance-related personnel actions taken  against them. Because VA’s policy is silent on documenting whether  performance-related personnel actions affected performance pay, none of  the medical centers provided documentation that these actions were  considered in making performance pay decisions. As a result, VHA lacks  information about how these decisions were made and whether these  decisions reflect providers’ performance. Moreover, because VA’s policy  does not specify how compliance should be documented for certain  performance pay requirements, such as discussion of goals and approval  of amounts, VHA cannot ensure consistent compliance across its medical  centers.

In addition, oversight of medical centers’ management of performance  pay and awards is not adequate for VHA to have reasonable assurance  that medical centers fully comply with requirements. VHA has not  assigned responsibility to an organizational component to follow up on  identified problems at medical centers, including problems identified  during CARDS reviews, to ensure that they are corrected and remain  corrected. Oversight that does not ensure that identified problems are  resolved and remain so is inconsistent with federal standards for internal  control, and may allow compliance problems to persist or worsen.

section_title: Recommendations for Executive Action
paragraphs: To clarify VA’s performance pay policy, we recommend that the Secretary  of Veterans Affairs direct the Assistant Secretary for Human Resources  and Administration to take the following four actions to specify in policy:  the overarching purpose of performance pay; how medical centers should document that supervisors have  discussed performance pay goals with providers within the first 90  days of the fiscal year;  that medical centers should document approval of performance pay  amounts and that the approval occurred before the required March 31  disbursement date; and how medical center officials should document whether performance- related personnel actions had an impact on providers’ achievement of  performance pay goals, and as a result, affected performance pay  decisions.

To ensure that performance pay goals are consistent with the overarching  purpose that VA specifies for this pay, we recommend that the Secretary  of Veterans Affairs direct the Under Secretary for Health to review  existing performance pay goals across VA’s health care system.

To strengthen oversight of medical centers’ compliance with VA policy  requirements for performance pay and awards, we recommend that the  Secretary of Veterans Affairs direct the Under Secretary for Health to take  the following two actions: ensure medical centers are in compliance with the requirements in the  performance pay and award policies and assign responsibility to a VHA organizational component with the  knowledge and expertise to ensure correction of medical centers’  noncompliance with VA’s performance pay and award policy  requirements, including problems identified during CARDS reviews,  and ensure that medical centers maintain compliance with these  requirements.

section_title: Agency Comments and Our Evaluation
paragraphs: VA provided written comments on a draft of this report, which we have  reprinted in appendix II.conclusions and recommendations.

In its comments, VA generally agreed with our  In response to our recommendations to clarify the performance pay  policy, VA stated that it concurred with three of them and concurred in  principle with the fourth. Regarding the overarching purpose of  performance pay, VA stated that it will coordinate with VHA to develop a  policy change that will clearly articulate the purpose of performance pay,  which is to ensure and improve the quality of care through the  achievement of specific goals and objectives. In response to our  recommendations that VA specify how medical centers should document  the goal-setting discussion between the supervisor and provider, and the  approval of the performance pay amount, VA stated that it would revise  the performance pay policy to include more detailed instructions for  documenting compliance with these two requirements. In addition, VA  said it would revise form 10-0432 to include sections for documenting  compliance with these two requirements.

VA stated that it agreed in principle with our recommendation that medical  centers should document whether performance-related personnel actions  had an impact on providers’ achievement of performance pay goals, and  affected performance pay decisions. VA agreed that medical center  officials should consider whether a performance-related personnel action  had an impact on the provider’s achievement of the goals and objectives  associated with performance pay, but stated that it is inappropriate to  require the documentation of the decision on form 10-0432. We  appreciate VA’s commitment to clarify in policy that medical center  officials should consider performance-related personnel actions when  making performance pay decisions. We support VA’s flexibility as to  where to document these considerations, which is why we did not specify  in our recommendation that form 10-0432 should be used for this  purpose. However, we continue to believe that if such considerations are  not documented, VHA lacks information about how these decisions were  made and whether these decisions appropriately reflected providers’  performance, which is inconsistent with federal internal control standards  for documentation.

To address our recommendation that the Under Secretary for Health  review the existing performance pay goals across VA’s health care  system to ensure that performance pay goals are consistent with the  purpose specified in policy, VA stated that the Under Secretary for Health  directed a committee on February 11, 2013, to conduct a review of  policies and controls associated with the administration of performance  pay, including evaluating challenges associated with establishing  performance pay goals, inconsistent application of performance pay, and  the overall perceived value of performance pay. In June 2013, the Under  Secretary for Health directed a new task force to build upon the work of  that committee and make recommendations for ensuring a consistent and  system-wide process for setting and evaluating performance pay goals  and granting performance pay, including making recommendations for  reviewing and setting uniform performance pay goals across the system  that are aligned to help VHA achieve its goals.

To address our recommendations to strengthen oversight of medical  centers’ compliance with VA policy requirements for performance pay and  awards, VA stated that the Under Secretary for Health established in May  2013 a task force to develop and provide guidance and methodology for  performance pay. In addition, VA stated that VHA’s Office of the Deputy  Under Secretary for Health for Operations and Management will assign  responsibility to the network directors, in coordination with the network  human resources managers, network chief medical officers, medical  center directors, medical center chiefs of staff, and medical center human  resources managers, for monitoring and enforcing VA’s performance pay  and award policies, and communicate that responsibility in a  memorandum. Additionally, the Office of the Deputy Under Secretary for  Health for Operations and Management will communicate in a  memorandum to the network directors and human resources managers  that they should monitor and track CARDS reviews and coordinate with  the medical center directors and human resources managers to ensure  proper corrective actions are taken for compliance.

VA also provided a general comment that it considered our definition of  performance-related personnel actions, defined in footnote 5 of the report,  to be too broad. Specifically, VA stated that performance actions are  taken when an employee lacks the skill and ability to perform assigned  duties, and that in such situations providers are given assistance and an  opportunity period to perform at an acceptable level of competence. VA  also stated that if the provider fails to perform at an acceptable level  during this period, the resulting performance action will be either a  reduction of privileges or termination. However, VA’s policy on  employee/management relations states that disciplinary actions—which  include admonishments and reprimands—and major adverse actions— which include suspension, transfer, reduction in grade, and reduction in  basic pay, in addition to termination—can be taken to address  performance or conduct. In addition, VA stated that four of the five  scenarios listed in appendix I of the report were conduct actions, not  performance actions. As stated in footnote 5 of the report, we created the  term performance-related personnel actions to include any action taken to  address clinical performance—that is, an action that medical centers’  documentation indicated was related to patient safety or quality.  Documentation provided by the medical centers for each of the five cases  listed in appendix I clearly stated that the actions that were taken against  the providers were related to patient safety or quality.

As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Veterans  Affairs, interested congressional committees, and others. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.

If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or draperd@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 major contributions to this report  are listed in appendix III.

section_title: Appendix I: Performance-Related Personnel Actions and Performance Pay Amounts
paragraphs: Appendix I: Performance-Related Personnel  Actions and Performance Pay Amounts A reprimand is an official letter of censure to a provider for deficiencies in competence. Reprimands  can also be issued for acts of misconduct. A reprimand is a more severe disciplinary action than an  admonishment, which is an official letter of censure to a provider for minor deficiencies in competence  or conduct.

VA officials did not provide documentation of the letter of alternative discipline but indicated that it  was probably a reprimand. We included this case in our sample based on documentation provided by  the medical center, which indicated that the action was closed in fiscal year 2010.

section_title: Appendix II: Comments from the Department of Veterans Affairs

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, Mary Ann Curran, Assistant  Director; Elizabeth Conklin; Kaitlin McConnell; Elizabeth T. Morrison;   Lisa Motley; and Christina Castillo Serna made key contributions to this  report.


Question-summary annotations: questions: question: What does the VA's performance pay policy do?
answer: The performance pay policy gives VA's 152 medical centers and 21 networks discretion in setting the goals providers must achieve to receive this pay, but does not specify an overarching purpose the goals are to support.
child_questions: question: What areas does the pay policy cover?
answer: Among the four medical centers GAO visited, performance pay goals covered a range of areas, including clinical, research, teaching, patient satisfaction, and administration.

question: How effective is the performance pay policy?
answer: The Department of Veterans Affairs' (VA) performance pay policy has gaps in information needed to appropriately administer this type of pay.

question: What are the gaps between the policy's understood purpose and its written policy?
answer: VA officials responsible for writing the policy told us that the purpose of performance pay is to improve health care outcomes and quality, but this is not specified in the policy.

question: What are the shortcomings of the policy's goals?
answer: Moreover, the Veterans Health Administration (VHA) has not reviewed the goals set by medical centers and networks and therefore does not have reasonable assurance that the goals make a clear link between performance pay and providers' performance.

question: What did GAO find in its review of the pay policy with regards to recipients?
answer: At these medical centers, all providers GAO reviewed who were eligible for performance pay received it, including all five providers who had an action taken against them related to clinical performance in the same year the pay was given.
child_questions: question: What shortcomings in the policy did GAO discover?
answer: The related provider performance issues included failing to read mammograms and other complex images competently, practicing without a current license, and leaving residents unsupervised during surgery. Moreover, VA's policy is unclear about how to document certain decisions related to performance pay. For example, the policy does not provide clear guidance on what to document regarding whether a provider's performance-related action should result in the reduction or denial of the provider's performance pay.

question: What is the difference between performance pay and performance award?
answer: In contrast to the performance pay policy, VA's performance award policy clearly states the purpose of these awards-- specifically, that they are to recognize sustained performance of providers beyond normal job requirements as reflected in the provider's most recent performance rating.

questions: question: What does VA policy list in terms of performance ratings?
answer: VA policy also lists the measures, such as clinical competence, that providers' supervisors are to use to determine these providers' performance rating.

question: What do VHA consultative reviews do?
answer: VHA's annual consultative reviews, initiated in 2011, help medical centers comply with human resources requirements, including performance award requirements. Recently, these reviews began to also include performance pay requirements, but do not yet include a standard list of performance pay elements to review, which would be needed to ensure consistency of reviews across medical centers.

question: Why is VHA oversight inadequate?
answer: VHA's oversight is inadequate to ensure that medical centers comply with performance pay and award requirements.
child_questions: question: What are limits on VHA's authority?
answer: Further, reviewers do not have the authority to require medical centers to resolve compliance problems they identify, and VHA has not formally assigned specific organizational responsibility to ensure medical centers resolve identified problems.

question: What is one result of this inadequacy?
answer: As a result, VHA is unable to ensure that reviews consistently identify problems, and that these problems are corrected and do not recur.

question: What has GAO found in analyzing this inadequacy?
answer: GAO found that two of the four medical centers visited did not always correct problems identified through these reviews. For example, a May 2011 review of one of these two medical centers found that the medical center did not conduct a formal evaluation of its performance award program, as required. A review of the same medical center about a year later found the identical problem.

questions: question: What is the role of VHA?
answer: VHA administers VA's health care system and strives to provide high-quality, safe care to veterans.
child_questions: question: What is the disconnect between VHA's quality of care and its performance-based awards?
answer: Concerns continue about the quality of care VHA delivers, but many physicians and dentists, referred to as providers, receive performance-based pay and awards.
child_questions: question: What kinds of performance pay did VHA grant in FY 2011?
answer: In fiscal year 2011, about 80 percent of VHA's nearly 22,500 providers received approximately $150 million in performance pay, and about 20 percent received more than $10 million in performance awards.

question: What was GAO asked to review regarding VHA?
answer: GAO was asked to review VHA's performance pay and award systems.
child_questions: question: What does GAO's review assess?
answer: This report examines (1) whether VA's performance pay and award policies ensure appropriate administration of this compensation and (2) VHA's oversight of medical centers' compliance with policy requirements.
child_questions: question: How did GAO conduct this review?
answer: GAO reviewed documents and interviewed VA and VHA officials about the administration of performance pay and awards and VHA's oversight of the related policy requirements; analyzed data from a random sample of about 25 providers selected primarily from primary care, surgery, psychiatry, and dentistry at each of four medical centers GAO visited that had at least one provider who was the subject of an action related to clinical performance.