VA Health Care: Additional Efforts to Better Assess Joint Ventures Needed
Released: 2008-03-28T00:00:00

Letter

Background

VA’s Partnerships with DOD

VA has a long history of partnering with DOD to enhance health care delivery to veterans, beginning in 1982 with the enactment of the Sharing Act, which aimed to promote more cost-effective use of health care resources through greater interagency sharing and coordination. Since that time, VA and DOD have participated in a wide array of sharing agreements for the mutual use or exchange of health care resources. Starting in the 1990s, VA and DOD expanded their sharing agreements to include joint ventures sharing agreements. Joint ventures are intended to avoid costs by maximizing available resources by jointly using a medical facility. According to VA, joint ventures involve a multi-entity, collaborative and strategic arrangement of at least 5 years in duration and a level of magnitude and scale comparable to VA’s current major capital threshold ($10 million). Joint ventures are complex in that they require an integrated approach because two separate health care systems must develop multiple sharing agreements that allow them to operate as one system at one location. VA currently has eight joint ventures with DOD (see fig. 1).

VA’s Partnerships with Academic Affiliates

For decades, VA has also developed and maintained partnerships, or affiliations, with university medical schools to provide health care to veterans. Through these affiliations, VA has been able to obtain medical services for veterans and provide training and education to medical residents. Although VA maintains numerous sharing agreements with its academic affiliates, it has not yet entered into a joint venture with any of them. However, in recent years, VA has had the opportunity to consider proposed joint ventures with several academic affiliates. In particular: University of Colorado Hospital (UCH): In the late 1990s, UCH proposed to integrate the VA Denver medical center and UCH into a new joint facility on the Fitzsimons campus, which is located in Aurora, Colorado. UCH and VA officials could not reach agreement on certain aspects of the proposal, and, therefore, discussions about a proposed joint venture between VA and UCH concluded in 2002. As required by law, in June 2007, VA issued a report that examined options for replacing its Denver facility, including the feasibility of entering into a partnership for constructing and operating a new facility with a federal, state, or local governmental agency or a suitable nonprofit organization. The report outlined three different options available to VA for replacing the facility and summarized their key advantages and disadvantages.

Medical University of South Carolina: In 2002, MUSC proposed to partner with VA in the construction and operation of a new medical center in Charleston. Since that time, VA and MUSC have conducted several feasibility studies examining the potential collaboration. In 2006, Congress authorized the VA Secretary to enter into an agreement with MUSC to design and plan for the operation of a colocated joint-use medical facility. In November 2007, VA officials from the medical center in Charleston told us that VA and MUSC are still exploring a range of collaborative arrangements.

Louisiana State University Health Care Services Division: In 2005, Hurricanes Katrina and Rita damaged VA’s New Orleans medical center and LSU medical facilities. In February 2006, VA and LSU signed a memorandum of understanding that established the framework for exploring whether any mutually beneficial sharing and contracting could occur between VA and LSU. In 2006, the VA Secretary was authorized to carry out the project as a collaborative effort with LSU. According to a VA official, no final decision on the proposed joint venture between VA and LSU has been made. However, VA has announced a preferred site for the joint facility in the downtown New Orleans area, adjacent to the site LSU has identified for its new facility (see fig. 2). Although no final decision has been made, the proximity of the preferred sites keeps the possibility of some type of joint facility as an option.

N

Congress has had a long-standing interest in expanding VA’s and DOD’s sharing of health care resources. For example, the National Defense Authorization Act for Fiscal Year 2003 required VA and DOD to implement two programs—the joint incentive program and the demonstration program—to increase the sharing of health care resources between VA and DOD. The administration has also encouraged such collaboration between VA and DOD as a means to achieve more cost-effective use of health care resources. For example, in 2003, a presidential task force recommended that VA and DOD declare that joint ventures are integral to the standard operations of both departments and use the existing joint ventures as laboratories for developing future interdepartmental policy frameworks. Congress has also recently encouraged VA to explore opportunities for expanding its collaboration with academic affiliates as a potential cost-effective means of rebuilding and revitalizing VA’s aging infrastructure. Table 1 briefly describes selected laws and initiatives that have authorized and encouraged collaboration between VA and DOD as well as between VA and academic affiliates.

VA and DOD have also taken steps to improve and expand their health care sharing activities. For example, since 2005, VA and DOD have convened annual conferences to highlight the progress and accomplishments of joint ventures as well as provided a forum for discussing common barriers to success, lessons learned, and best practices. In 2007, VA and DOD established the VA-DOD Joint Market Opportunities Working Group to examine the existing VA-DOD joint ventures and the potential for additional joint ventures. In the first phase of its review, the working group studied all eight existing VA-DOD joint ventures sites to identify best practices, lessons learned, and challenges. In the second phase of its review, the working group plans to assess potential opportunities for the colocation and comanagement of VA-DOD facilities.

In addition, VA is exploring options to improve its partnerships with academic affiliates. For example, in 2006, VA established a blue ribbon panel to advise the VA Secretary on issues related to a comprehensive philosophical framework to enhance VA’s partnerships with medical schools and affiliated institutions. Among other things, the panel will explore the different types of health care partnerships between VA and academic affiliates, including joint ventures, in light of changes of medical education, research priorities, and the health care needs of veterans.

Guidance Related to Strategic Planning and Performance Measures

The National Defense Authorization Act for Fiscal Year 2003 also required VA and DOD to develop and publish a joint strategic plan to shape, focus, and prioritize coordination and sharing efforts within the departments and to incorporate the goals and requirements of the joint strategic plan into each department’s strategic plan. In response, VA and DOD approved their initial Joint Strategic Plan in April 2003 to guide the departments’ health care resource-sharing activities. The plan is updated annually and included in the Joint Executive Council Annual Report to Congress.

We have reported that there is no more important element in results- oriented management than an agency’s strategic planning effort. This effort is the starting point and foundation for defining what the department seeks to accomplish, identifying the strategies it will use to achieve the desired results, and then determining how well it succeeds in reaching goals and achieving objectives. We also previously reported that traditional management practices involve the creation of long-term strategic plans and regular assessments of progress toward achieving the plans’ stated goals. Moreover, the Government Performance and Results Act of 1993 requires agencies to set goals, measure performance, and report on their accomplishments. The use of performance measures is a key tool to help managers assess progress toward achieving the goals or objectives stated in their plans. This is also an important accountability tool to communicate a department’s progress to Congress and the public.

Officials Identified Potential Benefits and Concerns, but Have Not Used Performance Measures to Document and Assess the Outcomes of Joint Ventures

Officials from VA and DOD and representatives from academic affiliates identified a number of potential benefits and concerns associated with joint ventures, but have not used performance measures to routinely or comprehensively document and assess the outcomes of the joint ventures. The most commonly cited potential benefits of joint ventures include improved access to care, cost savings and avoidances, and improved training opportunities. According to the officials we interviewed, joint ventures also raise a number of potential concerns, including potential conflicts between organizations’ missions and cultures, a potential loss of organizational identity and control, and uncertainties associated with staffing. While able to discuss these potential benefits and concerns, none of the officials involved in VA-DOD joint ventures use performance measures to routinely document or assess the outcomes of these endeavors at their facilities. Without this information, the extent to which identified benefits have been achieved and concerns mitigated at joint ventures is unknown. VA also does not use performance measures at the department level to determine what is being achieved through the joint ventures. As a result, VA has only limited and anecdotal information on the results of joint ventures.

Officials Cite a Number of Benefits Associated with Joint Ventures

According to our interviews with officials from VA and DOD and representatives from academic affiliates, the potential benefits of joint ventures range from improved access to care to greater flexibility in the use of staff and other resources.

Joint ventures provide improved access to care: VA and DOD officials said that the existing and proposed joint ventures provide their patients with improved access to specialty care and services that may not otherwise be available. For example, VA officials said that veterans in Honolulu have access to orthopedic care at the DOD medical center that would not otherwise be readily available. Similarly, according to LSU representatives, the proposed joint venture between VA and LSU would provide veterans with access to the only Level I Trauma Center in the region. Also, according to DOD officials in Fairfield, the joint venture with VA provides their beneficiaries with access to specialty care, such as neurosurgery, dialysis, and radiation oncology services. VA officials also said that joint ventures have resulted in fewer referrals of veterans to VA medical centers in other geographic areas, and, as a result, veterans do not have to travel great distances to receive care. For example, VA officials in El Paso said that local veterans, who previously had to travel over 250 miles to the Albuquerque VA medical center, can now be treated at the local DOD hospital. VA officials in Anchorage said that before a joint venture with DOD was established there, they referred most of their joint replacement cases to the Seattle VA medical center. With the joint venture, many veterans requiring joint replacement can now be treated at the facility in Anchorage and do not have to travel to Seattle.

Joint ventures could reduce or avoid costs: Many of the officials from VA and DOD and representatives from the academic affiliates told us that joint ventures have resulted in or have the potential to result in lower or avoided costs by creating economies of scale, eliminating redundant or duplicative services, and reducing infrastructure and construction costs. In general, officials at many of the VA-DOD joint venture sites said that purchasing care from their joint venture partner was less expensive than purchasing the same services in the local community from private providers. In addition, officials said they lowered their costs through economies of scale or volume discounts that each agency—working alone—would not otherwise receive. Officials at some joint venture sites said they lower their costs by reducing redundancies and duplication of staffing, equipment, services, and space. For example, in North Chicago, DOD officials estimated that they will save about $352,000 annually by sharing a magnetic resonance imaging (MRI) machine purchased using joint incentive funds (see fig. 3). In New Orleans, VA officials estimated that a joint facility with LSU would be more cost-effective than a stand- alone facility because a joint operation would enable the partners to share space and facilities, such as laboratories, kitchens, and the energy plant. Several of the officials at VA-DOD joint venture sites said they avoided several million dollars in construction costs by entering into a joint venture rather than building a stand-alone medical facility. Each partner thus expanded the services available to all patients, while avoiding the costs of separate, duplicative medical facilities.

Joint ventures offer additional training opportunities: VA and DOD officials at the existing VA-DOD joint venture sites said that the joint ventures provide educational and training opportunities to meet DOD’s readiness mission. Several DOD officials said that the joint ventures give their medical staff opportunities to work on veteran patient cases that are more severe, complex, and varied than cases involving active duty personnel. Such opportunities help the military medical staff sustain their skill levels and provide greater assurance of medical readiness. According to VA and DOD officials we interviewed, joint ventures also offer knowledge-sharing opportunities. For example, in Key West, VA personnel train Navy staff to handle disruptive behavior, while Navy staff train VA personnel in a variety of areas, including basic life support and advanced cardiac life support. Finally, VA officials and academic affiliate representatives said that the educational and training opportunities at joint ventures can serve as a recruitment and retention tool. For example, in New Orleans, VA officials and LSU representatives said that the proposed joint venture—specifically, a new, modern facility and the range of training opportunities that may be offered in the new facility—could help in recruiting and retaining highly skilled medical staff.

Joint ventures increase flexibility in the use of resources: According to many of the VA and DOD officials and academic affiliate representatives we interviewed, joint ventures offer flexibility in handling fluctuations in staffing and allow more efficient use of space and equipment. Since DOD staff is subject to deployments, VA staff can often help stabilize staffing at VA-DOD joint venture facilities. For example, because VA and DOD staff are extensively integrated among all commonly shared or used work units, DOD officials in Las Vegas said that VA and DOD staff are often seen as interchangeable and can, therefore, fill in for each other as needed, allowing continuity in service and care. LSU officials expected the proposed joint venture with VA in New Orleans to provide a similar opportunity, especially for hard-to-fill and specialty positions. Furthermore, joint ventures can provide additional flexibility with and access to space and equipment, according to officials from DOD and VA. In North Chicago, VA officials described how the joint venture helped them better use their underutilized capacity by integrating VA and DOD medical facilities and expanding the emergency room at the VA medical center. In Albuquerque, VA officials said they were able to use DOD’s outpatient facility as backup space when VA’s operating room was flooded due to a water leak.

In addition to the benefits previously cited, some VA and DOD officials identified a benefit that is specific to VA-DOD joint ventures—that is, joint ventures support efforts to achieve a seamless transition between VA and DOD. Some VA and DOD officials noted that joint ventures support the Presidential Task Force objective for VA and DOD to collaborate at all levels to ensure a seamless transition for eligible military personnel from active duty to veteran status. DOD officials in Honolulu told us that the joint venture agreement with VA and the resulting close working relationship help them to seamlessly transfer beneficiaries from the DOD health system to the VA health system. VA officials at two joint venture sites said that the colocation of the VA and DOD facilities enables them to conduct medical evaluations of active duty personnel before they are transferred to veteran status, which helps to provide a smoother transition.

Officials Acknowledge Potential Concerns Associated with Joint Ventures, but Offer Mitigation Strategies

VA and DOD officials and representatives from academic affiliates also identified a number of potential concerns associated with joint ventures, including maintaining timely access to care, potential conflicts between organizational missions and cultures, staffing uncertainties that can affect hospital operations, a loss of organizational identity or control, the potential to create dependencies, and financial risks. In identifying the potential concerns, they offered examples of the mitigation strategies they have used or could use to manage these concerns. Furthermore, federal statutes serve to safeguard the quality of care and access to care for veterans in a joint venture arrangement, and VA officials noted that veteran service organizations play an important oversight role in ensuring that these provisions are met.

Joint ventures may not maintain timely access to care: Limited access to joint venture facilities, resulting from either reduced capacity or increased security procedures, could hinder a patient from obtaining timely care. At a few VA-DOD sites, officials said that their patients may not always be able to access timely care from their joint venture partner because of capacity constraints. For example, in El Paso, VA and DOD officials said that an expected realignment of military personnel in the region may result in an increased demand for medical services. This increase, coupled with limits on available space and personnel, may reduce DOD’s ability to meet the demands of both veterans and active duty personnel for timely care. To mitigate this concern, VA officials told us that the El Paso VA office has developed contingency plans, which are reviewed each day, to ensure that care is not delayed or denied to any veteran. Officials at the El Paso VA medical center also maintain a network of health care providers in the community and at other VA facilities. In addition, the high level of security at the military bases that host some of the VA-DOD joint ventures sometimes makes it difficult for the veterans to gain timely access to the medical facility. For example, in Fairfield, DOD officials said that it can be difficult to get VA staff and patients on and off the military base in a reasonable amount of time while adhering to security procedures.

Furthermore, VA officials in Las Vegas noted that during national emergencies, such as the terrorist attacks of September 11, 2001, the military base can be “locked down” for hours or days, and, therefore, veterans would not then be able to access the base for care. VA and DOD have taken steps to mitigate these access issues. For example, VA and DOD have developed informal “work arounds” at the military base in Fairfield, and, in Las Vegas, VA officials worked with DOD to ensure that veterans can access the base by presenting their veteran identification card.

Joint ventures could lead to conflicts between organizational missions and cultures: Differences in organizational missions and cultures could affect the success of a joint venture. VA officials stated that DOD’s readiness mission may be incompatible in certain situations with VA’s mission to provide quality and timely care to veterans. Similarly, VA officials noted that VA and its academic affiliates have different missions and, at times, competing priorities, which has raised concerns among veterans that they may not always receive appropriate access to equipment and services. A director of a VA medical center said these types of access-to-care issues can be addressed by establishing a protocol during the formation of the joint venture and monitoring to ensure that the protocol is followed once the joint venture is fully operational. Different organizations also have different cultures, which can lead to conflicts. In Honolulu, for example, VA officials discussed differences in VA’s and DOD’s interpretations of certain guidelines, which resulted in friction between the two organizations. However, the officials said these types of conflicts are worked out within the joint venture’s governance process. Although differences in missions cannot be completely eliminated, DOD officials in North Chicago said that using a phased approach to integrate staff, facilities, and services gave both VA and DOD the time to adjust to each other’s staff, culture, and operations.

Staffing uncertainties could affect joint venture operations: Staffing uncertainties, such as those resulting from changes in leadership or the deployment of DOD personnel, can affect the continuity and quality of care and access to care for veterans. At the VA-DOD joint ventures, DOD’s top-level administration rotates command about every 2 years, requiring VA to continually “sell” the concept of a joint venture to the new leadership, according to a VA official. LSU officials also noted that academic affiliates can experience frequent leadership turnovers. To facilitate a smooth transition, officials at one of the VA-DOD sites said that they hold transition briefings, while officials at other sites recommended maintaining documentation of joint policies and decisions to help the new leadership understand the ongoing operational agreements. Officials at most of the VA-DOD sites also discussed the concerns raised by the deployment of key DOD medical personnel and its potential negative effect on services—that is, when DOD personnel are deployed, the joint venture may not be able to maintain the same level of services or patient load. Although officials at some of the VA-DOD sites said that the integrated operations of the joint venture helped mitigate concerns about the potential impact of deployment, VA officials in Albuquerque said that they decided to mitigate these concerns by eliminating the joint staffing model and moving to an arrangement under which DOD purchases care from VA.

Joint ventures may result in a loss of identity or control: A joint venture could diminish VA’s identity by changing a VA medical center from a facility that treats only veterans to a facility with a mixed patient population that is served by providers from different health care systems. The same would be true for the DOD and academic affiliate partners. Since the identity of a VA medical center as a veteran’s hospital is important to veterans, initial construction proposals for joint ventures between VA and its academic affiliates in Charleston, Denver, and New Orleans included options to construct separate bed towers for VA and the academic affiliate. Another potential concern is the loss of some level of control. Because a joint venture binds the participating organizations together, one joint venture partner can be affected by the other partner’s actions or circumstances—from deployments to changes in leadership or priorities. To mitigate this concern, joint venture partners recommended having governance and contingency plans that delineate roles and responsibilities, establish lines of authority, and identify work-arounds, among other things.

Joint ventures may create dependencies: When partners enter into a joint venture, a concern exists that they may become dependent on each other for equipment and services and not have immediate access to necessary equipment or services if the joint venture arrangement is disrupted or dissolved. For example, VA officials in El Paso said one of their primary concerns is that VA patients will become dependent on services provided by DOD, which could be interrupted or discontinued in the event of a military realignment or deployment. To handle this uncertainty, VA officials said that it is important to have back-up plans for the provision of health care and to maintain relationships with other health care providers in the community. Also, as we have previously noted, VA officials said the El Paso VA office has developed contingency plans, which are reviewed daily, to ensure that care is not delayed or denied to any veteran. LSU representatives also stated that in addition to considering what services and equipment can be shared in a proposed joint venture with VA, it is important to consider how the partners would separate or discontinue such sharing, if necessary, in the future.

Joint ventures may pose financial risks: Although joint ventures are often viewed as a way to avoid costs by pooling resources, joint ventures also raise some financial concerns, such as the possibility of incurring additional costs. For example, VA officials from two of the eight VA-DOD sites said that certain aspects of the joint venture have resulted in additional costs for their organizations. In addition, a feasibility study conducted by VA and MUSC on the proposed joint venture in Charleston showed that VA would not earn a positive return on investment on any of the joint venture options. Furthermore, joint ventures may have additional costs associated with the projects that would not occur otherwise. For example, a representative from MUSC said that the federal homeland security requirements that apply to a facility’s construction and operations and other security considerations, which would apply to MUSC in a VA- MUSC joint venture, would add to the overall cost of the project for MUSC. In addition, joint ventures between federal and nonfederal organizations face more public scrutiny, because of concerns that the federal government may be viewed simply as a source of capital funding or may be financially taken advantage of by the nonfederal partner. To mitigate some of these financial concerns, the VA medical center director in New Orleans stated that joint venture partners should agree that neither partner should make a profit from the joint venture arrangement.

VA Does Not Use Performance Measures to Routinely or Comprehensively Document and Assess Outcomes of Joint Ventures at the Local or Department Level

Although VA and DOD officials at existing joint venture sites identified a number of benefits and concerns associated with joint ventures, they stated that they do not use performance measures to routinely or comprehensively document and assess the outcomes of the joint ventures. For example, VA and DOD officials told us that they do not use performance measures to assess the extent to which the joint ventures produce the identified benefits, such as improved care or lower costs. VA and DOD officials at several joint venture sites said that they have information, such as patient referral rates, wait times and satisfaction survey data, as well as workload and financial statistics that could be used to indicate how the joint ventures are performing. However, officials do not use the information to routinely or comprehensively document and measure the results of the joint ventures for a number of reasons, including the following: The VA-DOD sites have competing priorities for the limited resources that would be required to conduct such assessments, according to officials from several sites.

Officials at the VA-DOD sites said that differences in their computer systems and business processes can limit their ability to conduct such assessments.

VA officials said that since all of the existing joint ventures with DOD have been congressionally directed, there is little incentive to document or measure the results of the joint ventures.

VA officials noted that they are not required to conduct assessments.

Officials at some VA-DOD joint venture sites have done one-time studies assessing certain aspects of the joint venture. For example, DOD officials in Albuquerque said they commissioned a study of the cost of services provided in their network compared with the cost of services provided through the joint venture with VA. Officials at several sites also provided examples of projected cost savings associated with JIF projects, which require business case analyses. However, VA and DOD officials at all of the VA-DOD joint venture sites said that they do not routinely or comprehensively assess the outcomes of the joint ventures. Rather, several VA and DOD officials said they intuitively knew they were saving money as a result of the joint venture, but they were unable to provide data to support this belief. Without comprehensive, supporting evidence, the extent to which the cited outcomes have been achieved at joint venture sites is largely unknown.

From a department-level strategic planning perspective, VA has broadly defined what the joint ventures are to accomplish and identified some strategies it will use to achieve the desired results. However, VA does not use performance measures at the department level to determine what is being achieved through its joint ventures and how well VA succeeds in reaching the goals and achieving the desired outcomes. We have previously reported that performance measures are a valuable tool for holding agencies accountable for results, tracking progress toward agency goals, and giving managers crucial information on which to base their organizational and management decisions. Although VA has over a hundred performance measures that it uses to centrally monitor agency programs and activities, it does not have specific measures for its joint venture activities. The 2003 Presidential Task Force to Improve Health Care Delivery for Our Nation’s Veterans also found that none of VA’s and DOD’s performance metrics measured the depth and breadth of VA-DOD collaboration and sharing, or the impact of successful collaboration on various health care indicators, such as improved access or reductions in the overall cost of furnishing services. Similarly, in March 2006, we found that VA and DOD had not established specific quantitative performance measures to track the progress of their health care resource-sharing activities. We concluded that such measures would be a useful tool for VA to help ensure that health care sharing is optimized, and that the departments are cost-efficiently achieving their resource-sharing goals. Furthermore, we recommended that VA develop performance measures that would be useful for determining the progress of their health care resource-sharing goals. Performance measures could also help VA use the existing joint ventures as laboratories for developing future interdepartmental policy frameworks, as recommended by the 2003 presidential task force, by allowing VA to assess what is being achieved through the joint venture, including what is and what is not working.

Officials Identified Lessons Learned from Their Experiences with Existing and Proposed Joint Ventures

Officials from VA and DOD and representatives from academic affiliates identified several lessons they have learned from their experiences with the existing and proposed joint ventures. These lessons included establishing joint committees to work through issues, communicating frequently with their partner, securing leadership buy-in and support at all levels, developing contingency plans, allowing adequate time to implement change, and establishing clear roles and responsibilities.

Establish joint committees to work through issues: Officials at many of the joint venture locations said that establishing joint committees to work through the various issues that arise in developing and implementing joint ventures is helpful. Almost all of the sites had established such committees, which typically consist of an equal number of representatives from VA and DOD. The joint committee structure allows the officials to work collaboratively in tackling joint venture issues. For example, in North Chicago, the joint committee structure consists of an Executive Steering Group that is co-chaired by VA and DOD and six joint working groups that are responsible for specific issues, such as finance, information management, and clinical issues associated with forming their joint venture (see fig. 4). Similarly, in Las Vegas, all joint venture activities are addressed and monitored through a series of jointly staffed committees, ensuring that both VA and DOD have equal input into joint venture activities and decisions. These committees report to the leadership of the joint venture. In New Orleans, VA and LSU formed a joint venture coordinating committee whose responsibilities include identifying opportunities for sharing information technologies and ensuring the availability of appropriate staffing for all aspects of the joint venture. Our previous work on organizational transformation cites such benefits of establishing jointly staffed teams as creating opportunities for employees from the merging organizations to interact with each other, helping accelerate the merger or transformation process by allowing the parties to learn more about each other, and breaking down organizational silos. Teams composed of a cross-section of individual members can also assist in integrating different perspectives, flattening organizational structure, streamlining operations, and making it easier to work together on future projects.

Frequent communication between partners is important: Officials at most VA and DOD sites with whom we spoke said that frequent communication between partners helps reduce confusion, fosters a better work environment, helps ensure that vital information is shared with affected staff, and provides opportunities for each partner to learn from the other. For example, at one site, officials said that frequent meetings between VA and DOD leadership provide a convenient platform for the leaders to discuss joint venture issues, resolve problems, and evaluate a joint strategy or vision for going forward. At another site, the staff meets almost daily to plan and execute decisions related to the joint venture. At the site of a proposed joint venture between VA and an academic affiliate, VA officials adopted a communications strategy to use in communicating with VA’s potential partner, employees, and stakeholders. In our previous work on organizational transformations, we have noted that creating an effective, ongoing communications strategy is essential to implementing significant organizational changes, such as the joint ventures. Such a strategy helps to build an understanding of the purpose of the planned change and establish trust among VA and its academic affiliates and stakeholders, such as employees and veterans. A communications strategy can also help ensure that these groups receive a message that is consistent in tone and content. Sharing a consistent message with stakeholders helps reduce the perception that some are more likely than others to get the “real” story when, in fact, all are receiving the same information.

Leadership buy-in and support at all levels are vital: Most VA and DOD officials and academic affiliate representatives with whom we spoke said that leadership buy-in and support play a key role in the success of a joint venture. This lesson is consistent with our previous work on organizational transformation, which indicates that support from top leadership is indispensable for fundamental change, such as a joint venture entails. Top leadership’s clear and personal involvement in the transformation represents stability for both the organization’s employees and its external partners. Top leadership must set the direction, pace, and tone for the transformation. Likewise, when a transformation requires extensive collaboration with another organization, as would be the case with a joint venture, committed leadership at all levels is needed to overcome the many barriers to working across organizational boundaries. Officials noted that forming a joint venture is very challenging and leadership buy-in and support are needed to encourage the partners to work through the challenges. Without such commitment from the top, the officials at one VA-DOD joint venture site said that they would have given up on the joint venture a long time ago because of the number of seemingly insurmountable challenges. Conversely, the proposed joint venture between VA and UCH in Denver did not come to fruition largely because of a lack of leadership buy-in.

Contingency plans are critical: Officials from an academic affiliate noted that it is important that joint venture partners develop appropriate contingency plans to ensure continuity of service, and officials from many of the joint venture sites had developed such plans to ensure continued care for their clients. For example, VA officials at several sites said they have contingency plans in place—such as plans to send patients to other health care providers in the community—in case a military deployment threatens to disrupt services or care, or an increased demand for care by DOD beneficiaries reduces DOD’s ability to meet VA’s demand for care to veterans. As we have previously reported, contingency planning is important because it identifies alternative activities that can be employed to ensure the continuity of an agency’s core business operations and will greatly improve response efforts. Not having such a plan in place increases the risk of unnecessary problems in an uncertain situation.

Allow adequate time to introduce and implement change: Joint ventures represent a significant change in how VA normally conducts business. As a result, VA and DOD officials told us that the implementation of joint ventures must be managed with care. Officials at one of the VA-DOD joint ventures noted that forming a joint venture often takes years—which helps ensure that the changes are carefully considered. This lesson is consistent with the finding in our prior work on organizational transformations that successful major change management in large private and public-sector organizations can often take at least 5 to 7 years. As a result, we have previously reported that it is essential to establish and track implementation goals and establish a timeline to pinpoint performance shortfalls and gaps and suggest midcourse corrections. By demonstrating progress toward these transformation goals, the organization builds momentum and demonstrates that real progress is being made. Similarly, some VA and DOD officials recommended using a phased implementation schedule to help employees and stakeholders get accustomed to the changes.

Clearly define roles and responsibilities: Many VA and DOD officials and representatives from academic affiliates we interviewed said that clearly defining the roles and responsibilities of each joint venture partner helped to avoid problems such as misunderstandings, duplication, and confusion. Similarly, our previous work on collaboration between organizations suggests that agreeing on roles and responsibilities is important. In particular, collaborating organizations should work together to define and agree on their respective roles and responsibilities, including how the collaborative effort will be led. In doing so, organizations can clarify who will do what, organize their joint and individual efforts, and facilitate decision making. VA, DOD, and academic affiliates have used several techniques to define their roles and responsibilities. For example, at one VA-DOD joint venture site, officials use joint policy letters to document roles, responsibilities, policies, and decisions. These joint policy letters also help to maintain continuity during transitions, such as changes in the top leadership at one of the joint venture partners. In New Orleans, VA and LSU signed a memorandum of understanding that identifies the roles and responsibilities of the parties and provides a framework for collaboration and discussion between the two organizations on a proposed joint venture. Figure 5 shows the VA-LSU memorandum of understanding and highlights the specific roles and responsibilities of the parties.

VA Has Taken Steps to Evaluate Proposed Joint Ventures, but Additional Efforts Are Needed

VA has taken steps to evaluate proposed joint ventures. For example, VA established working groups in Charleston and New Orleans to examine joint venture proposals with academic affiliates. In addition, in response to our previous recommendations, VA developed and issued criteria for evaluating joint venture proposals in November 2007. However, VA’s evaluation criteria are not sufficiently specific to ensure consistent evaluations of proposals, and are not sufficiently tailored to ensure the appropriate level of review.

VA Has Taken Steps to Better Evaluate Proposed Joint Ventures

VA has undertaken steps to better assess proposed joint ventures. Specifically, in response to our recommendations, VA developed criteria for evaluating joint venture proposals at the department level. The criteria are contained in a handbook that VA issued in November 2007. The handbook represents an important step toward better assessing proposed joint ventures and managing existing joint ventures in that, among other things, it details departmental policy on joint ventures, defines joint ventures, identifies the process for reviewing and approving joint venture proposals, and outlines criteria for use in evaluating joint venture proposals—none of which had previously been developed, documented, or shared with joint venture partners. Developing evaluation criteria is a notable step because, as we have previously noted, the absence of criteria at the department level to evaluate joint venture proposals can result in inconsistent evaluations, misunderstandings, and delays. According to VA, the handbook was developed by a working group of over 50 officials from various offices and levels within VA. The working group used a variety of methods to identify the evaluation criteria, including soliciting ideas from VA officials, identifying and analyzing relevant statutes and regulations, and reviewing related published research.

As outlined in the November 2007 handbook, VA’s evaluation criteria will be applied in a two-phase review process and will be applicable to all joint venture proposals, including those involving DOD, academic affiliates, and other health care providers.

Phase I: The first review phase is the initial evaluation of a joint venture proposal. In this phase, VA officials apply a set of criteria, referred to as the screening criteria, to determine if the proposal will be submitted to the department level for consideration. Depending on how well the proposal meets the criteria, VA officials assign it a pass or fail rating. If the proposal receives a pass rating, it moves to the second review phase.

Phase II: In the second phase, VA officials apply a more robust set of criteria, referred to as comprehensive criteria, to determine if the proposal will be submitted to the VA Secretary for consideration. If the proposal passes the second phase of review, it will be folded into VA’s capital investment and budget processes and will compete with other projects for funding. The Secretary will make the final decision regarding whether VA will pursue the joint venture.

In addition to developing the evaluation criteria, VA has taken other steps to better evaluate proposed joint ventures. For example, VA established Collaborative Opportunities Steering Groups and Collaborative Opportunities Planning Groups to study the proposed joint ventures with its academic affiliates in Charleston and New Orleans. The study groups were tasked with analyzing what, if any, mutually beneficial sharing and contracting could be done with each academic affiliate. Composed of VA officials and representatives from the respective academic affiliate, the study groups assessed a range of issues, including sharing options and the clinical, legal, and financial considerations associated with the different sharing options. The study groups were charged with issuing their findings to VA and the respective academic affiliate, which they did in a series of reports. The study groups did not make recommendations, but rather they laid out the advantages and disadvantages of the different options examined.

VA’s Evaluation Criteria Are Less Useful Than They Could Be

VA’s development of criteria for evaluating joint venture proposals represents a step forward in VA’s process for assessing joint venture proposals. However, the evaluation criteria are less useful than they could be.

The evaluation criteria are not sufficiently specific—in terms of both the definition and the application of the criteria: VA defined most of the screening and comprehensive criteria by outlining the different elements that make up each criterion. While this information is instructive, key elements of some of the criteria are sometimes not defined. For example, one of the screening criteria is “serendipitous win-wins.” Other than instructing VA officials to determine if the proposal offers “unique promise and advantages for enhancing quality,” this term is not defined, and there are no examples of what might be considered a “serendipitous win-win” arrangement. Furthermore, although the handbook identifies a host of criteria that VA officials should consider in evaluating joint venture proposals, it generally does not provide guidance on whether certain criteria are more important than others or how each criterion will be used to make an overall assessment. For example, it is unclear whether all 4 screening criteria, plus their 18 subelements, must be met to receive a passing rating. The lack of specificity in the definition and application of the evaluation criteria could lead to inconsistent evaluations of joint venture proposals—thereby reducing the value of having such criteria in place.

VA officials noted that the lack of specificity in the evaluation criteria reflects, in part, their view of a primary purpose of the criteria. Specifically, they noted that for the working group, a primary purpose of the criteria was to inform potential partners about VA’s requirements for joint venture proposals. VA officials further noted that their familiarity with the processes involved in preparing proposals for community outpatient clinics and joint incentive projects, among other things, will help them to apply the criteria. We recognize the usefulness of the criteria as a communication tool and considered their usefulness for this purpose when we previously recommended that VA develop evaluation criteria and share them with proposed joint venture partners. In addition, we recognize that VA officials’ experience with related processes will be useful in applying the criteria. However, our purpose in previously recommending that VA develop evaluation criteria was to ensure that proposals are evaluated consistently across the country. Given that multiple VA officials will be using the criteria to evaluate joint venture proposals, increasing the specificity of the criteria—by fully defining their key elements and the process for applying them—will help ensure that the criteria are applied consistently. Furthermore, given the magnitude of joint ventures compared with other projects, such as joint incentive projects, additional specificity in how to apply the criteria seems warranted.

The criteria are not tailored for the different types of joint ventures: VA plans to apply the same criteria and review process for all joint venture proposals, including those with DOD, academic affiliates, and other health care providers. However, according to some VA and DOD officials we interviewed, there are fundamental differences, risks, and experiences between joint ventures with DOD and joint ventures with other partners that should be taken into account. For example, since VA and DOD are federal departments, both are accustomed to working within the federal framework and following federal laws, regulations, guidance, and procedures—which may not be the case for academic affiliates or other health care providers. Furthermore, both VA and DOD follow the same federal appropriation cycle—which can help to synchronize joint investments. In contrast, academic affiliates or other health care providers may use a different fiscal year. In addition, federal law governs the availability of federal funds—and provides safeguards in the use of those funds, which helps mitigate some of the potential financial risks involved with a joint venture. For example, appropriation law provides that appropriated funds are available only for the objects for which the appropriations were made, except as otherwise provided by law. Thus, VA and DOD can spend their appropriated funds only to meet the health care needs of their beneficiaries, and neither department is permitted to pay for the health care needs of the other department’s beneficiaries. In addition, the Sharing Act provides for the department providing the health care services to be reimbursed for the cost of the services under a rate of reimbursement determined by the two departments. Finally, VA and DOD have experience developing and implementing joint ventures, whereas VA has not developed a joint venture with any other health care provider. While some of the criteria that VA has found most useful in working through the challenges of forming joint ventures with DOD may be applicable to forming joint ventures with academic affiliates or other health care providers, other criteria may be less applicable or some potentially useful criteria may be lacking.

Conclusions

A number of potential benefits are associated with joint ventures, including improved access to care and reduced costs. As a result, Congress and the administration have encouraged joint ventures between VA and DOD and, more recently, between VA and academic affiliates as a cost-effective means to stretch limited resources and replace aging infrastructure. However, comprehensive information is not readily available on whether joint ventures actually produce all of the identified benefits. Specifically, VA does not use performance measures at the local or department level to routinely or comprehensively assess the outcomes of its existing joint ventures, leaving VA with only limited and anecdotal information on the outcomes of joint ventures. While some of the benefits of joint ventures, such as gaining economies of scale, may be intuitive, and the anecdotal examples provided by officials at different joint venture sites suggest that some benefits are being achieved, the magnitude and extent of such benefits are unknown. Routine and comprehensive information on what is being achieved through the joint ventures could help VA leadership and policymakers make more informed decisions about how to improve the performance of existing joint ventures as well as whether to pursue different joint venture opportunities in the future.

VA’s effort to develop criteria for evaluating joint venture proposals is a positive step in improving VA’s process for assessing joint venture proposals. However, without more specific criteria for evaluating future joint venture proposals, VA may not improve the consistency of its evaluations as we intended when we recommended that VA develop evaluation criteria. Given the long-term and resource-intensive nature of joint ventures, it is critical that VA have robust criteria that can be consistently applied to distinguish proposals that are in the best interest of our nation’s veterans and the federal government from those proposals that are not. Furthermore, although the intent of our previous recommendations was to ensure consistency in the evaluation of joint venture proposals, we also recognize that each proposal could have unique aspects and should be evaluated on its merits and circumstances. To the extent that the application of a single set of criteria to all joint venture proposals excludes consideration of unique but important aspects of individual proposals, VA may overlook differences among different types of prospective joint venture partners that should be taken into account.

Recommendations for Executive Action

To develop a more comprehensive framework for evaluating existing and future joint ventures, we recommend that the Secretary of Veterans Affairs take the following three actions: Develop departmental performance measures to assess the outcomes of joint ventures and to determine the extent to which strategic goals are being achieved.

Revise the evaluation criteria for joint venture proposals to ensure they are measurable and specific—both in terms of definition and application.

Analyze the differences among types of joint venture partners to determine whether the evaluation criteria should be tailored to the type of partner (e.g., DOD or academic affiliate) and, if so, tailor the criteria accordingly.

Agency Comments

We provided a draft of this report to VA and DOD for review and comment. VA and DOD provided written comments on a draft of this report, which are reprinted in appendixes II and III, respectively. VA generally agreed with our findings, conclusions, and recommendations. VA stated that the report is consistent with VA’s direction and ongoing work toward enhancing existing and future joint ventures. As part of this ongoing work, VA’s Joint Ventures Working Group is reviewing existing performance measures to develop specific measures for joint venture activities and will facilitate incorporation of the measures into VA’s established processes. In addition, the working group will review and refine the proposed evaluation guide on a continual basis. Also, DOD generally agreed with the report’s overall findings. The departments provided technical comments, which we have incorporated as appropriate.

We are sending copies of this report to congressional committees with responsibilities for veterans’ issues; the Secretary of Veterans Affairs; the Secretary of the Department of Defense; and the Director, Office of Management and Budget. We also will make copies available to others upon request. In addition, this report will be available at no charge on GAO’s Web site at http://www.gao.gov.

If you or your staff have any questions on matters discussed in this report, please contact me on (202) 512-2834 or at williamsonr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IV.

Appendix I: Objectives, Scope, and Methodology

This report discusses the (1) potential benefits and concerns associated with joint ventures and the extent to which they are documented and measured, (2) lessons learned from existing and proposed Department of Veterans Affairs (VA) joint ventures with academic affiliates and the Department of Defense (DOD), and (3) steps VA has taken to better evaluate proposed joint ventures.

To address these objectives, we used a combination of site visits and semistructured interviews to obtain information for all eight existing VA- DOD joint ventures and for the three proposed joint ventures between VA and academic affiliates. Specifically, we visited three existing VA-DOD joint ventures in El Paso, Texas; Las Vegas, Nevada; and North Chicago, Illinois. We also visited New Orleans, Louisiana, the site of a proposed joint venture between VA and the Louisiana State University (LSU) Health Care Services Division. We used several criteria to select these sites, including geographic dispersion, the maturity of the partnership, the nature of the shared services, the organizations involved in the partnership (e.g., the branch of the military), the structure or framework of the partnership, and the perceived effectiveness of the partnership. We conducted semistructured telephone interviews with officials from the remaining existing and proposed joint ventures. During the site visits and telephone interviews, we interviewed the parties involved in the existing or proposed joint ventures, including VA and DOD officials and representatives from the academic affiliates. We also performed a content analysis of the information we collected through the site visits and semistructured interviews to determine the benefits and concerns associated with joint ventures, as well as the lessons learned in developing joint ventures that were commonly cited by the officials involved in the VA joint ventures. We also interviewed department-level officials from VA and DOD and representatives from several veterans service organizations, including Disabled American Veterans, the Paralyzed Veterans of America, and the American Legion.

In addition to conducting the site visits and semistructured interviews, we reviewed agency documentation, reports, studies, and analyses on existing and proposed VA joint ventures so that we could report on any issues or concerns associated with jointly planning, constructing, and sharing a medical center. For example, we reviewed the VA Strategic Plan Fiscal Year 2006-2011, the VA 5-Year Capital Plan Fiscal Year 2005-2010, the VA- DOD Joint Executive Council Strategic Plan Fiscal Year 2007-2009, VA- DOD Joint Executive Council annual reports, the VA-MUSC Collaborative Opportunities Steering Group final report, and the VA-LSU Collaborative Opportunities Study Group report. We reviewed legal authorities governing the sharing of health resources between VA and DOD, and VA and its academic affiliates, including appropriation and fiscal law authorities.

To identify criteria for possible use in evaluating joint ventures and to help us assess the comprehensiveness of VA’s criteria, we reviewed published research and studies, including GAO reports, on public-private partnerships; best practices in collaboration, partnering, and organizational transformation; and evaluation criteria. To identify applicable studies focusing on public-private partnerships for constructing joint public facilities or hospitals similar to VA’s joint venture partnerships, we searched literature databases using the following criteria: (1) studies that identified any benefits and risks associated with forming public-private partnerships for hospitals or federal buildings, with a focus on cost savings or risk management; (2) studies that provided lessons learned from previous health-care-related, public-private partnerships, including any factors contributing to challenges or successes; and (3) studies that provided guidelines or evaluative criteria that could be used to evaluate a health-care-related, public-private partnership. After identifying the studies, we reviewed each study to determine its relevance and applicability to our objectives and to ensure the methodological soundness of the non-GAO studies.

We conducted this performance audit from May 2007 through March 2008 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.

Appendix II: Comments from the Department of Veterans Affairs

Appendix III: Comments from the Department of Defense

Appendix IV: GAO Contact and Staff Acknowledgments

Staff Acknowledgments

In addition to the individual named above, Nikki Clowers, Assistant Director; Vashun Cole; Elizabeth Curda; Jennifer DuBord; Elizabeth Eisenstadt; Cindy Gilbert; Alexander Lawrence; Susan Michal Smith; and James Musselwhite Jr. made key contributions to this report.